<PAGE>
Registration No. 2-42379
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. _____ -----
Post-Effective Amendment No. 16 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 16
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STRATTON MONTHLY DIVIDEND SHARES, INC.
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(Exact Name of Registrant as Specified in Charter)
610 W. Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
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(Address of Principal Executive Offices)
(610) 941-0255
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(Registrant's Telephone Number Including Area Code)
Patricia L. Sloan, Secretary/Treasurer
Stratton Monthly Dividend Shares, Inc.
610 West Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
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(Name and Address of Agent for Service)
With copies to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
215-988-2700
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
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X on (June 1, 1996) pursuant to paragraph (b)
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60 days after filing pursuant to
----- paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to
----- paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule
----- 485.
If appropriate, check the following box:
this post-effective ammendment designates a new effective
----- date for a previously filed post-effective ammendment.
(1) Registrant has elected to register an indefinite number and amount of
shares of beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 Notice for Fiscal Year ended
January 31, 1996 was filed with the Commission on March 26, 1996 and
amended on March 28, 1996.
Total Pages 130 Exhibit Index Page 55
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<PAGE>
CALCULATION OF THE REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933/(1)/
<TABLE>
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Amount Maximum Maximum
Securities Being Being Offering Price Aggregate Amount of
Registered Registered /(2)/ Per Unit /(2)/ Offering Price/(3)/ Registration Fee
Common Stock,
par value $1.00
per share,
Stratton
Monthly
Dividend
Shares, Inc.
930,164 26.02 $17,454,506 $100.00
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</TABLE>
/(1)/Registrant has elected to register an indefinite number of shares of its
Common Stock under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended January 31, 1996 was filed with the Commission on
March 26, 1996 and amended on March 28, 1996.
/(2)/Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and Rule
457 (d) under the Securities Act of 1933, based on an offering price of
$26.02 on May 17, 1996.
/(3)/The maximum aggregate offering for Registrant's shares is calculated
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During
Registrant's fiscal year ended January 31, 1996, 1,676,173
shares of the Registrant's Common Stock were redeemed, of which
757,154 were used for reductions pursuant to paragraph (c) of Rule
24f-2 in Registrant's Rule 24f-2 Notice for the year ended January 31,
1996, and none of the redeemed shares were used for reductions
pursuant to Rule 24e-2 in previous post-effective amendments filed during
the current fiscal year. While no fee is required for the 919,019
shares, the Registrant has elected to register for $100, an additional
$289,993 in shares (11,145 shares at $26.02 per share).
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Caption
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<C> <S> <C>
1. Cover Page Cover Page
2. Synopsis Fee Table
3. Condensed Financial Information Financial Highlights;
Performance Calculations
4. General Description of Registrant Introduction, The Fund's
Investment Objective,
Policies, Restrictions and
Risk Considerations;
Description of Common
Stock
5. Management of the Fund Management of the Fund;
Investment Advisor;
Service Providers and
Underwriter
5A. Management's Discussion of Inapplicable
Fund Performance
6. Capital Stock and Other Securities How to Buy Fund Shares;
Reinvestment of Income
Dividends and Capital
Gains Distributions;
Income Dividends and
Capital Gains
Distributions: Tax
Treatment; Description of
Common Stock
7. Purchase of Securities Being Offered Service Providers and
Underwriter; Computation
of Net Asset Value;
How to Buy Fund Shares;
Exchange Privilege;
Retirement Plans
8. Redemption or Repurchase How to Redeem Fund
Shares
9. Pending Legal Proceedings Inapplicable
Part B Statement of Additional
Item No. Information Caption
- -------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Information Caption
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<S> <C> <C>
12. General Information and Inapplicable
History
13. Investment Objective and Policies Investment Restrictions
14. Management of the Fund Directors and Officers
of the Fund
15. Control Persons and Principal Directors and Officers
Holders of Securities of the Fund
16. Investment Advisory and Other The Investment Advisor
Services and Other Service
Providers
17. Brokerage Allocation and Portfolio Transactions and
Other Practices Brokerage Commissions
18. Capital Stock and Other Securities Covered in Part A
19. Purchase, Redemption and Pricing Covered in Part A
of Securities Being Offered
20. Tax Status Additional Information
Concerning Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Additional Information on
Performance Calculations
23. Financial Statements Financial Statements;
Report of Independent
Certified Public
Accountants
</TABLE>
Part C
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Post-Effective Amendment No. 16 to
the Registration Statement.
<PAGE>
PROSPECTUS
JUNE 1, 1996
[NO-LOAD LOGO APPEARS HERE]
Stratton Monthly Dividend Shares, Inc. is a no-load mutual fund seeking as its
objective a high rate of return from dividend and interest income on its
investments in common stock and securities convertible into common stock.
This Prospectus sets forth concisely the information about the Fund that
prospective investors ought to know before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
or writing the Fund at the telephone number or address below. The "Statement of
Additional Information" bears the same date as this Prospectus and is
incorporated by reference into this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
[LOGO OF SMDS STRATTON MONTHLY DIVIDEND SHARES, INC. APPEARS HERE]
A NO-LOAD FUND
PROSPECTUS / JUNE 1, 1996
PLYMOUTH MEETING EXECUTIVE CAMPUS 610 W. GERMANTOWN PIKE, SUITE 300
PLYMOUTH MEETING, PA 19462-1050 610-941-0255
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction............................................................. 3
Fee Table................................................................ 3
Financial Highlights..................................................... 4
The Fund's Investment Objective, Policies, Restrictions & Risk Considera-
tions................................................................... 5-6
Management of the Fund................................................... 6
Investment Advisor....................................................... 6-8
Computation of Net Asset Value........................................... 8
How to Buy Fund Shares................................................... 8-11
Investing by Mail....................................................... 9
Investing by Wire....................................................... 9
Automatic Investment Plan............................................... 10
Direct Deposit Program.................................................. 10
Reinvestment of Income Dividends and Capital Gains Distributions........ 10
Additional Information.................................................. 10-11
Investment Application................................................... 12a
How to Redeem Fund Shares................................................ 11-14
By Written Request...................................................... 11-12
By Automated Clearing House ("ACH")..................................... 12
Systematic Cash Withdrawal Plan......................................... 12
Additional Information.................................................. 13-14
Exchange Privilege....................................................... 14
Retirement Plans......................................................... 15
Income Dividends and Capital Gains Distributions: Tax Treatment.......... 15-16
Performance Calculations................................................. 16-17
Description of Common Stock.............................................. 17
General Information...................................................... 17
Service Providers and Underwriter........................................ 17-18
Audits and Reports....................................................... 18
Automatic Investment Plan Application.................................... 19-20
</TABLE>
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FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND'S "DISTRIBUTOR", FUND/PLAN BROKER SERVICES, INC., 2 W.
ELM STREET, P.O. BOX 874, CONSHOHOCKEN, PA 19428-0874, OR BY TELEPHONING 800-
634-5726.
2
<PAGE>
INTRODUCTION
Stratton Monthly Dividend Shares, Inc. (the "Fund") is a no-load open-end
diversified mutual fund seeking as its objective a high rate of return from
dividend and interest income on its investments in common stock and securities
convertible into common stock.
The Fund will seek to achieve this objective through investment of at least 25%
of assets in public utility companies engaged in the production, transmission
or distribution of electric, energy, gas, water or telephone services. Due to
the inherent risk of any type of investment, however, there can be no assurance
that the objective of the Fund will be achieved.
The Fund pays a monthly dividend to shareholders (see pages 15 and 16 for more
detailed information about Income Dividends and Capital Gains Distributions).
FEE TABLE
Below is a summary of the Operating Expenses that the Fund incurred during its
last fiscal year. A hypothetical example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees...................................................... 0.63%
Other Expenses....................................................... 0.36%
----
Total Fund Operating Expenses........................................ 0.99%
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming: (1) a 5% annual return;
and (2) redemption at the end of
each time period: $10 $31 $54 $120
</TABLE>
WHILE THE FOREGOING EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN MORE OR LESS THAN 5%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The purpose of this Fee Table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load or redemption or exchange
fees, nor does it bear any fees pursuant to a Rule 12b-1 Plan; however, the
Transfer Agent currently charges investors who request redemptions by wire
transfer a fee of $9 for each such payment. For more complete descriptions of
the various costs and expenses, see Investment Advisor, How to Buy Fund Shares,
How to Redeem Fund Shares, Retirement Plans and Service Providers and
Underwriter in this Prospectus and the financial statements and related notes
contained in the Statement of Additional Information.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information provides financial highlights for a share of the Fund
outstanding throughout each year. The information for each of the five years in
the period ended January 31, 1996 has been audited by Tait, Weller & Baker,
certified public accountants, whose report thereon appears in the Fund's
Statement of Additional Information dated June 1, 1996. This data should be
read in conjunction with the other financial statements and notes thereto, also
included in the Fund's Statement of Additional Information. Additional
information about the performance of the Fund is contained in the Fund's annual
report, which can be obtained without charge by calling 800-634-5726.
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
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1996 1995 1994 1993 1992 1991/1/ 1990/1/ 1989/1/ 1988/1/,/2/ 1987/1/,/2/
-------- -------- -------- ------- ------- ------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $24.84 $28.69 $29.91 $27.83 $23.02 $24.50 $24.43 $25.11 $31.09 $27.82
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 1.88 1.94 1.87 1.94 1.97 2.05 2.09 2.10 2.06 2.09
Net gains (loss) on
securities (both
realized and
unrealized)........... 2.60 (3.87) (1.14) 2.08 4.79 (1.33) 0.03 (0.70) (5.33) 3.96
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ 4.48 (1.93) 0.73 4.02 6.76 0.72 2.12 1.40 (3.27) 6.05
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income).... (1.89) (1.92) (1.94) (1.94) (1.95) (2.20) (2.05) (2.08) (2.06) (2.28)
Distributions in excess
of net Investment
Income................ (0.03) 0.00 (0.01) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from net
realized gains from
security transactions. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.27) (0.10)
Distributions from
paid-in capital/3/.... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.38) (0.40)
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (1.92) (1.92) (1.95) (1.94) (1.95) (2.20) (2.05) (2.08) (2.71) (2.78)
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR................... $27.40 $24.84 $28.69 $29.91 $27.83 $23.02 $24.50 $24.43 $25.11 $31.09
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............ 18.98% -6.57% 2.22% 15.18% 30.55% 3.30% 8.69% 5.93% -10.80% 22.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in 000's)............. $129,267 $134,066 $165,798 $98,227 $45,566 $31,178 $33,200 $33,845 $36,305 $53,545
Ratio of expenses to
average net assets..... 0.99% 1.08% 0.99% 1.10% 1.23% 1.27% 1.25% 1.21% 1.21% 1.24%
Ratio of net income to
average net assets..... 7.42% 7.71% 6.12% 6.74% 7.63% 8.79% 8.19% 8.54% 7.52% 6.90%
Portfolio turnover rate. 53.30% 39.50% 19.15% 35.94% 43.55% 14.00% 39.10% 15.00% 24.44% 14.87%
</TABLE>
/1/ Not covered by independent accountants' report.
/2/ Pershare income and expenses and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares
outstanding during the period. These computations had no effect on net
asset value per share.
/3/ Distributions from paid-in capital result from the excess of taxable capital
gains over gains available from book sources.
The Fund's portfolio turnover is calculated by dividing the lesser of the
Fund's annual aggregate purchases or sales of its portfolio securities by the
average monthly value of the Fund's portfolio securities during the year.
4
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE, POLICIES, RESTRICTIONS AND RISK CONSIDERATIONS
The Fund's objective is to seek a high rate of return from dividend and
interest income on its investments in common stock and securities convertible
into common stock. Of course, there is no assurance that this objective will be
achieved. Investment decisions will be made on the basis of an analysis of
fundamentals of individual companies and on relevant economic and social
conditions.
The Fund will invest at least 80% of its assets in common stock and securities
convertible into, or exchangeable for, common stock. The foregoing objective
and policies may be changed by the Board of Directors without shareholder
approval.
The Fund may invest in real estate investment trusts ("REITs"). Equity REITs
invest directly in real property while mortgage REITs invest in mortgages on
real property. REITs may be subject to certain risks associated with the direct
ownership of real estate including declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, and variations
in rental income. Generally, increases in interest rates will decrease the
value of high yielding securities and increase the costs of obtaining
financing, which could decrease the value of the portfolio's investments. In
addition, equity REITs may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage REITs may be affected
by the quality of credit extended. Equity and mortgage REITs are dependent upon
management skill, are not diversified and are subject to the risks of financing
projects. REITs are also subject to heavy cash flow dependency, defaults by
borrowers, self liquidation and the possibility of failing to qualify for tax-
free pass-through of income under the Internal Revenue Code and to maintain
exemption from the Investment Company Act of 1940, as amended (the "1940 Act").
REITs pay dividends to their shareholders based upon available funds from
operations. It is quite common for these dividends to exceed the REIT's taxable
earnings and profits resulting in the excess portion of such dividends being
designated as a return of capital. The Fund intends to include the gross
dividends from such REITs in its monthly distribution to its shareholders and,
accordingly, a portion of the Fund's distributions may also be designated as a
return of capital. For more information, please see the discussion under Income
Dividends and Capital Gains Distributions: Tax Treatment.
The Fund intends to invest at least 25% of its assets at the time of purchase
in securities of public utility companies engaged in the production,
transmission or distribution of electric, energy, gas, water or telephone
service. This policy of concentration may not be changed without the approval
of the holders of a "majority" of the Fund's outstanding shares as defined
under "General Information."
Not withstanding these general requirements with respect to concentration of its
assets, the Fund reserves the right also to hold up to 100% of its assets in
cash and cash equivalents for temporary defensive purposes. The Fund may invest
its cash reserves in short-term debt securities, securities of the U.S.
Government, its agencies and instrumentalities, bankers' acceptances and
certificates of deposit.
5
<PAGE>
The following investment restrictions are deemed fundamental policies and may
be changed only by the approval of the holders of a "majority" of the Fund's
shares (as defined under "General Information"):
1. The Fund will not borrow money, except from banks for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total
assets; or mortgage, pledge or hypothecate its assets to secure any
borrowing except to secure temporary or emergency borrowing and then only
in an amount not exceeding 15% of the value of its total assets. See the
Statement of Additional Information for a further restriction undertaken in
connection with registration in a certain state.
2. The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which, with their predecessors, have not had at least
three years of continuous operation.
A list of other restrictions on the Fund's investment activities which cannot
be changed without the approval of the holders of a majority of the Fund's
shares as defined in the 1940 Act appears in the Statement of Additional
Information.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests with
the Fund's Directors. There are currently eight Directors, six of whom are not
"interested persons" of the Fund within the meaning of that term under the
1940 Act. The Board meets regularly five times each year, and at other times
as necessary.
By virtue of the functions performed by Stratton Management Company as
Investment Advisor, the Fund requires no employees other than its executive
officers, all of whom are employed by the Advisor. Three of the Advisor's
employees devote full-time to the affairs and administration of the Fund,
Stratton Growth Fund, Inc., and The Stratton Funds, Inc. (collectively, the
"Stratton Group"). Three other employees of the Advisor also devote a
significant amount of time to the affairs of the Stratton Group.
The Statement of Additional Information contains the names of and general
background information regarding each Director and executive officer of the
Fund.
INVESTMENT ADVISOR
The Investment Advisor to the Fund is Stratton Management Company (the
"Advisor"), Plymouth Meeting Executive Campus, 610 W. Germantown Pike, Suite
300, Plymouth Meeting, PA 19462-1050.
The Advisor provides investment advisory services, consisting of portfolio
management, for a variety of individuals and institutions and had
approximately $1.3 billion in assets under management as of March 31, 1996.
The principal executive officer of the Advisor is James W. Stratton, who owns
all of the Advisor's issued and outstanding voting securities. Since 1980, Mr.
Stratton has been primarily responsible for the day-to-day investment
management of the Fund's portfolio. Mr. Stratton also serves as Chairman of
the Board of the Fund, Stratton Growth Fund, Inc. and The Stratton Funds, Inc.
As of April 30, 1996, the Profit Sharing Plan of the Advisor owned 34,278
shares or 0.8% of the Fund's outstanding shares.
6
<PAGE>
The Advisor also provides investment advice to the Stratton Growth Fund, Inc.
("SGF"), a no-load fund whose primary objective is growth of capital with
current income from interest and dividends as a secondary objective. SGF's
investments will normally consist of common stock and securities convertible
into or exchangeable for common stock. The Advisor also provides investment
advice to Stratton Small-Cap Yield Fund ("SSCY"), a no-load series of The
Stratton Funds, Inc., whose objective is to achieve both dividend income and
capital appreciation through investment in the equity securities of companies
with total market capitalizations at the time of investment of less than $500
million and which are outside the Standard & Poor's 500 Index. As of April 30,
1996, SGF and SSCY had net assets of $42.8 million and $20.1 million,
respectively.
The Fund entered into its current Investment Advisory Agreement (the
"Agreement") with the Advisor as of July 1, 1989. The Agreement was approved
by the Fund's shareholders on June 22, 1989 and was last approved by the
Fund's Board of Directors on June 20, 1995. Subject to the supervision and
direction of the Fund's Board of Directors, the Advisor manages the Fund's
investment portfolio in accordance with the Fund's stated investment objective
and policies, makes investment decisions for the Fund and places orders to
purchase and sell securities on behalf of the Fund.
The Advisor performs these services for an investment advisory fee payable
monthly at an annual rate of 5/8 of 1% of the Fund's daily net asset value.
The Advisor may also charge the Fund a portion of the costs of: (1) any
equipment used solely in Fund operations; and (2) certain administrative and
accounting services for the Fund; provided, however, that such reimbursement
shall be limited to the amount which would cause the ratio of net operating
expenses to average net assets for the remaining fiscal year not to exceed 2%.
This reimbursement is in addition to the fee paid to the Advisor for
investment advisory services.
For a more complete description of the terms of the Investment Advisory
Agreement, as well as for the guidelines followed by the Advisor in seeking to
obtain the best price and execution of the purchase and sale of securities for
the Fund, refer to the Statement of Additional Information.
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent and responsibility for certain accounting services
(e.g., computation of the net asset value of the Fund's shares and maintenance
of the Fund's books and financial records) were transferred from the Advisor
to Fund/Plan. At that time, the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense reimbursements from the Fund in the foreseeable future.
Fund/Plan currently receives a fee at the annual rate of $26,000 for these
services.
The Fund has also entered into an Administration Agreement with Fund/Plan
dated March 1, 1990. As a result of the Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan including responsibility for all federal and state
compliance matters. Fund/Plan receives a fee payable monthly at the annual
rate of $30,000 per year for providing these services. Although the Advisor
was entitled to receive
7
<PAGE>
reimbursement from the Fund for the expenses incurred in the performance of
these services, such reimbursement was never sought. Accordingly, the Advisor
has voluntarily agreed to waive $15,000 annually of the advisory fees due it
under the Investment Advisory Agreement to offset a significant portion of the
fee that the Fund will incur under the Administration Agreement. This fee
waiver can be terminated or reduced by the Advisor upon 60 days prior written
notice to the Fund.
COMPUTATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once each business day
as of the close of regular trading hours (currently 4:00 p.m. Eastern time) on
the New York Stock Exchange. Such determination will be made by dividing the
value of all securities and other assets (including dividends accrued but not
collected) less any liabilities (including accrued expenses), by the total
number of shares outstanding.
Portfolio securities are valued as follows:
1. Securities listed or admitted to trading on any national securities
exchange are valued at their last sale price on the exchange where the
securities are principally traded or, if there has been no sale on that
date, at the mean between the last reported bid and asked prices.
2. Securities traded in the over-the-counter market are valued at the last
sale price, if carried in the National Market Issues section by NASDAQ;
other over-the-counter securities are valued at the mean between the
closing bid and asked prices obtained from a principal market maker.
3. All other securities and assets are valued at their fair value as
determined in good faith by the Board of Directors of the Fund, which may
include the amortized cost method for securities maturing in sixty days or
less and other cash equivalent investments.
Determination of the net asset value may be suspended when the right of
redemption is suspended as provided under "How to Redeem Fund Shares" on pages
11 through 14.
HOW TO BUY FUND SHARES
Shares of the Fund are offered on a continuous basis at the net asset value.
The net asset value per share of the Fund, and hence the purchase price of the
shares, will vary with the value of securities held in the Fund's portfolio.
Purchasers of the Fund's shares pay no "sales load"; the full amount of the
purchase price goes toward the purchase of shares of the Fund. Purchases are
made at the net asset value next determined following receipt of a purchase
order by the Fund's Transfer Agent, Fund/Plan, at the address set forth below,
accompanied by payment for the purchase. The Fund may also from time to time
accept wire purchase orders from broker/dealers and institutions who have been
approved previously by the Fund.
Orders for shares of the Fund received prior to the close of regular trading
hours on the New York Stock Exchange (currently 4:00 p.m. Eastern time) are
confirmed at the net asset value determined at the close of regular trading
hours on the Exchange on that day.
8
<PAGE>
Orders received at the address set forth below subsequent to the close of
regular trading hours on the New York Stock Exchange will be confirmed at the
net asset value determined at the close of regular trading hours on the next
day the Exchange is open.
INVESTING BY MAIL
An account may be opened and shares of the Fund purchased by completing the
Investment Application enclosed within this Prospectus and sending the
Application, together with a check for the desired amount, payable to "Stratton
Monthly Dividend Shares, Inc." to the Fund c/o Fund/Plan Services, Inc., 2 W.
Elm Street, P.O. Box 874, Conshohocken, PA 19428. The minimum amount for the
initial purchase of shares of the Fund is $2,000. Subsequent purchases may be
made in amounts of $100 or more. (Note: There are no minimum investment amounts
applied to retirement plans.) After each purchase you will receive an account
statement for the shares purchased. Once a shareholder's account has been
established, additional purchases may be made by sending a check made payable
to "Stratton Monthly Dividend Shares, Inc." to the Fund c/o Fund/Plan Services,
Inc., P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of
your account statement and include your Fund account number on your check (as
well as the attributable year for retirement plan investments, if applicable).
PLEASE NOTE: A $20 FEE WILL BE CHARGED TO YOUR ACCOUNT FOR ANY PAYMENT CHECK
RETURNED TO THE CUSTODIAN.
INVESTING BY WIRE
- -----------------
You may also pay for shares by instructing your bank to wire Federal funds to
the Fund's Transfer Agent. Federal funds are monies of member banks within the
Federal Reserve System. Your bank must include the full name(s) in which your
account is registered and your Fund account number, and should address its wire
as follows:
UNITED MISSOURI BANK KC NA
ABA # 10-10-00695
For: Fund/Plan Services, Inc.
Account # 98-7037-071-9
FBO: "STRATTON MONTHLY DIVIDEND SHARES, INC."
Account of (exact name(s) of account registration)
---------------------------------------
Shareholder Account #
-----------------------------
If you are opening a new account by wire transfer, you must first telephone the
Fund's Transfer Agent at 800-441-6580 to request an account number and furnish
the Fund with your social security or other tax identification number. A
completed application with signature(s) of registrant(s) must be filed with the
Fund immediately subsequent to the initial wire. Your bank will generally
charge a fee for this wire. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve wire
systems.
PLEASE NOTE: YOUR INITIAL FUND ACCOUNT MUST SATISFY THE $2,000 MINIMUM BALANCE
REQUIREMENT IN ORDER TO PARTICIPATE IN THE FOLLOWING PROGRAMS OR PLANS.
9
<PAGE>
AUTOMATIC INVESTMENT PLAN
Shares of the Fund may be purchased through our "AUTOMATIC INVESTMENT PLAN"
(tear-out application in back of this Prospectus). The Plan provides a
convenient method by which investors may have monies deducted directly from
their checking, savings or bank money market accounts for investment in the
Fund. The minimum investment pursuant to this Plan is $100 per month. The
account designated will be debited in the specified amount, on the date
indicated, and Fund shares will be purchased. Only an account maintained at a
domestic financial institution which is an Automated Clearing House ("ACH")
member may be so designated. The Fund may alter, modify or terminate this Plan
at any time.
DIRECT DEPOSIT PROGRAM
- ----------------------
This program enables a shareholder to purchase additional shares by having
certain payments from the Federal government ONLY (i.e. Federal salary, Social
Security and certain veterans, military or other payments) automatically
deposited into the shareholder's account in the Fund. The minimum investment is
$100.
To elect this privilege, a shareholder must complete a Direct Deposit
Enrollment Form for each type of payment desired. The form may be obtained by
contacting the Fund's Transfer Agent, Fund/Plan Services, Inc., at the address
or telephone number shown below. Death or legal incapacity will terminate a
shareholder's participation in this program. A shareholder may terminate their
participation by notifying, in writing, the appropriate Federal agency. In
addition, the Fund may terminate participation upon 30 days' notice to the
shareholder.
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- ----------------------------------------------------------------
Any shareholder may at any time request and receive automatic reinvestment of
any Fund income dividends and capital gains distributions, or income dividends
only, or capital gains distributions only, in additional shares of the Fund
unless the Fund's Board of Directors determines otherwise. The Fund will send
the shareholder an account statement reflecting all such reinvestments. The
$100 minimum requirement for subsequent investments does not apply to the
reinvestment of income dividends and/or capital gain distributions.
The election to reinvest may be made on the Investment Application enclosed
within this Prospectus or by writing to Stratton Monthly Dividend Shares, Inc.,
c/o Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA
19428-0874. Any such election will automatically continue for subsequent
dividends, and/or distributions until written revocation is received by the
Fund. If no election is chosen the Fund will automatically reinvest your
dividends and capital gains.
ADDITIONAL INFORMATION
- ----------------------
Shares of the Fund may be purchased or redeemed through certain broker/dealers
who may charge a transaction fee, which would not otherwise be charged if the
shares were purchased directly from the Fund.
The Fund reserves the right to reject purchases under circumstances or in
amounts considered disadvantageous to the Fund. CERTIFICATES WILL NOT BE ISSUED
UNLESS REQUESTED IN WRITING BY THE REGISTERED SHAREHOLDER(S).
10
<PAGE>
The Fund is required by Federal tax law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions)
paid to shareholders who have not complied with IRS regulations regarding Tax
ID Certification. In order to avoid this withholding requirement, you must
certify via signature on your Application, or on a separate W-9 Form supplied
by the Transfer Agent, that your Social Security or Taxpayer Identification
Number is correct (or you are waiting for a number to be issued to you), and
that you are currently not subject to backup withholding, or you are exempt
from backup withholding.
While the Fund provides most shareholder services, certain special services,
such as a request for a historical transcript of an account, may involve an
ADDITIONAL FEE. To avoid having to pay such a fee for these special services,
it is important that you SAVE your last Year-to-Date Confirmation Statement
received each year.
PLEASE REFER ALL QUESTIONS AND CORRESPONDENCE ON NEW AND EXISTING ACCOUNTS
(SUCH AS PURCHASES OR REDEMPTIONS, OR STATEMENTS NOT RECEIVED), DIRECTLY TO
THE FUND'S TRANSFER AGENT, BY WRITING TO FUND/PLAN SERVICES, INC., 2 W. ELM
STREET, P.O. BOX 874, CONSHOHOCKEN, PA 19428-0874, OR BY CALLING FUND/PLAN'S
CUSTOMER SERVICE DEPARTMENT AT 800-441-6580. PLEASE REFERENCE YOUR FUND NAME
AND ACCOUNT NUMBER.
HOW TO REDEEM FUND SHARES
BY WRITTEN REQUEST
- ------------------
Shareholders may redeem shares of the Fund by mail, by writing directly to the
Fund's Transfer Agent, Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box
874, Conshohocken, PA 19428-0874, and requesting liquidation of all or any
part of their shares. The redemption request must be signed exactly as the
shareholder's name appears in the registration and must include the Fund name
and account number. If shares are owned by more than one person, the
redemption request must be signed by all owners exactly as their names appear
in the registration. Shareholders holding stock certificates must deliver them
along with their signed redemption requests. To protect your account, the
Transfer Agent and the Fund from fraud, signature guarantees are required for
certain redemptions. SIGNATURE GUARANTEES ARE REQUIRED FOR: (1) all
redemptions of $5,000 or more; (2) any redemptions if the proceeds are to be
paid to someone other than the person(s) or organization in whose name the
account is registered; (3) any redemptions which request that the proceeds be
wired to a bank; (4) requests to transfer the registration of shares to
another owner; and (5) any redemption if the proceeds are to be sent to an
address other than the address of record. The Transfer Agent requires that
signatures be guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. The Transfer Agent cannot
accept guarantees from notaries public. In certain instances, the Fund may
require additional
11
<PAGE>
documents, such as certified death certificates or proof of fiduciary or
corporate authority. (NOTE: PLEASE CALL OUR TRANSFER AGENT TO VERIFY REQUIRED
LANGUAGE FOR ALL RETIREMENT PLAN REDEMPTION REQUESTS.) No redemption shall be
made unless a shareholder's investment application is first on file. In
addition, the Fund will not accept redemption requests until checks (including
certified checks or cashier's checks) received for the shares purchased have
cleared, which can be as long as 15 days.
Redemption requests mailed to the Fund's Advisor located in Plymouth Meeting,
PA must be forwarded to the Transfer Agent and will not be effected until they
are received in good order by the Transfer Agent. The Transfer Agent cannot
accept redemption requests which specify a particular forward date for
redemption.
BY AUTOMATED CLEARING HOUSE ("ACH")
- -----------------------------------
A shareholder may elect to have redemption proceeds, cash distributions or
systematic cash withdrawal payments transferred to his or her bank, savings and
loan association or credit union that is an on-line member of the ACH system.
There are no fees associated with the use of the ACH service.
Written ACH redemption requests must be received by the Fund's Transfer Agent
before 4 p.m. Eastern time to receive that day's closing net asset value. ACH
redemptions will be sent on the day following the shareholder's request; funds
will be available two days later.
Redemption proceeds (including systematic cash withdrawals), as well as
dividend and capital gains distributions, may be sent to a shareholder via
Federal Funds wire. However, the Fund's Transfer Agent will charge a $9 fee for
each Federal Funds wire transmittal, which will be deducted from the amount of
the payment.
SYSTEMATIC CASH WITHDRAWAL PLAN
- -------------------------------
The Fund offers a Systematic Cash Withdrawal Plan as another option which may
be utilized by an investor who wishes to withdraw funds from his or her account
on a regular basis. To participate in this option, an investor must either own
or purchase shares having a value of $10,000 or more. Automatic payments by
check will be mailed to the investor on either a monthly, quarterly, semi-
annual or annual basis in amounts of $50 or more. All withdrawals are processed
on the 25th of the month or, if such day is not a business day, on the next
business day and paid promptly thereafter. Please complete the appropriate
section on the Investment Application enclosed within this Prospectus,
indicating the amount of the distribution and the desired frequency.
An investor should realize that if withdrawals exceed income dividends and
capital gains distributions, the invested principal will be depleted. Thus,
depending on the size of the withdrawal payments and fluctuations in the value
of the shares, the original investment could be exhausted entirely. An investor
may change or stop the Plan at any time by written notice to the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS MUST BE AUTOMATICALLY REINVESTED TO
PARTICIPATE IN THIS PLAN. Stock certificates cannot be issued under the
Systematic Cash Withdrawal program.
12
<PAGE>
This is your
INVESTMENT APPLICATION
Detach and mail to:
Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
12a
<PAGE>
[LOGO APPEARS HERE]
[NO-LOAD LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
MAIL TO: FUND/PLAN SERVICES, INC., P.O. BOX 874, CONSHOHOCKEN, PA 19428
1. INITIAL INVESTMENT ($2000 MINIMUM)
FORM OF PAYMENT
[ ]Check for $ enclosed (payable to "Stratton Monthly Dividend
Shares, Inc.")
[ ]BY WIRE An initial purchase of $ was wired on by
Date
__________________________ to account # ________________________
Name of your Bank or Broker Number assigned by
F/P/S
2.REGISTRATION (PLEASE PRINT) NO CERTIFICATES WILL BE ISSUED UNLESS REQUESTED
IN WRITING.
- -------------------------------------------------------------------------------
INDIVIDUAL
-- --
------------------------------------------ --------------------------
First name Middle Initial Last Name Social Security #
-- --
------------------------------------------ --------------------------
Jt. Owner First Name*Middle Initial Last Social Security #
Name
*(Joint ownership with rights of survivorship unless otherwise noted).
- --------------------------------------------------------------------------------
GIFT TO MINORS
-------------------------------------------------------------------------
Name of Custodian (name one only) As Custodian For (name one only)
Under the--------------- Uniform Gift to Minors Act -- --
--------------------
State Minor's Social Security
#
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS**
-------------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
--
----------------------- ----------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
**Complete Corporate Resolution attached, if applicable.
- --------------------------------------------------------------------------------
3.MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
-------------------------------------------------------------------------
Street Address & Apt. #
--
-------------------------------------- ---- -------------------------
City State Zip & ext.
( ) ____________________ ( ) ____________________
Residence Telephone Number Business Telephone Number
<PAGE>
4. DISTRIBUTION OPTIONS (SEE PAGE 10 FOR MORE DETAIL)
Income Dividends (check one box/line only) [ ] reinvested [ ] paid in cash
Capital Gains Distributions (check one box/line only) [ ] reinvested
[ ] paid in cash
[refer to box 7 below for instructions cash if cash option via ACH is desired]
5. SYSTEMATIC WITHDRAWAL PLAN (MINIMUM INITIAL INVESTMENT $10,000) SEE PAGE 12
FOR MORE DETAIL.
A check in the amount of $________ (minimum $50) will be sent to you at your
address of record unless otherwise noted.
Please select desired frequency:
[ ] Monthly, prior to last day
[ ] Quarterly, prior to last day of________,________,________, and _______.
[ ] Semi-Annual or Annual, prior to the last day of ________, ________, or
________.
6. TELEPHONE PRIVILEGE (SEE PAGE 14 FOR MORE DETAIL)
[ ] Exchange: Permits switching at any time between Stratton Growth Fund,
Inc., Stratton Monthly Dividend Shares, Inc. and Stratton
Small-Cap Yield Fund, provided such other shares may legally
be sold in the state of the investor's residence.
7. SPECIAL PROGRAMS (SEE PAGES 10 & 12 FOR MORE DETAIL)
To participate in the Direct Deposit Program, or to send cash distributions
via the Automated Clearing House System ("ACH"), please contact the Fund's
Transfer Agent at (800) 441-6580 to obtain the proper form(s).
8. SIGNATURE AND CERTIFICATION
The following is required by Federal tax law to avoid 31% backup
withholding; "By signing below, I certify under penalties of perjury that
the social security or taxpayer identification number entered above is
correct (or I am waiting for a number to be issued to me), and that I have
not been notified by the IRS that I am subject to backup withholding unless
I have checked the box." If you have been notified by the IRS that you are
subject to backup withholding, check box [ ].
Citizen of: [ ] United States [ ] Other (Please indicate)_____________________
Receipt of current Prospectus is hereby acknowledged. I (we) authorize
Fund/Plan Services, Inc. to act upon instructions for exchanges between
Funds received by telephone believed by it to be genuine.
----------------------------------------- -----------------------------
Signature [ ] Owner [ ] Custodian [ ] Trustee Date
----------------------------------------- -----------------------------
Signature of Joint Owner (if applicable) Date
<PAGE>
- -------------------------------------------------------------------------------
RESOLUTIONS
(This Section to be Completed by Corporations, Trusts, and Other
Organizations).
RESOLVED: That this corporation or organization become a shareholder of
Stratton Monthly Dividend Shares, Inc. (the "Fund") and that
- -------------------------------------------------------------------------------
(Name of Trustee)
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and take any action for it as may be
necessary or appropriate with respect to its shareholders account(s) with the
Fund, and it is FURTHER RESOLVED: That any one of the below noted officers is
authorized to sign any documents necessary or appropriate to appoint Fund/Plan
Services, Inc. as redemption agent of the corporation or organization for
shares of the Fund, to establish or acknowledge terms and conditions governing
the redemption of said shares or to otherwise implement the privileges elected
on the application.
- -------------------------------------------------------------------------------
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the ______________________
(Name of Corporation)
incorporated or formed under the laws of ______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on _____ at which a quorum
was present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Witness my hand and the seal of the corporation or organization this ____ day
of __________, 19_____.
- -------------------------------------- --------------------------------------
*Secretary-Clerk Other Authorized Officer (if
required)
* If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
ADDITIONAL INFORMATION
- ----------------------
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem shares in any account for its then
current net asset value (which will be paid to the shareholder within five
business days, or such shorter time period as may be required applicable
S.E.C. rules) if at any time the total investment does not have a value of at
least $500. The shareholder will be notified that the value of his or her
account is less than the required minimum and will be allowed at least 45 days
to bring the value of the account up to at least $500 before the redemption is
processed.
The redemption price will be the net asset value of the shares to be redeemed
as determined at the close of regular trading hours on the New York Stock
Exchange after receipt at the address set forth above of a request for
redemption in the form described above and the certificates (if any)
evidencing the shares to be redeemed. No redemption charge will be made.
Payment for shares redeemed is made within five business days, or such shorter
time period as may be required by applicable S.E.C. rules, after receipt of
the certificates (or of the redemption request where no certificates have been
issued) by mailing a check to the shareholder's address of record. PLEASE
NOTE, A $9 FEE WILL BE CHARGED TO YOUR ACCOUNT AT THE TIME OF REDEMPTION IF
INSTRUCTIONS TO WIRE PROCEEDS ARE GIVEN; THERE IS NO FEE TO MAIL PROCEEDS.
THE FUND MAY ALSO FROM TIME TO TIME ACCEPT TELEPHONE REDEMPTION REQUESTS, FROM
BROKER/DEALERS AND INSTITUTIONS WHO HAVE BEEN APPROVED PREVIOUSLY BY THE FUND.
Neither the Fund nor any of its service contractors will be liable for any
loss or expense or cost in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use such procedures as are considered
reasonable, including requesting a shareholder to correctly state his or her
Fund account number, the name in which his or her account is registered, his
or her banking institution, bank account number and the name in which his or
her bank account is registered. To the extent that the Fund fails to use
reasonable procedures to verify the genuineness of telephone instructions, it
and/or its service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized. During times of unusual market
conditions it may be difficult to reach the Fund by telephone. If the Fund
cannot be reached by telephone, shareholders should follow the procedures for
redeeming by mail as set forth above.
The right of redemption may not be suspended or payment upon redemption
deferred for more than five business days, or such time shorter time period as
may be required by applicable S.E.C. rules, except: (1) when trading on the
New York Stock Exchange is restricted as determined by the S.E.C. or such
Exchange is closed for other than weekends and holidays; (2) when the S.E.C.
has by order permitted such suspension; or (3) when an emergency, as defined
by the rules of the S.E.C., exists, making disposal of portfolio securities or
valuation of net assets of the Fund not reasonably practicable. In case of a
suspension of the determination of the net asset value, the right of
redemption is also suspended and unless a shareholder withdraws his request
for redemption, he or she will receive payment at the net asset value next
determined after termination of the suspension.
13
<PAGE>
As provided in the Fund's Articles of Incorporation, payment for shares
redeemed may be made either in cash or in-kind, or partly in cash and partly
in-kind. However, the Fund has elected, pursuant to Rule 18f-1 under the 1940
Act to redeem its shares solely in cash up to the lesser of $250,000 or one
percent of the net asset value of the Fund, during any 90 day period for any
one shareholder. Payments in excess of this limit will also be made wholly in
cash unless the Board of Directors believes that economic conditions exist
which would make such a practice detrimental to the best interests of the
Fund. Any portfolio securities paid or distributed in-kind will be in readily
marketable securities, and will be valued as described under "Computation of
Net Asset Value" on page 8. Subsequent sale of such securities would require
payment of brokerage commissions by the investor.
The value of a shareholder's shares on redemption may be more or less than the
cost of such shares to the shareholder, depending upon the net asset value of
the Fund's shares at the time of redemption.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the other Funds managed by
Stratton Management Company, Stratton Growth Fund, Inc. ("SGF") or The
Stratton Funds, Inc.--Stratton Small-Cap Yield Fund ("SSCY"), provided such
other shares may legally be sold in the state of the investor's residence. SGF
has a primary investment objective of possible growth of capital with current
income from interest and dividends as a secondary objective. SGF's investments
will normally consist of common stocks and securities convertible into or
exchangeable for common stock. SSCY has an investment objective of achieving
both dividend income and capital appreciation by investing in equity
securities, primarily common stock and securities convertible or exchangeable
for common stock of companies with total market capitalizations at the time of
investment of less than $500 million and which are outside the Standard &
Poor's 500 Index.
For more complete information about SGF and SSCY, including charges and
expenses, a current Prospectus of SGF or SSCY should be obtained and read
prior to seeking any such exchange. Shares may be exchanged by: (1) written
request; or (2) telephone if a special authorization form has been completed
and is on file with the Transfer Agent in advance. See "How to Redeem Fund
Shares--Additional Information" for a description of the Fund's policy
regarding telephone instructions.
PLEASE NOTE: Shareholders who have certificated shares in their possession
MUST surrender these shares to the Fund's Transfer Agent to be held on account
in unissued form PRIOR to taking advantage of either exchange privilege. When
returning certificates for this purpose only, signature(s) need NOT be
guaranteed. There are no sales charges involved. Shareholders who engage in
frequent exchange transactions may be prohibited from further exchanges or
otherwise restricted in placing future orders. The Fund reserves the right to
suspend the telephone exchange privilege at any time. An exchange for tax
purposes constitutes the sale of one fund and the purchase of another.
Consequently, the sale may involve either a capital gain or loss to the
shareholder for Federal income tax purposes.
14
<PAGE>
RETIREMENT PLANS
The Fund has available three types of tax-deferred retirement plans for its
shareholders: Defined Contribution Plans, for use by both self-employed
individuals and corporations; an Individual Retirement Account, for use by
certain eligible individuals with compensation (including earned income from
self-employment); and a 403(b)(7) Retirement Plan, for use by employees of
schools, hospitals, and certain other tax-exempt organizations or
associations. More detailed information about how to participate in these
plans, the FEES charged by the custodian, and the limits on contributions can
be found in the Statement of Additional Information. TO INVEST IN ANY OF THE
TAX-DEFERRED RETIREMENT PLANS, PLEASE CALL THE FUND FOR INFORMATION AND THE
REQUIRED SEPARATE APPLICATION.
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS:
TAX TREATMENT
The Fund expects to distribute monthly substantially all of its net investment
income, if any, and annually all of its net realized capital gains, if any.
Any distribution paid necessarily reduces the Fund's net asset value per share
by the amount of the distribution. Distributions may be reinvested in
additional shares of the Fund (See "Reinvestment of Income Dividends and
Capital Gains Distributions" on page 10).
For the fiscal year ended January 31, 1996, the Fund distributed dividends of
$1.92 per share from ordinary income, all of which was taxable.
For the fiscal year ended January 31, 1996 the Fund met the requirements for
the special tax treatment afforded certain investment companies and their
shareholders under Subchapter M of the Internal Revenue Code, and the Fund
expects that the requirements for special tax treatment under the Code will
continue to be met. Under such circumstances, the Fund is not subject to
Federal income tax on such part of its ordinary taxable income or net realized
long-term capital gains that it distributes to shareholders. Distributions
paid by the Fund from net investment income and short-term capital gains (but
not distributions paid from long-term capital gains) will be taxable as
ordinary income to shareholders, whether received in cash or reinvested in
additional shares of the Fund. Such ordinary income distributions will qualify
for the dividends received deduction for corporations to the extent of the
total qualifying dividends from domestic corporations received by the Fund for
the year. Shareholders who are citizens or residents of the United States will
be subject to Federal taxes with respect to long-term realized capital gains
which are distributed to them, whether or not reinvested in the Fund and
regardless of the period of time such shares have been owned by the
shareholders. These distributions do not qualify for the dividends received
deduction. Due to the nature of REITs' dividends, the Fund may or may not
realize a return of capital. Consequently, a portion of the Fund's total
distributions might also include return of capital. Shareholders will be
advised after the end of each calendar year as to the Federal income tax
consequences of dividends and distributions of the Fund made each year.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months, will be deemed for
Federal tax purposes to have been
15
<PAGE>
received by the shareholders and paid by the Fund on December 31 of such year
in the event such dividends are paid during January of the following year.
Prior to purchasing shares of the Fund, the impact of dividends or capital
gains distributions which are expected to be announced or have been announced,
but not paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares by an investor
prior to the record date will have the effect of reducing the per share net
asset value of his or her shares by the per share amount of the dividends or
distributions. All or a portion of such dividends or distributions, although in
effect a return of capital to the shareholder, is subject to taxes, which may
be at ordinary income tax rates.
A taxable gain or loss may be realized by an investor upon his or her
redemption, transfer or exchange of shares of the Fund, depending upon the cost
of such shares when purchased and their price at the time of redemption,
transfer or exchange. If a shareholder has held Fund shares for six months or
less and received a distribution taxable as capital gains attributable to those
shares, any loss he realizes on a disposition of those shares will be treated
as a capital loss to the extent of the earlier capital gain distribution.
The information above is only a short summary of some of the important Federal
tax considerations generally affecting the Fund and its shareholders. Income
and capital gains distributions may also be subject to state and local taxes.
Investors should consult their tax advisor with respect to their own tax
situation.
PERFORMANCE CALCULATIONS
From time to time, performance information such as total return and yield data
for the Fund may be quoted in advertisements or in communications to
shareholders. The Fund's total return may be calculated on an average annual
total return basis, and may also be calculated on an aggregate total return
basis, for various periods. Average annual total return reflects the average
annual percentage change in value of an investment in the Fund over the
measuring period. Aggregate total return reflects the total percentage change
in value over the measuring period. Both methods of calculating total return
assume that dividends and capital gains distributions made by the Fund during
the period are reinvested in Fund shares.
The yield of the Fund may be computed based on the net income of the Fund
during a 30-day (or one month) period (which period will be identified in
connection with the particular yield quotation). More specifically, the Fund's
yield may be computed by dividing the Fund's net income per share during a 30-
day (or one month) period by the net asset value per share on the last day of
the period and annualizing the result.
The total return and yield of the Fund may be compared to that of other mutual
funds with similar investment objectives and to bond and other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
total return of the Fund's shares may be compared to data prepared by Lipper
Analytical Services, Inc. and to indices prepared by Dow Jones & Co., Inc. and
Standard & Poor's Ratings Group.
16
<PAGE>
Performance quotations of the Fund represent the Fund's past performance, and
should not be considered as representative of future results. The investment
return and principal value of an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by broker-dealers, banks or other financial
institutions directly to their customer accounts in connection with
investments in shares of the Fund will not be included in the Fund's
calculations of yield and total return. Further information about the
performance of the Fund is included in the Fund's most recent Annual Report
which may be obtained without charge by contacting the Fund at (800) 634-5726.
DESCRIPTION OF COMMON STOCK
The Fund is a Maryland corporation organized on March 4, 1985, as successor to
a Delaware corporation organized on November 10, 1971. The Fund's authorized
capital is 10,000,000 shares of Common Stock, par value $1.00 per share. Each
share has equal voting, dividend, distribution and liquidation rights. The
outstanding shares are, and when issued for a consideration in excess of the
par value, the shares offered by this Prospectus will be, fully-paid and non-
assessable. Shares have no preemptive or conversion rights and are freely
transferable.
Shares may be issued as full or fractional shares and each fractional share
has proportionately the same rights as provided for full shares.
VOTING
The Fund's shares have non-cumulative 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 shares voting for the election of directors will
not be able to elect any directors.
The Fund does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The law under
certain circumstances provides shareholders with the right to call for a
meeting of shareholders to consider the removal of one or more directors. To
the extent required by law, the Fund will assist in shareholder communication
in such matters.
GENERAL INFORMATION
As used in this Prospectus the term "majority" of the Fund's outstanding
shares means with respect to the approval of an investment advisory agreement
or a change in fundamental policy, the holders of the lesser of: (1) 67% of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more than 50% of
the Fund's outstanding shares.
SERVICE PROVIDERS AND UNDERWRITER
Pursuant to an arrangement between the Fund, The Bank of New York and
Fund/Plan Services, Inc. ("Fund/Plan"), The Bank of New York, serves as
Custodian of all securities and cash owned by the Fund. The Custodian performs
no managerial or policy-making functions for the Fund.
17
<PAGE>
Pursuant to an agreement between the Custodian and Fund/Plan, Fund/Plan
performs certain administrative and recordkeeping services for the Custodian.
The Custodian reallows a portion of its custody fee to Fund/Plan for providing
such services.
Fund/Plan, serves as the Fund's Transfer Agent, Administrator and Fund
Accounting/Pricing Agent. Fund/Plan was acquired by FinDaTex, Inc. on January
1, 1986. Certain directors and officers of Stratton Management Company, the
Advisor to the Fund, and certain directors and officers of the Fund are
controlling shareholders of FinDaTex, Inc. During the Fund's last fiscal year,
Fund/Plan received fees of $228,235 for providing shareholder services, $30,000
for certain administrative services and $26,000 for accounting/pricing
services. Fund/Plan Broker Services, Inc. ("FPBS") was paid $3,000 for
underwriting services in connection with the registration of the Fund's shares
under state securities laws.
FPBS, 2 W. Elm Street, Conshohocken, PA 19428-0874, acts as underwriter to the
Fund pursuant to an agreement dated June 22, 1993. Also, Fund/Plan and FPBS are
affiliates of the Advisor inasmuch as FPBS, Fund/Plan and the Advisor are under
common control.
AUDITS AND REPORTS
Investors in the Fund will be kept informed of its progress through quarterly
reports showing diversification of portfolio, principal security changes,
statistical data and other significant data and annual reports containing
audited financial statements. The Fund's independent certified public
accountants for the fiscal year ended January 31, 1996 were Tait, Weller &
Baker.
18
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
- --------------------------------------------------------------------------------
HOW DOES IT WORK?
1. Fund/Plan Services, Inc., through our bank, United Missouri Bank KC NA,
draws an automatic clearing house (ACH) debit electronically against your
personal checking account each month, according to your instructions.
2. Choose any amount ($100 or more) that you would like to invest regularly and
your debit for this amount will be processed by Fund/Plan Services, Inc. as
if you had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the forms and the Fund Application Form if you do not already have
an existing account.
2. Mark one of your personal checks VOID, attach it to the forms below and mail
to Fund/Plan Services, Inc., P.O. Box 874, Conshohocken, PA 19428-0874.
3. As soon as your bank accepts your authorization, debits will be generated
and your Automatic Investment Plan started. In order for you to have ACH
debits from your account, your bank must be able to accept ACH transactions
and/or be a member of an ACH association. Your branch manager should be able
to tell you your bank's capabilities. We cannot guarantee acceptance by your
bank.
4. Please allow one month for processing of your Automatic Investment Plan
before the first debit occurs.
- -------------------------------------------------------------------------------
- --------------------------------------------------
AUTOMATIC INVESTMENT PLAN APPLICATION
TO: Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428-0874
Please start an Automatic Investment Plan for me and invest __________________.
($100 or more)
on the [ ] 10th [ ] 15th [ ] 20th of each month,
in shares of STRATTON MONTHLY DIVIDEND SHARES, INC.
Check one:
[ ] I am in the process of establishing an account.
or
[ ] My account number is: ______________________________________________________
________________________________________________________________________________
Name as account is registered
________________________________________________________________________________
Street
________________________________________________________________________________
City State Zip + ext.
I understand that my ACH debit will be dated on the day of each month as
indicated above or as specified by written request. I agree that if such debit
is not honored upon presentation, Fund/Plan Services, Inc. may discontinue this
service and any share purchase made upon deposit of such debit may be
cancelled. I further agree that if the net asset value of the shares purchased
with such debit is less when said purchase is cancelled than when the purchase
was made, Fund/Plan Services, Inc. shall be authorized to liquidate other
shares or fractions thereof held in my account to make up the deficiency. This
Automatic Investment Plan may be discontinued by Fund/Plan Services, Inc. upon
30-days written notice or at any time by the investor by written notice to
Fund/Plan Services, Inc. which is received not later than 5 business days prior
to the above designed investment date.
Signature(s):____________________________
_______________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - -
19
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
- --------------------------------------------------------------------------------
BANK REQUEST AND AUTHORIZATION
TO: ______________________________ ____________________
Name of Your Bank Bank Checking Account Number
_____________________________________________________________________________
Address of Bank or Branch Where Account is Maintained
As a convenience to me, please honor ACH debits on my account drawn by
Fund/Plan Services, Inc., United Missouri Bank KC NA and payable to "STRATTON
MONTHLY DIVIDEND SHARES, INC."
I agree that your rights with respect to such debit shall be the same as if it
were a check drawn upon you and signed personally by me. This authority shall
remain in effect until you receive written notice from me changing its terms or
revoking it, and until you actually receive such notice, I agree that you shall
be fully protected in honoring such debit.
I further agree that if any debit is dishonored, whether with or without cause
or whether intentionally or inadvertently, you shall be under no liability
whatsoever.
DEPOSITOR'S ____________________________________________________________________
Signature of Bank Depositor(s) as shown on bank records.
NOTE: Your bank must be able to accept ACH transactions and/or be a member of
an ACH association in order for you to use this service.
- -------------------------------------------------------------------------------
- --------------------------------------------------
INDEMNIFICATION AGREEMENT
TO: The bank named above
So that you may comply with your Depositor's request and authorization,
STRATTON MONTHLY DIVIDEND SHARES, INC. agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising from
or in connection with the payment by you of a debit drawn by Fund/Plan
Services, Inc. to the order of STRATTON MONTHLY DIVIDEND SHARES, INC.
designated on the account of your depositor(s) executing the authorization
including any costs or expenses reasonably incurred in connection with such
loss. STRATTON MONTHLY DIVIDEND SHARES, INC. will not, however, indemnify
you against any loss due to your payment of any debit generated against
insufficient funds.
2. To refund to you any amount erroneously paid by you to Fund/Plan Services,
Inc. on any such debit if claim for the amount of such erroneous payment is
made by you within 3 months of the date of such debit on which erroneous
payment was made.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - -
20
<PAGE>
PROSPECTUS
JUNE 1, 1996
DIRECTORS
LYNNE M. CANNON
JOHN J. LOMBARD, JR.
ROSE J. RANDALL
HENRY A. RENTSCHLER
MERRITT N. RHOAD, JR.
ALEXANDER F. SMITH
RICHARD W. STEVENS
JAMES W. STRATTON
OFFICERS
JAMES W. STRATTON
Chairman
GERARD E. HEFFERNAN
President
JOHN A. AFFLECK
JOANNE K. KUZMA
FRANK H. REICHEL, III
Vice President
PATRICIA L. SLOAN
Secretary and Treasurer
JAMES A. BEERS
CAROL L. ROYCE
Assistant Secretary
Assistant Treasurer
MEMBER OF
==================
NO-LOAD(TM)
100% MUTUAL FUND
COUNCIL
==================
INVESTMENT ADVISOR
STRATTON MANAGEMENT COMPANY
Plymouth Meeting Executive Campus
610 W. Germantown Pike, Suite 300
Plymouth Meeting, PA 19462-1050
Telephone: 610-941-0255
TRANSFER AGENT AND DIVIDEND PAYING AGENT
FUND/PLAN SERVICES, INC.
2 W. Elm Street, P.O. Box 874
Conshohocken, PA 19428-0874
Telephones: 610-834-3500 . 800-441-6580
CUSTODIAN BANK
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
INDEPENDENT ACCOUNTANTS
TAIT, WELLER & BAKER
2 Penn Center Plaza, Suite 700
Philadelphia, PA 19102-1707
LEGAL COUNSEL
DRINKER BIDDLE & REATH
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
[LOGO OF STRATTON MONTHLY DIVIDEND
SHARES, INC. APPEARS HERE]
A NO-LOAD FUND
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1996
This Statement of Additional Information is not a Prospectus but should be read
in conjunction with the current Prospectus for Stratton Monthly Dividend Shares,
Inc. (the "Fund"), dated June 1, 1996. A copy of the Prospectus for the
Fund may be obtained by contacting the Fund's "Distributor", Fund/Plan Broker
Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874, or
by telephoning (800) 634-5726.
<PAGE>
TABLE OF CONTENTS
Page
Statement of Additional Information.............................................
Investment Restrictions.........................................................
Directors and Officers of the Fund..............................................
The Investment Advisor and Other Service Providers..............................
The Investment Advisor........................................................
Accounting Agent..............................................................
The Administrator & Transfer Agent............................................
Auditor & Custodian...........................................................
Portfolio Transactions and Brokerage Commissions................................
Retirement Plans................................................................
Underwriter.....................................................................
Additional Information Concerning Taxes.........................................
Additional Information on Performance Calculations..............................
Miscellaneous...................................................................
Financial Statements............................................................
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction with the
Prospectus of the Fund having the same date as this Statement of Additional
Information. Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No investment in
shares of the Fund should be made without first reading the Prospectus of the
Fund.
INVESTMENT RESTRICTIONS
A list of the Fund's investment policies and restrictions, including those
policies and restrictions that can be changed by the Board of Directors without
shareholder approval, can be found on pages 5 & 6 of the Fund's
Prospectus.
The following investment restrictions are deemed fundamental policies and may be
changed only by the approval of the holders of a "majority" of the Fund's shares
(as defined under "General Information" in the Fund's prospectus):
THE FUND WILL NOT:
1. Issue any senior securities (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")), except in so far as investment
restriction 1 on pagex of the Prospectus may be deemed to be an issuance
of a senior security.
2. Act as an underwriter or purchase securities which the Fund may not be
free to sell to the public without registration of the securities under
the Securities Act of 1933.
3. Purchase or sell real estate, commodities, or commodity contracts.
4. Invest less than 75% of the value of its total assets in securities
limited in respect to any one issuer to an amount not exceeding 5% of
the value of its total assets, Government securities
<PAGE>
(as defined in the (1940-Act) cash and cash items. (There is no similar
restriction as to the investment of the balance of the Fund's total
assets). See page x for a further restriction undertaken in connection
with registration in certain states.
5. Purchase or own 5% or more of the outstanding voting securities of any
electric or gas utility company (as defined in the Public Utility
Holding Company Act of 1935), or purchase or own 10% or more of the
outstanding voting securities of any other issuer.
6. Purchase the securities of an issuer, if, to the Fund's knowledge, one
or more Officers or Directors of the Fund or of its Investment Advisor
individually own beneficially more than 0.5%, and those owning more than
0.5% together own beneficially more than 5%, of the outstanding
securities of such issuer.
7. Make loans to other persons, except that the purchase of a portion of an
issue of publicly distributed debt securities (whether or not upon
original issuance) shall not be considered the making of a loan.
8. Purchase securities on margin, except that it may obtain such short-term
credits as may be necessary for the clearance of purchases or sales of
securities.
9. Participate on a joint or a joint-and-several basis in any securities
trading account.
10. Invest in puts, calls or combinations thereof or make short sales.
11. Purchase the securities of other investment companies
12. Purchase securities which do not have readily available market
quotations.
Real estate investment trusts ("REITs") are not considered investment companies,
and therefore are not subject to the restriction in limitation 11 above. The
restriction in limitation 3 on the purchase or sale of real estate does not
include investments by the Fund in securities secured by real estate or
interests therein or issued by companies or investment trusts which invest in
real estate or interests therein.
The following investment restrictions may be changed by the Board of Directors
of the Fund:
THE FUND WILL NOT:
1. Invest for the purpose of exercising control or management.
2. Invest in warrants, except when acquired as a unit with other securities.
The Fund has agreed, for purposes of compliance with certain state securities
regulations, that so long as its shares are registered and are being offered in
such states, that the Fund will: (1) not purchase a security, including
commercial paper or variable amount master notes, of any one issuer if
immediately after such purchase more than five percent of the value of its total
assets would be invested in such issuer; (2) not mortgage, pledge or
hypothecate its assets to secure any borrowing except to secure temporary
borrowing or emergency borrowing and then only in an amount not exceeding 10% of
the value of its total assets; and (3) not invest in interests in oil, gas or
other mineral exploration or development programs. These policies are subject
to change without the affirmative vote of a majority of the Fund's outstanding
shares.
The percentage limitations on investments are applied at the time an investment
is made. An actual
<PAGE>
percentage in excess of a stated percentage limitation does not violate the
limitation unless such excess exists immediately after an investment is made and
results from the investment. In other words, appreciation or depreciation of
the Fund's investments will not cause a violation of the limitations. In
addition, the limitations will not be violated if the Fund receives securities
by reason of a merger or other form of reorganization.
DIRECTORS AND OFFICERS OF THE FUND
The directors and executive officers of the Fund, their position with the Fund,
their addresses, affiliations, if any, with the Investment Advisor, and
principal occupations during the past five years are set forth below. Each of
the directors named below is also a director of Stratton Growth Fund, Inc. and
The Stratton Funds, Inc. and each of the officers named below also holds the
same position, unless otherwise noted, with Stratton Growth Fund, Inc. and The
Stratton Funds, Inc.
James W. Stratton*
Director/Chairman
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mr. Stratton is the Chairman of the Board of Directors and President of the
Investment Advisor, Stratton Management Company. He is a Director of ALCO
Standard (diversified distribution and manufacturing company), Amerigas Propane
Ltd. (energy), FinDaTex, Inc. (financial services), Gilbert Associates, Inc.
(engineering/consulting services), Teleflex, Inc. (aerospace controls and
medical products) and UGI Corp., Inc. (utility-natural gas).
Lynne M. Cannon*
Director
2 W. Elm Street
Conshohocken, PA 19428
Ms. Cannon is a Senior Vice President of Relationship Management of Fund/Plan
Services, Inc. She was formerly employed as Vice President of Mutual Funds of
Independence Capital Management, Inc. (investment advisor). Prior to
Independence Capital, she was Vice President of AMA Investment Advisors, Inc.
(investment advisor & broker/dealer).
John J. Lombard, Jr.
Director
2000 One Logan Square
Philadelphia, PA 19103
Mr. Lombard is a partner in the law firm of Morgan, Lewis & Bockius LLP .
Rose J. Randall
Director
20 Laughlin Lane
Philadelphia, PA 19118
Ms. Randall is a private investor.
<PAGE>
Henry A. Rentschler
Director
P.O. Box 962
Paoli, PA 19301
Mr. Rentschler is a private investor. He was formerly the President of Baldwin-
Hamilton Company, a division of Joy Environmental Equipment Co. (manufacturer of
renewal parts for Baldwin locomotives and diesel engines) and was also formerly
a Director of the Society for Industrial Archeology (which promotes the study
and preservation of the physical survivals of our technological and industrial
past).
Merritt N. Rhoad, Jr.
Director
640 Bridle Road
Custis Woods
Glenside, PA 19038
Mr. Rhoad is a private investor. He was formerly a senior systems engineer with
International Business Machines Corporation.
Alexander F. Smith
Director
Cricket Springs
Geigertown, PA 19523
Mr. Smith is a private investor. He was formerly the Chairman and Director of
Gilbert Associates, Inc. (engineering/consulting/services/).
Richard W. Stevens
Director
One Jenkintown Station
115 W. Avenue, Suite 108
Jenkintown, PA 19046
Mr. Stevens is an attorney in private practice. He was formerly a partner in
the law firm of Clark, Ladner, Fortenbaugh and Young.
Gerard E. Heffernan *
President
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mr. Heffernan is a Senior Vice President and Director of the Investment Advisor,
Stratton Management Company. He is Vice President of Stratton Growth Fund, Inc.
and The Stratton Funds, Inc. He is secretary of FinDaTex, Inc.
John A. Affleck *
Vice President
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mr. Affleck is a Senior Vice President and Director of the Investment Advisor,
Stratton Management Company. He is President of Stratton Growth Fund, Inc. and
Vice President of The Stratton Funds, Inc.
Joanne E. Kuzma
Vice President
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mrs. Kuzma is the Director of Trading and a Managing Partner of the
Investment Advisor, Stratton Management Company. She is Vice President of
Compliance for Stratton Growth Fund, Inc. and The Stratton Funds, Inc.
Frank H. Reichel, III *
Vice President
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mr. Reichel is a Vice President, a Director and the Director of Research of the
Investment Advisor, Stratton Management Company. He is President of The
Stratton Funds, Inc. and Vice President of Stratton Growth Fund, Inc.
<PAGE>
Patricia L. Sloan
Secretary/Treasurer
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Ms. Sloan is an employee of the Investment Advisor, Stratton Management Company.
James A. Beers
Assistant Secretary/Treasurer
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mr. Beers is an employee of the Investment Advisor, Stratton Management
Company.
Carol L. Royce
Assistant Secretary/Treasurer
610 W. Germantown Pike
Suite 300
Plymouth Meeting, PA 19462
Mrs. Royce is an employee of the Investment Advisor, Stratton Management
Company.
- ------
* As defined in the 1940 Act, Mr. Stratton is an "interested person" of
the Fund by reason of his positions with the Fund's Investment Advisor
and Ms. Cannon is an "interested person" of the Fund by reason of her
employment with Fund/Plan Services, Inc. Several of the Directors and
officers of the Fund are controlling shareholders of FinDaTex, Inc.,
which acquired Fund/Plan on January 1, 1986.
The officers and directors of the Fund who are also officers or employees of the
Advisor or Fund/Plan Services, Inc. receive no direct compensation from
the Fund for services to it. The Directors who are not "interested persons" of
the Fund receive fees and expenses for each meeting of the Board of Directors
they attend. Such Directors currently receive $750 for each Board Meeting
attended, and an annual retainer of $4,000. The Directors serve in the same
capacity for the other two Funds in the Stratton Family of Funds complex. There
are no separate audit, compensation or nominating committees of the Board of
Directors.
Set forth below are the total fees which were paid to each of the
Directors who are not "interested persons" during the fiscal period ended
January 31, 1996:
<TABLE>
<CAPTION>
Aggregate Fees Total Fees Paid
Director Paid by the Company by the Fund Complex
- -------- ------------------- -------------------
<S> <C> <C>
John J. Lombard, Jr. $5,644.01 $7,750
Rose J. Randall $5,082.47 $7,000
Henry A. Rentschler $5,644.01 $7,750
Merritt N. Rhoad, Jr. $5,644.01 $7,750
Alexander F. Smith $5,070.34 $7,000
Richard W. Stevens $5,070.34 $7,000
</TABLE>
As of April 30, 1996, the Directors and officers as a group beneficially
owned 77,729 shares, or 1.8% of the Fund's outstanding shares.
As of April 30, 1996, James W. Stratton beneficially owned 55,316 shares,
or 1.3% of the outstanding shares of the Fund; as of that same date,
the Profit Sharing Plan of the Investment Advisor
<PAGE>
owned 34,278 shares, or 0.8% of the Fund.
THE INVESTMENT ADVISOR AND OTHER SERVICE PROVIDERS
The Investment Advisor
The Investment Advisory Agreement (the "Agreement") requires the Advisor to
furnish research, statistical and administrative services and advice, reports
and recommendations with respect to the Fund's portfolio, and to compute the net
asset value of the Fund's shares and maintain the books and records of the Fund.
The Agreement provides that the Advisor is not required to give the Fund
preferential treatment as compared with the treatment given to any other
customer or investment company. In addition, the Advisor furnishes to the Fund
office space and facilities necessary in connection with the operation of the
Fund. The Fund pays, or arranges for others to pay, all other expenses in
connection with its operations.
The investment advisory fee payable under the Agreement is payable monthly, at
an annual rate of 5/8 of 1% of the Fund's daily net assets. During the fiscal
years ended January 31, 1994, 1995 and 1996, the fees paid to the Advisor were
$971,241, $829,796 and $794,629 respectively.
The Advisor may charge the Fund monthly for its cost in providing (1) any
equipment used in the Fund's operations, and (2) any administrative and
accounting services for the Fund including, without limitation, maintaining
financial records and bookkeeping, daily computation of net asset value per
share, registration of the Fund and its securities with the SEC and under
various state laws, and holding shareholders' meetings. The Advisor will in no
event seek reimbursement of costs which would result in the net operating
expenses of the Fund being in excess of two percent (2%) of the average net
asset value of the Fund for any fiscal year. The Advisor's costs which are to
be reimbursed are not intended to include any profit to the Advisor.
The Advisor has agreed to reimburse the Fund in an amount equal to the expenses
of the Fund in any fiscal year which exceed the permissible limits applicable to
the Fund in any state in which its shares are qualified for sale. At the
present time, the most restrictive state limitation limits the Fund's annual
expenses (excluding interest, taxes, brokerage commissions, extraordinary
expenses and other expenses) subject to approval by state securities
administrators to 2 1/2% of the first $30 million, 2% of the next $70 million,
and 1 1/2% of the remaining average net assets. The operating expenses of the
Fund will be accrued daily and any excess over the above described limitations
will be reimbursed monthly. For the fiscal years ended January 31, 1994,
1995 and 1996, no such reimbursement of expenses was necessary.
Accounting Agent
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent and responsibility for certain accounting services
(e.g., computation of the net asset value of the Fund's shares and maintenance
of the Fund's books and financial records) were transferred from the Advisor to
Fund/Plan. At that time the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense reimbursements from the Fund in the foreseeable future.
During the fiscal years ended January 31, 1994, 1995 and
1996, there were no reimbursements paid to the Advisor. For the fiscal
years ended January 31, 1994, 1995 and 1996 the Fund paid
Fund/Plan $26,000 each year in fees pursuant to the accounting services
agreement.
<PAGE>
The Administrator & Transfer Agent
The Fund has also entered into an Administration Agreement with Fund/Plan dated
March 1, 1990. As a result of this Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan, including responsibility for all federal and state
compliance matters. Fund/Plan is entitled to receive a fee payable
monthly at the annual rate of $30,000 per year. For the fiscal years ended
January 31, 1994, 1995 and 1996 the Fund paid Fund/Plan $30,000 each year in
fees for administrative services. Although the Advisor was entitled to
receive reimbursement from the Fund for the expenses incurred in the performance
of these services, such reimbursement was never sought. Accordingly, the
Advisor has voluntarily agreed to waive $15,000 annually of the compensation due
it under the Investment Advisory Agreement, to offset a significant portion of
the fee that the Fund will incur under the Administration Agreement. This fee
waiver can be terminated or reduced by the Advisor upon 60 days prior written
notice to the Fund.
The Fund's transfer agent and dividend-paying agent is Fund/Plan Services, Inc.,
2 W. Elm Street, Conshohocken PA 19428. Fund/Plan was acquired by FinDaTex,
Inc. on January 1, 1986. Stratton Management Company, the Advisor to the Fund,
and certain directors and officers of the Fund are controlling shareholders of
FinDaTex, Inc. Fund/Plan annually receives $13.00 per account for providing
this service.
Auditor and Custodian
The Fund's independent auditor is Tait, Weller & Baker. Their offices are
located at 2 Penn Center Plaza, Suite 700, Philadelphia PA 19102-1707. The
auditor's responsibilities are (1) to ensure that all relevant accounting
principles are being followed by the Fund; and (2) to report to the Fund's Board
of Directors concerning the Fund's operations.
The Bank of New York, 48 Wall Street, New York, New York 10286 serves as the
custodian of the Fund's assets pursuant to a custodian agreement. Under such
agreement, The Bank of New York (1) maintains a separate account or accounts in
the name of the Fund; (2) holds and transfers portfolio securities on account of
the Fund; (3) accepts receipts and makes disbursements on money on behalf of the
Fund; (4) collects and receives all income and other payments and distributions
on account of the Fund's securities; and (5) makes periodic reports to the Board
of Directors concerning the Fund's operations.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund seeks to obtain the best price and execution in all purchases and sales
of securities, except when the authorization to pay higher commissions for
research and services, as provided for in the Investment Advisory Agreement, is
exercised. Purchases and sales of over-the-counter securities are ordinarily
placed with primary market makers acting as principals. Consistent with its
obligation to seek the best price and execution, the Fund may place some
purchases and sales of portfolio securities with dealers or brokers who provide
statistical and research information to the Advisor. Statistical and research
services furnished by brokers through whom the Fund effects securities
transactions in accordance with these procedures are ordinarily of general
application and may be used by the Advisor in servicing other accounts as well
as that of the Fund. In addition, not all such services may be used in
connection with the Advisor's activities on behalf of the Fund. Portfolio
transactions are assigned to brokers, and commission rates negotiated, based on
an assessment of the reliability and quality of a broker's services, which may
include research and statistical information such as reports on specific
companies or groups of companies, pricing information, or broad overviews of the
stock market and the economy.
<PAGE>
Although investment decisions for the Fund will be made independently
from investment decisions made with respect to other clients advised by the
Advisor, simultaneous transactions may occur on occasion when the same security
is suitable for the investment objectives of more than one client. When two or
more such clients are simultaneously engaged in the purchase or sale of the same
security, to the extent possible the transactions will be averaged as to price
and allocated among the clients in accordance with an equitable formula. In
some cases this system could have a detrimental effect on the price or quantity
of a security available to the Fund. In other cases, however, the ability of
the Fund to participate with other clients of the Advisor in volume transactions
may produce better executions for the Fund.
The Investment Advisory Agreement contains provisions which authorize the
Advisor to recommend and cause the Fund to pay brokerage commissions in excess
of commissions which might be charged by other brokers, where a determination is
made that the amount of commission paid is reasonable in relation to the
brokerage and research services provided by the broker to the Fund, viewed in
terms of the particular transaction or the overall responsibilities of the
Advisor with respect to the Fund. In addition, the Investment Advisory
Agreement recognizes that the Advisor may, at its expense, acquire statistical
and factual information, advice about economic factors and trends and other
appropriate information from others in carrying out its obligations. During the
fiscal year ended January 31, 1996, no brokerage commissions were paid by
the Fund pursuant to the provision in the Investment Advisory Agreement
permitting the Fund to pay commissions for brokerage and research services in
excess of commissions that might have been charged by other brokers.
During the fiscal years ended January 31, 1994, 1995 and 1996, the Fund paid
$224,528, $274,673 and $280,842 respectively, in brokerage commissions,
substantially all of which were paid to brokers which had provided research,
statistical data or pricing information to the Advisor. The variation in these
commissions from year to year reflects primarily the amount of total net assets
in the Fund and to a lesser extent the annual turnover rate. For the fiscal
years ended January 31, 1994, 1995 and 1996, the Fund's portfolio turnover rate
was 19.15%, 39.50 % and 53.30% respectively.
RETIREMENT PLANS
Defined Contribution Plans
The Fund offers a profit sharing and a money purchase plan (the "Defined
Contribution Plans") for use by both self-employed individuals (sole
proprietorships and partnerships) and corporations who wish to use shares of the
Fund as a funding medium for a retirement plan qualified under the Internal
Revenue Code.
Annual deductible contributions to the Defined Contribution Plans may generally
be made on behalf of each participant in a total amount of up to the lesser of
20% of a self-employed participant's pre-contribution earned income (after
reducing the earned income by the self-employed's deduction for 50% of his or
her self-employment tax) (25% of a non-self-employed participant's wages) or
$30,000. Unless the employer chooses to take Social Security contributions into
account, the same percentage of earned income (or wages) must be contributed on
behalf of each participant in the Defined Contribution Plans. Earned income and
wages are generally limited for this purpose to $150,000 (for 199 6 --
indexed for cost-of-living).
The Internal Revenue Code provides certain tax benefits for participants in a
Defined Contribution Plan. For example, amounts contributed to a Defined
Contribution Plan and earnings on such amounts are not taxed until distributed.
However, distributions to a participant from a Defined Contribution Plan before
the participant attains age 59 1/2 will (with certain exceptions) result in an
additional 10% tax on the amount included in the participant's gross income.
<PAGE>
Individual Retirement Account
The Fund offers an individual retirement account (the "IRA") for use by
individuals with compensation for services rendered (including earned income
from self-employment) who wish to use shares of the Fund as a funding medium for
individual retirement saving. However, except for rollover contributions, an
individual who has attained, or will attain, age 70 1/2 before the end of the
taxable year may only contribute to an IRA for a nonworking spouse who
is under age 70 1/2.
The general deductible limit for contributions to an IRA is the lesser of 100%
of compensation or $2,000 ($2,250 total for the individual and the individual's
nonworking spouse with two separate accounts). However, this limit is phased
out for certain individuals who are active participants in an employer-
maintained retirement plan. If such an individual is a married person with
adjusted gross income ("AGI") on his or her joint return in excess of $40,000
but less than $50,000, or a single person with AGI in excess of $25,000 but less
than $35,000, the individual's $2,000 deduction will be decreased
proportionately. A married individual with AGI on his or her joint return of
$50,000 or more, or a single individual with AGI of $35,000 or more, may not
make any deductible contribution if he or she is an active participant in a
retirement plan.
Even if the individual is not an active participant in a retirement plan, if his
or her spouse is a participant in such a plan and if their AGI, filed jointly,
is more than $40,000, the individual and his or her spouse will both be subject
to the phase-out discussed above. If neither the individual nor his or her
spouse is a participant in an employer-sponsored retirement plan, or if their
AGI is less than the $40,000 amount discussed above, the individual may continue
to make deductible contributions of up to the lesser of $2,000 ($2,250), or 100%
of compensation.
Nondeductible contributions to the IRA may be made to the extent an individual
is unable to make a deductible contribution under the phase-out rules discussed
above. In addition, an individual may roll over to the IRA funds (in any
amount) that he or she has received in a qualifying distribution from an
employer's retirement plan.
The individual's IRA assets (and earnings thereon) may generally not be
withdrawn (without the individual's incurring an additional 10% tax on the
amount included in the individual's gross income) until age 59 1/2. Earnings
on amounts contributed to the IRA are not taxed until distributed.
403(b)(7) Retirement Plan
The Fund offers a plan (the "403(b)(7) Plan") for use by schools, hospitals, and
certain other tax-exempt organizations or associations who wish to use shares of
the Fund as a funding medium for a retirement plan for their employees.
Contributions are made to the 403(b)(7) Plan based on a reduction of the
employee's regular compensation. Such contributions, to the extent they do not
exceed applicable limitations (including a generally applicable limitation of
$9,500 per year), are excludable from the gross income of the employee for
Federal income tax purposes. Assets withdrawn from the 403(b)(7) Plan are
subject to Federal income tax and to the additional 10% tax on early
withdrawals discussed above under "Defined Contribution Plans."
General Information
In all these Plans, distributions of net investment income and capital gains
will be automatically reinvested in the Fund.
The Custodian of the plans is Semper Trust Company ("Semper"), Plymouth Meeting,
Pennsylvania. Fund/Plan Services, Inc. serves as the fiduciary agent for Semper
and in such capacity is responsible
<PAGE>
for all recordkeeping, applicable tax reporting and fee collection in connection
with the plan accounts. Fund/Plan Services, Inc. is also the transfer agent for
the Funds. The Custodian is entitled to deduct its fees and administrative
expenses by liquidating shares annually in September, unless the annual
maintenance fee is paid separately to Fund/Plan Services, Inc. The annual
maintenance fee is currently $12.00 per plan account. This fee may be amended
without notice by Stratton Management Company, the Custodian, or Fund/Plan
Services, Inc. in the future.
The foregoing brief descriptions are not complete or definitive explanations of
the Defined Contribution, IRA, or 403(b)(7) Plans available for investment in
the Fund. Any person who wishes to establish a retirement plan account may do
so by contacting the Fund directly. The complete Plan documents and
applications will be provided to existing or prospective shareholders upon
request, without obligation. Since all these Plans involve setting aside assets
for future years, it is important that investors consider their needs and
whether the investment objective of the Fund as described in this Statement of
Additional Information and in the Prospectus is most likely to fulfill them.
The Fund recommends that investors consult their attorneys or tax advisors to
determine if the retirement programs described herein are appropriate for their
needs.
UNDERWRITER
The Fund has entered into an Underwriting Agreement with Fund/Plan Broker
Services, Inc. ("FPBS"). FPBS acts as an underwriter of the Fund's shares for
the purpose of facilitating the registration of shares. In this regard, FPBS
has agreed at its own expense to qualify as a broker/dealer under all applicable
federal or state laws in those states which the Fund shall from time to time
identify to FPBS as states in which it wishes to offer its shares for sale, in
order that state registrations may be maintained for the Fund.
FPBS is a broker/dealer registered with the Securities and Exchange Commission
and a member in good standing of the National Association of Securities Dealers,
Inc. FPBS is an affiliate of the Advisor inasmuch as both the Underwriter and
the Advisor are under common control.
For the services to be provided under the Underwriting Agreement in facilitating
the registration of Fund shares under state securities laws, FPBS has received
an annual fee of $3,000 for providing these services in each of the last three
fiscal years. This fee is included in the net expenses of the Fund. The Fund
shall continue to bear the expense of all filing or registration fees incurred
in connection with the registration of shares of the Fund under state securities
laws. The Fund pays no compensation to FPBS for its assistance in sales of Fund
shares. The Advisor pays certain out-of-pocket expenses, plus the cost for each
employee to be licensed as a Registered Representative by FPBS.
The Underwriting Agreement may be terminated by either party upon 60 days prior
written notice to the other party, and if so terminated, the pro-rata portion of
the unearned fee will be returned to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisors with specific reference to their own
tax situation.
As stated in the Prospectus, the Fund intends to qualify as a regulated
investment company under the Internal Revenue Code for each taxable year. The
Fund will not be treated as a regulated investment
<PAGE>
company for a taxable year if, among other things, the Fund derives 30% or more
of its gross income from the sale or other disposition of securities and certain
other investments held for less than three months.
Ordinary income of individuals is taxable at a maximum nominal rate of 39.6%;
although because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for certain taxpayers may be more than 39.6% in certain circumstances. Net
long-term capital gains are taxed at a maximum normal rate of 28%. For
corporations, long-term capital gains and ordinary income are both taxable at a
maximum nominal rate of 35%.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any fiscal year the Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to Federal income tax at regular corporate rates (without any deduction
for distributions to its shareholders). In such event, dividend distributions
would be taxable as ordinary income to shareholders to the extent of the Fund's
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS
From time to time, the Fund's yield and the total return may be quoted in
advertisements, shareholder reports or other communications to shareholders.
YIELD CALCULATIONS
The Fund's yield may be calculated by dividing the net investment income per
share (as described below) earned by the Fund during a 30-day (or one month)
period by the net asset value per share on the last day of the period and
annualizing the result by adding one to the quotient, raising the sum
to the power of six, subtracting one from the result and then doubling the
difference. The Fund's net investment income per share earned during the period
is based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
a-b
Yield= 2[( --- + 1 )/6/-1]
cd
<PAGE>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = net asset value per share on the last day of the period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), interest earned on debt obligations held by the
Fund is calculated by computing the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the result by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by the Fund. For
purposes of this calculation, it is assumed that each month contains 30 days.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased at a discount or
premium, the formula generally calls for amortization of the discount or
premium. The amortization schedule will be adjusted monthly to reflect changes
in the market values of such debt obligations.
Undeclared earned income will be subtracted from the net asset value per share
(variable "d" in the formula). Undeclared earned income is the net investment
income which, at the end of the base period, has not been declared as a
dividend, but is reasonably expected to be and is declared as a dividend shortly
thereafter. Based on the foregoing calculations, the Fund's yield for the month
of January, 1996 was 6.58%.
TOTAL RETURN CALCULATIONS
The Fund computes its average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
investment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result.
This calculation can be expressed as follows:
ERV
T = [( --- )(1/n)-1]
P
<PAGE>
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 investment made at the beginning of the
period.
P = hypothetical initial investment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Fund computes its aggregate total return by determining the aggregate
compounded rate of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
(ERV-P)
A = ---------
P
Where: A = aggregate total return.
ERV = ending redeemable value at end of the period covered by
the computation of a hypothetical $1,000 investment made
at the beginning of the period.
P = hypothetical intitial investment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund cannot
necessarily be used to compare an investment in the Fund's shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.
Based on the foregoing calculations, the average annual total returns for the
Fund for the one year, five year and ten year periods ended January 31, 1996
were 18.99%, 11.31% and 8.31%, respectively. The aggregate total returns for the
same five year and ten year periods were 70.88% and 122.25%, respectively.
<PAGE>
MISCELLANEOUS
As of April 30, 1996, Charles Schwab Co. was the record owner of 14.7% of the
outstanding shares of the Fund. However, at such date, no other single
shareholder owned of record or beneficially more than 5% of the outstanding
shares of the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund which appear in this Statement of
Additional Information and the Financial Highlights which appears in the Fund's
Prospectus were examined by Tait, Weller & Baker, independent certified public
accountants, whose report thereon appears elsewhere herein, and have been
included herein and in the Fund's Prospectus in reliance upon the report of
said accountants given upon their authority as experts in accounting and
auditing.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS JANUARY 31, 1996
Market
Number of Value
Shares Security (Note 1)
- --------- -------- --------------
<S> <C> <C>
COMMON STOCKS - 90.0%
Real Estate Commercial - 8.2%
380,000 Crown American Realty Trust .................... $ 2,945,000
165,000 Excel Realty Trust, Inc. ....................... 3,444,375
166,000 IRT Property Co. ............................... 1,577,000
324,000 Mid-America Realty Investments, Inc. ........... 2,632,500
--------------
10,598,875
--------------
Real Estate Diversified - 5.6%
30,000 Associated Estates Realty Corp. ................ 648,750
225,000 Colonial Properties Trust ...................... 5,540,625
50,000 EastGroup Properties, SBI ...................... 1,081,250
--------------
7,270,625
--------------
Real Estate Health Care - 9.9%
50,000 Health & Retirement Properties Trust ........... 837,500
309,800 Health Care REIT, Inc. ......................... 6,467,075
163,400 National Health Investors, Inc. ................ 5,433,050
--------------
12,737,625
--------------
Telecommunications - 9.7%
200,000 Pacific Telesis Group .......................... 5,900,000
190,000 U. S. West Communications Group Delaware ....... 6,673,750
--------------
12,573,750
--------------
Utilities - 56.6%
200,000 Boston Edison Co. .............................. 5,875,000
184,600 Central Hudson Gas & Electric Corp. ............ 5,745,675
220,000 CINergy Corp. .................................. 6,847,500
300,000 Delmarva Power & Light Co. ..................... 6,787,500
250,000 Eastern Utilities Associates ................... 5,937,500
100,000 General Public Utilities Corp. ................. 3,400,000
250,000 Nevada Power Co. ............................... 5,437,500
175,000 Northeast Utilities ............................ 4,134,375
50,000 Oklahoma Gas & Electric Co. .................... 2,100,000
150,000 Orange & Rockland Utilities, Inc. .............. 5,250,000
100,000 Public Service Co. of Colorado ................. 3,600,000
225,000 Puget Sound Power & Light Co. .................. 5,625,000
250,000 Rochester Gas & Electric Corp. ................. 5,750,000
212,000 WPL Holdings, Inc. ............................. 6,678,000
--------------
73,168,050
--------------
Total Common Stocks (cost $111,029,295) ........ 116,348,925
--------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS JANUARY 31, 1996
Market
Number of Value
Shares Security (Note 1)
- --------- ------- --------------
<S> <C> <C>
PREFERRED STOCKS - 1.2%
100,000 Psychiatric Group Preferred Depositary Shares ............................ $ 1,500,000
(each depositary share represents 1/10th of a share of --------------
American Health Properties Psychiatric Group Pfd. Stock)
Total Preferred Stocks (cost $1,777,330) ................................. 1,500,000
<CAPTION> --------------
Principal
Amount
- ----------------
<S> <C> <C>
CONVERTIBLE DEBENTURES - 4.9%
$ 500,000 Dorchester Gas Corp. 8.50% Cv. Sub. Debs. 12/01/05 *...................... 476,180
$2,659,000 Interstate/Johnson Lane, Inc. 7.75% Cv. Sub. Debs. 03/31/11 .............. 2,446,280
$1,000,000 Liberty Property Ltd. 8.00% Cv. Sub. Debs. 07/01/01 ...................... 1,103,750
$2,500,000 Mid-Atlantic Realty Trust 7.625% Cv. Sub. Debs. 09/15/03 ................. 2,303,125
--------------
Total Convertible Debentures (cost $6,332,732) ........................... 6,329,335
--------------
SHORT-TERM NOTES - 2.1%
$ 900,000 Associates Corp. of North America 5.75% due 02/01/96 ..................... 900,000
$ 900,000 Associates Corp. of North America 5.60% due 02/02/96 ..................... 900,000
$ 900,000 Associates Corp. of North America 5.35% due 02/05/96 ..................... 900,000
--------------
Total Short-Term Notes (cost $2,700,000) ................................. 2,700,000
--------------
Total Investments - 98.2% (cost $121,839,357)**........................... 126,878,260
Cash and other assets, less liabilities - 1.8% ........................... 2,389,226
--------------
NET ASSETS - 100.0% ...................................................... $ 129,267,486
==============
* Fair value as determined by the Board of Directors.
** Aggregate cost for federal income tax purposes is $121,839,357; and net unrealized appreciation
is as follows:
Gross unrealized appreciation............................................. $ 9,261,239
Gross unrealized depreciation............................................. (4,222,336)
--------------
Net unrealized appreciation............................................. $ 5,038,903
==============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities at market value (identified cost $121,839,357) (Note 1)........... $ 126,878,260
Cash ....................................................................................... 824,150
Dividends receivable........................................................................ 1,409,701
Interest receivable......................................................................... 157,041
Receivable for capital stock sold........................................................... 145,163
-------------
Total Assets.............................................................................. 129,414,315
-------------
LIABILITIES
Accrued expenses........................................................................... 48,097
Payable for investment securities purchased................................................ 40,615
Payable for capital stock redeemed......................................................... 58,117
-------------
Total Liabilities........................................................................ 146,829
-------------
NET ASSETS
Applicable to 4,718,067 shares; $1.00 par value; 10,000,000 shares authorized.............. $ 129,267,486
=============
Net asset value, offering and redemption price per share
($129,267,486/4,718,067 shares).......................................................... $ 27.40
=============
SOURCE OF NET ASSETS
Paid-in capital............................................................................ $ 142,084,637
Accumulated net realized loss on investments............................................... (17,856,054)
Net unrealized appreciation of investments................................................. 5,038,903
-------------
Net Assets............................................................................... $ 129,267,486
=============
============================================================================================================
</TABLE>
STATEMENT OF OPERATIONS
Year Ended January 31, 1996
<TABLE>
<CAPTION>
INCOME
<S> <C>
Dividends.................................................................................. $ 9,890,053
Interest................................................................................... 1,008,716
------------
Total Income............................................................................. 10,898,769
------------
EXPENSES
Advisory fees (Note 2)..................................................................... 794,629
Shareholder services fees (Note 2)......................................................... 228,235
Custodian fees (Note 2).................................................................... 43,709
Printing and postage fees.................................................................. 36,804
Registration fees ((Note 2)................................................................ 35,091
Directors' fees............................................................................ 32,155
Administrative services fees (Note 2)...................................................... 30,000
Accounting/Pricing services fees (Note 2).................................................. 26,000
Miscellaneous fees......................................................................... 24,098
Legal fees................................................................................. 18,909
Audit fees................................................................................. 18,805
------------
Total Expenses........................................................................... 1,288,435
------------
Net Investment Income.................................................................. 9,610,334
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments........................................................... 2,695,575
Net increase in unrealized appreciation of investments..................................... 9,893,647
------------
Net gain on investments.................................................................. 12,589,222
------------
Net increase in net assets resulting from operations................................... $ 22,199,556
============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended January 31,
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income.............................................................. $ 9,610,334 $ 10,426,589
Net realized gain (loss) on investments............................................ 2,695,575 (17,833,712)
Net increase (decrease) in unrealized appreciation (depreciation)
of investments................................................................... 9,893,647 (3,842,840)
------------ ------------
Net increase (decrease) in net assets resulting from operations................. 22,199,556 (11,249,963)
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income
($1.89 and $1.92 per share, respectively)........................................ (9,700,521) (10,336,402)
Distributions in excess of net investment income
($.03 and $.00 per share, respectively).......................................... (133,355) --
CAPITAL SHARE TRANSACTIONS
Net decreases in net assets derived from the net change
in the number of outstanding shares (a).......................................... (17,164,513) (10,145,399)
------------ ------------
Total Decrease in Net Assets.................................................... (4,798,833) (31,731,764)
NET ASSETS AT THE BEGINNING OF THE YEAR............................................. 134,066,319 165,798,083
------------ ------------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment
income of $0 and $90,187, respectively).......................................... $ 129,267,486 $ 134,066,319
============ ============
</TABLE>
<TABLE>
<CAPTION>
(a) A summary of capital share transactions follows:
Years Ended January 31,
--------------------------------------------------------------------
1996 1995
---------------------------------- --------------------------------
Shares Value Shares Value
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares issued.................................. 757,154 $ 19,154,193 1,506,670 $ 37,662,221
Shares reinvested from
net investment income...................... 239,595 6,039,536 252,999 6,370,235
------------ --------------- ------------ ---------------
996,749 25,193,729 1,759,669 44,032,456
Shares redeemed................................ (1,676,173) (42,358,242) (2,141,485) (54,177,855)
------------ --------------- ------------ ---------------
Net decrease............................... (679,424) $ (17,164,513) (381,816) $ (10,145,399)
============ =============== ============ ===============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
January 31, 1996
Note 1. - Significant Accounting Policies. Stratton Monthly Dividend Shares,
Inc. (the "Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
objective is to seek a high rate of return from dividend and interest income on
its investments in common stock and securities convertible into common stock.
It will seek its objective through investment of at least 25% of assets in
public utility companies engaged in the production, transmission or distribution
of electric, energy, gas, water or telephone services. Due to the inherent risk
of any type of investment, however, there can be no assurance that the objective
of the Fund will be achieved. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. Security valuation - Investments in securities traded on a national
securities exchange are valued at the last reported sales price on the
primary exchange on which they are traded on the valuation date.
Securities not listed or not traded are valued at the mean of the bid and
ask price. Illiquid securities and other securities for which market
valuations are not available are valued by or at the direction of the
Board of Directors. Short-term money market instruments which have a
maturity of 60 days or less are valued at amortized cost which
approximates market value.
B. Determination of gains or losses on sales of securities - Gains or losses
on the sale of securities are calculated for accounting and tax purposes
on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required. The
Fund has a capital loss carryover available to offset future capital
gains, if any, of approximately $17,856,000 of which $341,000 expires in
1999, $13,184,000 expires in 2003 and $4,331,000 expires in 2004.
D. Use of Estimates in Financial Statements - In preparing financial
statements in conformity with generally accepted accounting principles,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements,
as well as the reported amounts of income and expenses during the
reporting period. Actual results may differ from these estimates.
E. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Interest income is recorded on the accrual basis
and dividend income on the ex-dividend date. Dividends and distributions
to shareholders are recorded on the ex-dividend date.
Note 2. - During the year ended January 31, 1996, the Fund paid advisory fees
aggregating $794,629 to Stratton Management Company, (the "Advisor"). Management
services are provided by the Advisor under an agreement whereby the Advisor
furnishes all investment advice, office space and facilities to the Fund and
pays the salaries of the Fund's officers and employees, except to the extent
that those employees are engaged in administrative and accounting services
activities. In return for these services, the Fund pays a monthly fee to the
Advisor at an annual rate of 5/8 of 1% of the daily net asset value of the Fund
for such month. The Advisor has voluntarily agreed to waive $15,000 annually of
the compensation due it under the agreement to offset a significant portion of
the cost of certain administrative responsibilities delegated to Fund/Plan
Services, Inc. Because of certain undertakings to comply with various state
securities laws, if in any fiscal year the expenses of the Fund (excluding
taxes, brokerage commissions and interest) exceed 2 1/2% of the first $30
million of the Fund's average net assets, 2% of the next $70 million and 1 1/2%
of the remaining, the Advisor shall reimburse the Fund for such excess. Certain
officers and directors of the Fund are also officers and directors of the
Advisor. None of the Fund's officers receives compensation from the Fund.
The Fund's Transfer Agent, Fund/Plan Services, Inc. ("Fund/Plan"), is a wholly-
owned subsidiary of FinDaTex, Inc. Certain directors and officers of the Fund
are shareholders of FinDaTex, Inc. Fund/Plan received fees of $228,235 for
providing shareholder services, $30,000 for certain administrative services and
$26,000 for accounting/pricing services during the year ended January 31, 1996.
Pursuant to an agreement between The Bank of New York, (the "Custodian"), and
Fund/Plan, the Custodian reallows a portion of its custody fee to Fund/Plan for
certain services delegated to Fund/Plan. The amount is not readily determinable.
Fund/Plan Broker Services, Inc. serves as the Fund's principal underwriter and
receives no fees for services in assisting in sales of the Fund's shares but
does receive an annual fee of $3,000 for its services in connection with the
registration of the Fund's shares under state securities laws.
Note 3. - Purchases and sales of securities, excluding short-term notes,
aggregated $64,986,748 and $73,396,301, respectively, for the year ended January
31, 1996.
16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Stratton Monthly Dividend Shares,
Inc.
We have audited the accompanying statement of assets and liabilities of
Stratton Monthly Dividend Shares, Inc., including the schedule of investments,
as of January 31, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and 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 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. Our procedures included confirmation of securities owned as of
January 31, 1996, by correspondence with the custodian and brokers. 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 financial highlights referred
to above present fairly, in all material respects, the financial position of
Stratton Monthly Dividend Shares, Inc. as of January 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
Philadelphia, PA
February 9, 1996 TAIT, WELLER & BAKER
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year................ $24.84 $28.69 $29.91 $27.83 $23.02
---------- ---------- ---------- ---------- ----------
Income From Investment Operations
---------------------------------
Net investment income........................... 1.88 1.94 1.87 1.94 1.97
Net gains (loss) on securities
(both realized and unrealized)................ 2.60 (3.87) (1.14) 2.08 4.79
---------- ---------- ---------- ---------- ----------
Total from investment operations............ 4.48 (1.93) 0.73 4.02 6.76
---------- ---------- ---------- ---------- ----------
Less Distributions
------------------
Dividends (from net investment
income)....................................... (1.89) (1.92) (1.94) (1.94) (1.95)
Distributions (in excess of net
investment income)............................ (0.03) 0.00 (0.01) 0.00 0.00
---------- ---------- ---------- ---------- ----------
Total distributions......................... (1.92) (1.92) (1.95) (1.94) (1.95)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year...................... $27.40 $24.84 $28.69 $29.91 $27.83
========== ========== ========== ========== ==========
Total Return...................................... 18.98% -6.57% 2.22% 15.18% 30.55%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (in 000's).............. $129,267 $134,066 $165,798 $98,227 $45,566
Ratio of expenses to average
net assets.................................... 0.99% 1.08% 0.99% 1.10% 1.23%
Ratio of net investment
income to average net assets.................. 7.42% 7.71% 6.12% 6.74% 7.63%
Portfolio turnover rate......................... 53.30% 39.50% 19.15% 35.94% 43.55%
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
POST-EFFECTIVE AMENDMENT NO. 16
TO REGISTRATION STATEMENT NO. 2-42379
on
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements:
(1) The Financial Highlights are included in Part A of this
Registration Statement on Form N-1A. The following Financial
Statements which are included in Part B of this Registration
Statement on Form N-1A are for the fiscal year ended January 31,
1996:
Schedule of Investments at January 31, 1996.
Statement of Assets and Liabilities at
January 31, 1996.
Statement of Operations for the year ended January 31,
1996.
Statement of Changes in Net Assets for the years ended
January 31, 1996 and January 31, 1995.
Notes to Financial Statements.
Financial Highlights.
Report of Independent Accountants.
(2) All required financial statements are included or incorporated
in Parts A and B hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) Articles of Incorporation of Registrant dated March 1, 1985, are
incorporated herein as Exhibit No.1.
(2) By-laws of Registrant, as amended, dated February 28, 1989 are
incorporated herein as Exhibit No. 2.
(3) None.
(4) Specimen certificate for shares of common stock of Registrant is
incorporated herein by reference to Exhibit No. (4) of Post-
Effective Amendment No. 11 to Registrant's Registration
Statement on Form N-1A, filed on May 31, 1991.
(5) Investment Advisory Agreement dated July 1, 1989, between
Registrant and Stratton Management Company is incorporated
herein as Exhibit No. 5.
<PAGE>
(6) Underwriting Agreement dated June 22, 1993 between Registrant
and Fund/Plan Broker Services, Inc. is incorporated herein as
Exhibit No 6.
(7) None.
(8) (a) Custodian Agreement between Registrant and The Bank of
New York dated November 1, 1994 is incorporated herein
by reference to Exhibit 8(a) of Post-Effective
Amendment No. 15 to Registrant's Registration Statement
on Form N-1A, filed May 30, 1995.
(b) Custody Administration and Agency Agreement between
Registrant and Fund/Plan Services, Inc. dated November
1, 1994 is incorporated by reference to Exhibit 8(b)
of Post-Effective Amendement No. 15 to Registrant's
Registration Statement on Form N 1-A, filed May 30,
1995.
(9) (a) Administration Agreement dated March 1, 1990 between
Registrant and Fund/Plan Services, Inc. is incorporated
herein by reference to Exhibit No. (9)(a) of Post-
Effective Amendment No. 10 to Registrant's Registration
Statement on Form N-1A filed on March 30, 1990.
(b) Shareholder Services Agreement (formerly known as
Administration Agreement) dated May 31, 1985 between
Registrant and Fund/Plan Services, Inc. is incorporated
herein by reference to Exhibit No.(9)(a) of Post-
Effective Amendment No. 9 to Registrant's Registration
Statement on Form N-1A filed on May 31, 1989.
(c) Amendment No. 1 to Shareholder Services Agreement
(formerly known as Administration Agreement) dated May
29, 1987 is incorporated herein by reference to Exhibit
No. (9)(b) of Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A filed
on May 31, 1988.
(d) Amendment No. 2 to Shareholder Services Agreement
(formerly known as Administration Agreement) dated May
29, 1987 is incorporated herein by reference to Exhibit
No. (9)(c) of Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A filed
on May 31, 1988.
(e) Amendment to Shareholder Services Agreement (formerly
known as Administration Agreement) dated February 27,
1990 changing title of May 31, 1985 Administration
Agreement to Shareholder Services Agreement is
incorporated herein by reference to Exhibit No. (9)(e)
of Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A filed on March 30,
1990.
(f) Accounting Services Agreement dated May 1, 1988 between
Registrant and Fund/Plan Services, Inc. with notice of
February 22, 1989 is incorporated herein by reference to
Exhibit No. (9)(d) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A filed
on May 31, 1989.
(10)
<PAGE>
(a) Opinion and Consent of Counsel filed under Rule 24f-2 of
the 1940 Act as part of Registrant's Rule 24f-2
Notice on March 28, 1996 .
(b) Opinion and Consent of Counsel under Rule 24e-2 of the
1940 Act is filed herein as Exhibit No.10(b).
(11) (a) Consent of Tait, Weller & Baker filed herein as Exhibit
11(a).
(b) Consent of Drinker Biddle & Reath filed herein as
Exhibit 11(b).
(12) None.
(13) None.
(14) (a) Form of 403(b)(7) Retirement Plan is incorporated herein
as Exhibit 14(a).
(b) Form of Individual Retirement Account (I.R.A.) is
incorporated herein by reference to Exhibit No. (14)(b)
of Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A filed on May 31,
1991.
(c) Form of Self-Employed Retirement Plan (Defined
Contribution Plans) as amended June 30, 1994 is
incorporated herein by reference to Exhibit 14(c) of
Post-Effective No. 15 to Registrant's Registration
Statement on Form N-1A, filed on May 30, 1995.
(15) None.
(16) Schedule of computations of performance quotations is
incorporated herein by reference to Exhibit No. (16) of Post-
Effective Amendment No. 14 to Registrant's Registration
Statement on Form N-1A filed on June 1, 1994.
(17) Financial Data Scheduler filed as EX-27 herein.
(18) Powers of Attorney incorporated by referenced to Exhibit 17 of
Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A, filed May 30, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
- ------------------------------------------------------------------------
Registrant is controlled by its Board of Directors
Item 26. Number of Holders of Securities.
- ------------------------------------------
Number of
Record Holders
Title of Class (as of April 30, 1996)
-------------- ----------------------
Common Stock 7,053
par value $1.00
per share
<PAGE>
Item 27. Indemnification.
- --------------------------
Section 2-418 of the Corporation and Associations Article of the
Annotated Code of Maryland gives Registrant the power to indemnify its
directors and officers under certain situations. Article VII, Section 3
of Registrant's Articles of Incorporation, incorporated by reference as
Exhibit (1) hereto, and Section 2.12 of Registrant's By-Laws,
incorporated by reference as Exhibit (2) hereto, provide for the
indemnification of Registrant's directors and officers. Each
indemnification must be authorized by the Board of Directors of
Registrant by a majority of a quorum consisting of directors who were
not parties to the action, suit or proceeding, or by independent legal
counsel in a written opinion, or by the shareholders. Notwithstanding
the foregoing, Section 2.12(e) of Registrant's By-Laws provides that no
director or officer of Registrant shall be indemnified against any
liability to Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's duties to the
corporation.
In addition, the aforesaid section of the Corporations and Associations
Article of the Annotated Code of Maryland gives Registrant the power (a)
to purchase and maintain insurance for its directors and officers
against any liability asserted against them and incurred by them in that
capacity or arising out of their status as such, whether or not
Registrant would have the power to indemnify such directors and officers
under such statute, and (b) under certain circumstances to pay the
reasonable expenses incurred by a director or officer in defending an
action, suit or proceeding in advance of the final disposition of the
action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant, pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Indemnification of the Registrant's Custodian, Transfer Agent,
Accounting/Pricing Agent and Administrator against certain stated
liabilities is provided for by the following documents:
(a) Article XVII (14) of the Custodian Agreement between the
Registrant and The Bank of New York, incorporated herein by
reference to Exhibit 8(a) of the Registrant's Registration
Statement on Form N-1A.
(b) Section 26 of the Shareholder Services Agreement, incorporated
herein by reference as Exhibit 9(b) through 9(e) of the
Registrant's Registration Statement on Form N-1A;
(c) Section 10 of the Accounting Services Agreement, incorporated
herein by reference as Exhibit 9(f) of the Registrant's
Registration Statement on Form N-1A; and
<PAGE>
(d) Section 8 of the Administration Agreement, incorporated herein
by reference as Exhibit No. 9(a) of the Registrant's
Registration Statement on Form N-1A.
Item 28. Business and Other Connections of Investment Advisor.
- ---------------------------------------------------------------
Stratton Management Company provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions, and as of March 31, 1996 had approximately $1.3
billion in assets under management. It presently also acts as
investment advisor to two other registered investment companies,
Stratton Growth Fund, Inc. and The Stratton Funds, Inc.
For information as to any other business, vocation or employment of a
substantial nature in which each director or officer of the Registrant's
investment advisor has been engaged for his own account or in the
capacity of director, officer, employee, partner or trustee, reference
is made to Form ADV (File #801-8681) filed by it under the Investment
Advisors Act of 1940, as amended.
Item 29. Principal Underwriter.
- -------------------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for
the Registrant's securities, currently acts as principal underwriter for
the following entities:
The Brinson Funds
CT&T Funds
Farrell Alpha Strategies
First Mutual Funds
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan, Inc.
(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
- --------------------------- ----------------------------- --------------------
<S> <C> <C>
Kenneth J. Kempf Director and None
2 West Elm Street President
Conshohocken, PA 19428-0874
Lynne Cannon Vice President and Director
2 West Elm Street Principal
Conshohocken, PA 19428-0874
Rocco J. Cavalieri Director and None
2 West Elm Street Vice President
Conshohocken, PA
19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President and
Conshohocken, PA 19428-0874 Principal
Joseph M. O'Donnell, Esq. Director and None
2 West Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 West Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 West Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 West Elm Street
Conshohocken, PA 19428-0874
Bruno DiStefano Principal None
2 West Elm Street
Conshohocken, PA 19428-0874
</TABLE>
(c) Not applicable.
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
Item 30. Location of Accounts and Records.
- -------------------------------------------
All records described in Section 31(a) of the 1940 Act and Rules 17 CFR
270.31a-1 to 31a-3 promulgated thereunder, are maintained by Stratton
Management Company, the Fund's Investment Advisor, Plymouth Meeting
Executive Campus, 610 W. Germantown Pike, Suite
<PAGE>
300, Plymouth Meeting, Pennsylvania 19462-1050, except for those
maintained by the Fund's Custodian, The Bank of New York, 48 Wall
Street, New York, New York 10286, and Fund/Plan Services, Inc. the
Fund's Administrator, Transfer, Redemption and Dividend Disbursing
Agent, Administrator of its Retirement Plans and Accounting Services
Agent, 2 W. Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428-
0874.
Item 31. Management Services.
- ------------------------------
Not applicable.
Item 32. Undertakings.
- -----------------------
Registrant undertakes to provide its Annual Report upon request without
charge to any recipient of the Fund's Prospectus .
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant hereby certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment No.
16 to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No.
16 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in Plymouth Meeting, Pennsylvania, on the
___ day of May, 1996.
STRATTON MONTHLY DIVIDEND SHARES, INC.
- --------------------------------------------------------------------------------
James W. Stratton
Director and Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 6 to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date(s)
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ James W. Stratton Director and May 29, 1996
- ------------------------- Chairman of the Board
(Chief Executive Officer)
/s/ Patricia Sloan Secretary/Treasurer May 29, 1996
- ------------------------- (Chief Financial and
Patricia L. Sloan Accounting Officer)
* Lynne M. Cannon Director May 29, 1996
* John J. Lombard, Jr. Director May 29, 1996
* Rose J. Randall Director May 29, 1996
* Henry A. Rentschler Director May 29, 1996
* Merritt N. Rhoad, Jr. Director May 29, 1996
* Alexander F. Smith Director May 29, 1996
* Richard W. Stevens Director May 29, 1996
</TABLE>
*By:
/s/ William J. Baltrus
- ----------------------
William J. Baltrus
as Attorney-in-Fact and Agent, pursuant to Power of Attorney
<PAGE>
INDEX TO EXHIBITS ON FORM N-1A
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ------------- ----------------------- -------------
<C> <S> <C>
1 Articles of Incorporation of Registrant
dated March 1, 1985 56-65
2 By-laws of Registrant, as amended, dated
February 28, 1989 66-81
5 Investment Advisory Agreement dated July 1,
1989 between Registrant and Stratton
Management Company 82-91
6 Underwriting Agreement dated June 22, 1993
between Registrant and Fund/Plan
Broker Services, Inc. 92-99
10(b) Opinion and Consent of Counsel Under Rule
24e-2 of the 1940 Act 100-102
11(a) Consent of Tait Weller & Baker 103-104
11(b) Consent of Drinker Biddle & Reath 105-106
14(a) Form of 403(b)(7) Retirement Plan 107-127
27 Financial Data Scheduler 127-130
</TABLE>
<PAGE>
EXHIBIT EX-1
Articles of Incorporation of Registrant dated March 1, 1985
<PAGE>
ARTICLES OF INCORPORATION
OF
STRATTON MONTHLY DIVIDEND SHARES, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Barbara G. Fraser, whose post office address is 1100
Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107, being at
least eighteen years of age, does hereby act as incorporator, under and by
virtue of the General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
STRATTON MONTHLY DIVIDEND SHARES, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as management
investment company under the Investment Company Act of 1940.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the
<PAGE>
vote or consent of the stockholders of the Corporation) shares of its capital
stock, in any manner and to the extent now or hereafter permitted by law and by
the Charter of the Corporation.
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management of all or part of the
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. The compensation payable by the Corporation
under any such contract shall be such as is deemed fair and equitable by the
Board of Directors.
(5) To enter into a written contract or contracts appointing one or more
distributors or agents or both for the sale of the shares of the Corporation on
such terms and conditions as the Board of Directors of this Corporation may deem
reasonable and proper, and to allow such person or persons a commission on the
sale of such shares.
(6) To enter into a written contract or contracts employing such custodian
or custodians for the safekeeping of the property of the Corporation and of its
shares, such dividend disbursing agent or agents, and such transfer agent or
agents and registrar or registrars for its shares, on such terms and conditions
as the Board of Directors of the Corporation may deem reasonable and proper for
the conduct of the affairs of the Corporation, and to pay the fees and
disbursements of such custodians, dividend disbursing agents, transfer agents,
and registrars out of the income and/or any other property of the Corporation.
Notwithstanding any other provision of these Articles of Incorporation or the
By-Laws of the Corporation, the Board of Directors may cause any or all of the
property of the Corporation to be transferred to, or to be acquired and held in
the name of, any custodian so appointed or any nominee or nominees of the
Corporation or nominee or nominees of such custodian satisfactory to the Board
of Directors.
(7) To employ the same person in any multiple capacity under Sections (4),
(5) and (6) of this Article IV who may receive compensation from the Corporation
in as many capacities in which such person shall serve the Corporation.
(8) No contract, transaction, arrangement, or course of dealing between
the Corporation and any other person, partnership
<PAGE>
(general or limited), association, trust, corporation or other incorporated or
unincorporated group of persons shall be affected by the fact that one or more
of the directors, officers or stockholders of the Corporation were, are or may
become directors, officers or stockholders of or otherwise in any way interested
in such other person, partnership (general or limited), association, trust,
corporation or other incorporated or unincorporated group of persons. All such
contracts, transactions, arrangements and courses of dealing, including without
limitation those referred to under Sections (4), (5) and (6) of Article IV are
hereby expressly permitted.
(9) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
this State is The Corporation Trust Incorporated, a corporation of this State,
and the post officer address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Ten Million (10,000,000) shares, of the par
value of One Dollar ($1.00) per share and of the aggregate par value of Ten
Million Dollars ($10,000,000).
<PAGE>
(2) Any fractional share shall carry proportionately-all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the Charter and the By-Laws of the
Corporation.
ARTICLE VII
(1) The number of initial directors of the Corporation shall be five (5)
provided that: (A) The number of directors of the Corporation may be increased
or decreased pursuant to the By-Laws of the Corporation but shall never be less
than three (3), except as provided in this Article VII; (B) if there is no
capital stock of the Corporation outstanding the number of directors may be less
than three (3) but not less than one (1); and (C) if there is capital stock of
the Corporation outstanding and so long as there are less than three (3)
stockholders of the Corporation, the number of directors may be less than three
(3) but not less than the number of stockholders. The names of the directors who
shall act until the first annual meeting of stockholders or until their
successors are duly elected and qualify are:
Carter R. Buller
Charles K. Cox
Frank H. Reichel, Jr.
A. Addison Roberts
James W. Stratton
(2) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Charter, or out of any
shares of the capital stock of the Corporation acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of Directors,
in its discretion, may determine.
(3) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland, except to
<PAGE>
extend limited by the Investment Company Act of 1940, as now in effect or
hereafter amended, including advance of related expenses.
ARTICLE VIII
The provisions of this Article Eighth are applicable to the Corporation as
a regulated investment company registered under the Investment Company Act of
1940, as heretofore or hereafter amended:
(1) Subject to the provisions of the last sentence of this paragraph, the
Corporation shall be required to redeem shares of Common Stock tendered to it
for redemption, at the net asset value per share as determined pursuant to
methods established from time to time by resolution of the Board of Directors.
The redemption price shall be payable in cash, except to the extent that the
Board of Directors may from time to time determine that it may be payable in
kind. The Bylaws or the Board of Directors may from time to time prescribe
regulations with respect to redemption of shares of Common Stock, but such right
of redemption shall not be suspended, nor shall the date of payment or
satisfaction upon redemption be postponed, in contravention of the applicable
provisions of the Investment Company Act of 1940 as from time to time amended,
and regulations thereunder.
(2) In lieu of redemption pursuant to subparagraph (1), the Board of
Directors may authorize the Corporation to repurchase or authorize its agents or
agents to repurchase for the Corporation, shares of Common Stock at the
applicable Net Asset Value per Share.
(3) The Board of Directors may from time to time determine that shares of
Common Stock redeemed or repurchased by the Corporation under the foregoing
provisions shall be held as treasury shares with a view to possible resale, or
that they shall be returned and upon compliance with applicable provisions of
law restored to the status of authorized by unissued shares of Common Stock.
(4) Subject to the applicable provisions of the Investment Company Act of
1940 and the Bylaws of the Corporation, both as from time to time amended, the
Board of Directors may determine or cause to be determined the time when any
offer,
<PAGE>
sale, repurchase, redemption, tender or acceptance shall be deemed to have been
made, or when the rights of any stockholder offering or tendering shares for
redemption (other than the right to receive payment of the redemption price)
shall cease, or any matter with respect to assets, valuation of assets, debts,
obligations, liabilities, charges and reserves, or any other underlying matters.
(5) Without limiting the generality of the foregoing, the Corporation
shall, to the extent permitted by law, have the right at any time to redeem the
shares owned by any holder of Common Stock of the Corporation if the value of
such shares in the account maintained by the Corporation or its transfer agent
is less than $500.00 (Five Hundred Dollars), provided, however, that each
stockholder shall be notified that the value of his account is less than $500.00
and allowed sixty (60) days to make additional purchases of shares before
redemption is processed by the Corporation.
ARTICLE IX
The duration of the Corporation shall be perpetual.
ARTICLE X
(1) The Corporation reserves the right from time to time to make any
amendments to its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its Charter, of any of its outstanding stock by classification,
reclassification or otherwise, but no such amendment which changes such terms or
contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon by a vote at a
meeting.
(2) Notwithstanding any provision of the General Laws of the State of
Maryland requiring any action to be taken or authorized by the affirmative vote
of the holders of a designated proportion of the votes of all classes or of any
class of stock of the Corporation, such action shall be effective and valid if
taken or authorized by the affirmative vote of the holders of a majority of the
total number of shares outstanding and entitled to vote thereon, except as
otherwise required by applicable law or otherwise provided herein.
<PAGE>
(3) So long as permitted by Maryland law, the books of the Corporation may
be kept outside of the State of Maryland at such place or places as may be
designated from time to time by the Board of Directors or in the By-laws of the
Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by the
laws of the State of Maryland, the Board of Directors is expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation, except where
such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(B) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into shares of its stock of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem advisable.
(C) Without the assent or vote of the stockholders, to authorize and issue
obligations of the Corporation, secured and unsecured, as the Board of Directors
may determine.
(D) Notwithstanding anything in these Articles of Incorporation to the
contrary, to establish in its absolute discretion in accordance with the
provisions of applicable law the basis or method for determining the value of
the assets belonging to the Corporation, the amount of the liabilities belonging
to the Corporation, the times at which shares of the Corporation shall be deemed
to be outstanding or no longer outstanding and the net asset value of each
share of capital stock of the Corporation for purposes of sales, redemptions,
repurchases of shares or otherwise.
(E) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or net
assets in excess of capital, and to determine what accounting periods shall be
used by the Corporation for any purpose, whether annual or any other period,
including daily; to set apart out of any funds of the Corporation such reserves
for such purposes as it shall determine and to abolish the same; to declare and
pay any dividends and
<PAGE>
distributions in cash, securities or other property from surplus or any funds
legally available therefor, at such intervals (which may be as frequently as
daily) or on such other periodic basis, as it shall determine; to declare such
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the payment
of declared dividends on a date earlier or later than the specified payment date
in the case of stockholders of the Corporation redeeming their entire ownership
of shares of any class of the Corporation.
(F) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is authorized to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of Maryland
law, these Articles of Incorporation and the By-Laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of STRATTON MONTHLY
DIVIDEND SHARES, INC. hereby executes the foregoing Articles of Incorporation
and acknowledges the same to be her act.
Dated as of the 1st day of March, 1985.
_______________________
Barbara G. Fraser
<PAGE>
ARTICLES OF INCORPORATION
OF
STRATTON MONTHLY DIVIDEND SHARES, INC.
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF MARYLAND March 04, 1985 AT 11:05 O'CLOCK M. AS IN
CONFORMITY WITH LAW AND ORDERED RECORDED.
RECORDED IN LIBER 2702, FOLIO 002599 THE RECORDS OF THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND
BONUS TAX PAID: RECORDING FEE PAID: SPECIAL FEE PAID:
$ 490 $ 26 $________________
-------------- ----------------
D1880632
--------
TO THE CLERK OF THE CIRCUIT COURT OF BALTIMORE CITY
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
INDORSEMENT THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND
AS WITNESS MY HAND AND SEAL OF THE DEPARTMENT AT BALTIMORE.
________________________________
<PAGE>
EXHIBIT EX-2
By-laws of Registrant, as amended, dated February 28, 1989
<PAGE>
As revised 28 February 1989
BY-LAWS
of
STRATTON MONTHLY DIVIDEND SHARES, INC.
(A Maryland Corporation)
Section 1.MEETINGS OF STOCKHOLDERS
Section 1.01. Place, Date and Time of Meeting. Meetings of the
--------------------------------
stockholders of the Corporation shall be held at such place, date and time as
may be fixed by the Board of Directors. If the Board shall not fix a place for
such meetings, they shall be held at the office of the Corporation in Plymouth
Meeting, Pennsylvania.
Section 1.02. Annual Meeting. Any annual meeting of stockholders, for the
---------------
election of directors and the transaction of any other business which may be
brought before the meeting, shall, unless the Board of Directors shall determine
otherwise, be held at 2:00 P.M. on the fourth Thursday in April, if not a legal
holiday under the laws of Pennsylvania, and, if a legal holiday, then on the
next day not a legal holiday. No annual meeting of stockholders of the
Corporation shall be held unless required by applicable law or otherwise
determined by the Board of Directors.
Section 1.03. Special Meetings. Special meetings of the stockholders, for
-----------------
any purpose or purposes, unless otherwise prescribed by stature or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request in writing of either a majority of
the capital stock of the Corporation then issued and outstanding and entitled to
vote. Any such request shall state the purpose or purposes of the proposed
meeting.
Section 1.04. Notice of Meetings. Except as otherwise expressly required
-------------------
by law, notice of each meeting of stockholders, whether annual or special, shall
be given, not less than ten nor more than fifty days before the date on which
the meeting is to be held, to each stockholder of record entitled to
<PAGE>
vote thereat by delivering a notice thereof to him personally, or by mailing
such notice in a postage prepaid envelope directed to him at his address as it
appears on the books of the Corporation unless he shall have filed with the
Secretary a written request that notices intended for him be directed to him to
another address, in which case such notice shall be directed to him at the
address designated in such request. Notice shall be in writing and signed by
the Secretary or an Assistant Secretary, and shall state the time when and the
place where it is to be held. In the case of special meetings, the notice shall
also indicate that it is being issued by or at the direction of the person or
persons calling the meeting and shall state the purpose or purposes for which
the meeting is called. Notice of any adjourned meeting of stockholders shall
not be required to be given except where expressly required by law.
Section 1.05. Organization. At every meeting of the stockholders, the
-------------
President, or in his absence, a Vice President, or in the absence of the
President and all the Vice Presidents, a chairman chosen by the stockholders,
shall act as chairman; and the Secretary, or in his absence, a person appointed
by the chairman, shall act as Secretary.
Section 1.06. Quorum; Voting. Except as otherwise specified herein or in
---------------
the Certificate of Incorporation or as otherwise provided by law, (a) a quorum
shall consist of the holders of a majority of the stock issued and outstanding
and entitled to vote, and (b) when a quorum is present, all matters shall be
decided by the vote of the holders of a majority of the stock having voting
power present in person or by proxy.
In each election of directors, the candidates receiving the highest number
of votes, up to the number of directors to be elected in such election, shall be
elected.
Section 2. DIRECTORS
Section 2.01. Number of Term of Office. The Board of Directors shall
-------------------------
consist of such number of directors, not less than three nor more than fifteen,
as may be determined from time to time by resolution of the Board of Directors.
The members of the Board of Directors shall be elected by the stockholders at
their annual meeting and each director shall hold office until
-2-
<PAGE>
the next annual meeting after their election and until their successor shall
have been duly elected and qualified, or until they shall have resigned.
Section 2.02. Resignations; Vacancies. Any director may resign at any
-------------------------
time by giving written notice to the Board of Directors, to the President or to
the Secretary. Such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 2.03. Annual Meeting. Immediately after any election of
---------------
directors, the Board of Directors shall meet for the purpose of organization,
election of officers, and the transaction of other business, at the place where
such election of directors was held. Notice of such meeting need not be given.
In the absence of a quorum at said meeting, the same may be held at any other
time or place which shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors.
Section 2.04. Regular Meetings. Regular meetings of the Board of
-----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 2.05. Special Meetings; Notice. Special meetings of the Board of
-------------------------
Directors may be called by the President, by a Vice President, or by two or more
of the Directors, and shall be held at such time and place as shall be
designated in the call for the meeting. Notice of each special meeting shall be
given by mail, telegram, telephone or orally, by or at the direction of the
person or persons authorized to call such meeting, to each director, not later
than the day before the day on which such meeting is to be held.
Section 2.06. Organization. At every meeting of the Board of Directors,
-------------
the Chairman of the Board, if one has been selected and is present, and, if not,
the President, or in the absence of the Chairman of the Board and the President,
a Vice President, or in the absence of the Chairman of the Board, the President
and all the Vice Presidents, a chairman chosen by a majority of the Director
present, shall preside; and the Secretary, or in his
-3-
<PAGE>
absence, a person appointed by the chairman, shall act as secretary.
Section 2.07. Quorum; Voting. A majority of the directors then in office
---------------
shall constitute a quorum for the transaction of business and, except as
otherwise specifically provided by law or the Certificate of Incorporation, the
vote of a majority of the directors present at any meeting at which their is a
quorum shall be the act of the Board of Directors. If a quorum shall not be
present at any meting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 2.08. Committees. The Board of Directors may, be resolution
-----------
passed by a majority of the entire Board, designate one or more committees of
the Board of Directors, each consisting of two or more directors. To the extent
provided in such resolution, such committee or committees shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name and names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
Section 2.09. Action Without Meeting. Any action required or permitted
-----------------------
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if, prior to such action, a written consent
thereto is signed by all members of the Board or committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
Section 2.10. Participation in Meetings. Members of the Board of
--------------------------
Directors or of any committee thereof may participate in a meeting of the Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Such participation in a meeting shall constitute presence in person
at such meeting.
-4-
<PAGE>
Section 2.11. Compensation of Directors. Each director shall be entitled
--------------------------
to receive such compensation, if any, as may from time to time be fixed by the
Board of Directors, including a fee, if any is so fixed, for each meeting of the
Board or any committee thereof, regular or special attended by him. Directors
may also be reimbursed by the Corporation for all reasonable expenses incurred
in traveling to and from the place of each meeting of the Board or any such
committee.
Section 2.12. Indemnification of directors, Officers, Employees and
-----------------------------------------------------
Agents.
- -------
(a) Subject to subsection (e), the Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving with another corporation, partnership,
joint venture, trust or other enterprise at the request of the Corporation (i)
as a director or officer, or (ii) if such person is a director or officer of the
Corporation, as an employee or agent, against expenses (including attorney's
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgement, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, or
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) subject to subsection (e), the Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgement in its favor by reason of the fact that he is or was a
director
-5-
<PAGE>
or officer of the Corporation, or is or was serving with another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Corporation (i) as a director or officer, or (ii) if such person is a director
or officer of the Corporation, as an employee or agent, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that a court of equity
in the county where the Corporation has its principal office or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
(c) To the extent that any person has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) or (b), or in defense of any claim, issue or matter therein, her
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsection (a) or (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that (i) such indemnification complies with subsection (e)
and (ii) indemnification of the person is proper in the circumstance because he
has met the applicable standard of conduct set forth in subsection (a) or (b).
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
-6-
<PAGE>
(e) Notwithstanding any other provisions of this section, including
without limitation subsection (g), no director or officer of the Corporation
shall be indemnified by the Corporation against any liability to the Corporation
or holders of its Common Stock by reason of his willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct to
his office.
(f) Expenses of preparation and presentation of the defense to a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the person seeking indemnification guaranteed by a surety bond issued
by an insurance company qualified to do business in the Commonwealth of
Pennsylvania to repay such amount unless it shall ultimately be determined that
he is entitled to be indemnified by the Corporation as authorized in this
section.
(g) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statue or vote of stockholders or disinterested directors,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 3.OFFICERS
Section 3.01. Number. The officers of the Corporation shall be a
-------
President, a Secretary, a Treasurer, and may include a Chairman of the Board and
one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as the Board of Directors may from
time to time determine.
Section 3.02. Election and Term of Office. The officers of the
----------------------------
Corporation shall be elected by the Board of Directors at its annual meeting,
but the Board may elect officers or fill vacancies amount the officers at any
other meeting. Subject to earlier termination of office, each officer shall
hold office for
-7-
<PAGE>
one year and until his successor shall have been elected and qualified.
Section 3.03. Resignations. Any officer may resign at any time by giving
-------------
written notice to the Board of Directors, or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3.04. Removal. Any officer elected by the Board of Directors may
--------
be removed at any time by the vote of a majority of the Board of Directors.
Section 3.05. Chairman of the Board. If there is a chairman of the
----------------------
Board, he shall preside at the meetings of the Board. Such Chairman shall also
perform such other duties as may be specified by the Board from time to time and
as do not conflict with the duties of the President.
Section 3.06. The President. The President shall be the chief executive
--------------
officer of the Corporation and shall have general supervision over the business
and operations of the Corporation, subject, however, to the control of the Board
of Directors. He shall sign, execute, and acknowledge, in the name of the
Corporation, deed, mortgages, bonds, contracts and other instruments authorized
by the Board, except in cases where the signing and executing thereof shall be
delegated by the Board to some other officer or agent of the Corporation; and,
in general he shall perform all duties incident to the office of President, and
such other duties as from time to time may be assigned to him by the Board.
Section 3.07. The Vice President. In the absence or disability of the
-------------------
president or when so directed by the President, any Vice President designated by
the Board of Directors may perform all the duties of the President, and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President; provided, however, that no Vice President shall act as a
---------
member of or as chairman of any special committee of which the President is a
member or chairman by designation or ex-officio, except when designated by the
Board.
-8-
<PAGE>
The Vice Presidents shall perform such other duties as from time to time may be
assigned to them respectively by the Board or the President.
Section 3.08. The Secretary. The Secretary shall record all the votes of
--------------
the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; he shall see that notices of meetings of the stockholders and the
Board are given and that all records and reports are properly kept and filed by
the Corporation as required by law; he shall be the Custodian of the seal of the
Corporation and shall see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and, in general, he shall perform all
duties incident to the office of Secretary, and such other duties as may from
time to time be assigned to him by the Board or the President.
Section 3.09. Assistant Secretaries. In the absence or disability of the
----------------------
Secretary or when so directed by the Secretary, any Assistant Secretary may
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them respectively by the Board of Directors, the President, or
the secretary.
Section 3.10. The Treasurer. Subject to the provisions of any contract
--------------
which may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
its funds and securities; he shall have full authority to receive and give
receipts for all money due and payable to the Corporation, and to endorse
checks, drafts, and warrants in its name and on its behalf and to give full
discharge for the same; he shall deposit all funds of the Corporation, except
such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board or
the President.
-9-
<PAGE>
Section 3.11. Assistant Treasurers. In the absence of disability of the
---------------------
Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer, and, when so acting, shall have all the
powers of and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform all such other duties as from time to time
may be assigned to them respectively by the Board of Directors, the President or
the Treasurer.
Section 3.12. Compensation of Officers and Others. The compensation of
------------------------------------
all officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded from receiving such compensation by reason of the fact that he is also
a director of the Corporation.
Section 4. STOCK CERTIFICATES; TRANSFERS
Section 4.01. Stock Certificates. Every stockholder shall be entitled to
-------------------
a stock certificate or certificates in such form as the Board of Directors shall
prescribe certifying the number of shares of capital stock of the Corporation
owned by the stockholder. Stock certificates shall be signed by the President
or a Vice President and by the Secretary or the Treasurer or an Assistant
Secretary or Assistant Treasurer of the Corporation, but, to the extent
permitted by law, such signature may be facsimiles, engraved or printed.
Section 4.02. Transfers of Stock. Transfers of stock shall be made only
-------------------
on the books of the Corporation by the owner thereof or by his attorney
thereunto authorized. The Corporation shall impose no restrictions upon the
transfer of its stock, except that this sentence shall not prevent the charging
of the customary transfer agent fees.
Section 4.03. Closing of Transfer Books. The Board of Directors may
--------------------------
close the stock transfer books of the Corporation for a period not exceeding
fifty days preceding the date of any meeting of stockholders or the date for
payment of any dividend or other distribution or the date for the allotment of
rights or the date when any change or conversion or exchange of capital stock
shall go into effect or for a period not exceeding fifty days in connection with
obtaining the consent of stockholders for
-10-
<PAGE>
any purpose. In lieu of closing the stock transfer books as aforesaid, the
Board of Directors may fix, in advance, a date, which shall not be more than
sixty nor less than ten days before the date of any meeting of stockholders, not
more than sixty days prior to any other action, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution, to receive any allotment of rights, to exercise
rights in respect of any change, conversion or exchange of capital stock, or to
give any consent of stockholders for any purpose, and, in such case, such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to notice of, and to vote at, such meeting
or any adjournment thereof, or entitled to receive payment of such dividend or
other distribution, to receive such allotment of rights, to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
Section 4.04. Registered Stockholders. The Corporation shall be entitled
------------------------
to recognize, for all purposes, the person registered on its books as the owner
of a share or shares and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
Section 4.05. Transfer Agent and Registrar; Regulations. The Corporation
------------------------------------------
may, if and whenever the Board of Directors so determines, maintain, in the
State of Maryland or any other state of the United States, one or more transfer
offices or agencies, each in charge of a Transfer Agent designated by the Board,
where the stock of the Corporation shall be transferable. If the Corporation
maintains one or more such transfer offices or agencies, it also may, if and
whenever the Board of Directors so determines, maintain one or more registry
offices, each in charge of a Registrar designated by the Board, where such stock
shall be registered. No certificates for stock of the Corporation in respect of
which a Transfer Agent shall have been designated shall be valid unless
countersigned by such Transfer Agent, and no certificates for stock of the
Corporation in respect of which both a Transfer Agent and a Registrar shall have
been designated
-11-
<PAGE>
shall be valid unless countersigned by such Transfer Agent and registered by
such Registrar. The Board may also make such additional rules and regulations
as it may deem expedient concerning the issue, transfer and registration of
stock certificates.
Section 4.06. Lost, Destroyed and Mutilated Certificates. The Board of
-------------------------------------------
directors, by standing resolution or by resolutions with respect for particular
cases, may authorize the issue of new stock certificates in lieu of stock
certificates lost, destroyed or mutilated, upon such terms and conditions as the
Board may direct.
Section 4.07. Stock Ledgers. The corporation shall not be required to
--------------
keep original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the Transfer Agents of the Corporation's capital stock.
Section 5.GENERAL PROVISIONS
Section 5.01. Distributions. Distributions upon the Common Stock of the
--------------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Subject to the provisions of the Certificate of
Incorporation, distributions may be paid in cash, in property, or in shares of
the capital stock of the Corporation.
Before payment of any distribution, there may be set aside out of any funds
of the Corporation available for distribution such sum or sums as the Directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing distributions, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
Section 5.02. Reports. The Corporation shall transmit to its
--------
stockholders, at least semi-annually, unaudited or audited reports of its
financial condition and, annually, reports audited by independent public
accountants.
-12-
<PAGE>
Section 5.03. Investment Advisory or Management Contract. Any investment
-------------------------------------------
advisory or management contract under which the Corporation operates shall
provide that it cannot be amended (as to matters affecting substance), assigned,
transferred, sold or in any manner hypothecated or pledged without the
affirmative vote or written consent of the holders of a majority of the
outstanding Common Stock of the Corporation. In the event of the cancellation
or expiration by its own terms of any such contract, no new investment advisory
or management contract shall become effective without the affirmative vote or
written consent of the holders of a majority of the outstanding Common Stock of
the Corporation, except as shall be otherwise permitted by the Securities and
Exchange Commission under the Investment Company Act of 1940. As used in this
Section, the term "a majority of the outstanding Common Stock of the
Corporation" means the lesser of (1) 67% of the Corporation's Common Stock
present at a meeting if the holders of more than 50% of the outstanding Common
Stock are present in person or by proxy, or (2) more than 50% of the outstanding
Common Stock of the Corporation.
Section 5.04. Trading in Securities. Neither the investment adviser nor
----------------------
any officer or director thereof, not any officer or director of the Corporation,
shall take a long or short position in the Common Stock issued by the
Corporation, except as permitted by applicable laws and regulations; provided,
---------
that the foregoing shall not prevent the purchase from the Corporation of its
Common Stock by the officers or directors of the Corporation or of the
investment adviser or by the investment adviser at the applicable public
offering price provided there is on file with the securities commissions of such
states as may require the same an undertaking by the Corporation that such
purchases will be permitted for investment purposes only and that any sales of
Common Stock issued by the Corporation by such persons less than two months
after the date of purchase thereof will be immediately reported to such
securities commissions.
Section 5.05. Transactions with Officers and Directors. The directors and
-----------------------------------------
officers of the Corporation and of the investment adviser of the Corporation
with themselves, as principal or agent, or with any Corporation or partnership
in which they have a financial interest, provided, however, that this section
shall not prevent (a) such officers and directors from having a financial
interest in the Corporation or in the
-13-
<PAGE>
investment adviser of the Corporation; (b) the purchase or the sale of
securities by the corporation through a securities dealer one or more of whose
partners, officers, or directors is an officer or director of the Corporation
(if such transactions are handled in the capacity of broker only and if the
commissions and charges do not exceed the customary charges for such services);
(c) the employment of legal counsel, underwriter, registrar, transfer agent,
dividend disbursing agent or custodian having a partner, officer or director who
is an officer or director of the Corporation (if only customary fees are charged
for the services rendered to or for the benefit of the Corporation); and (d) the
purchase or sale by the Corporation of securities of an issuer having an
officer, director or substantial security holder who is an officer or director
or a member of an advisory or portfolio committee of the Corporation or an
officer or director of the investment adviser, provided, that the officer or
---------
director or committee member concerned abstains from participating in any
decision made on behalf of the Corporation to purchase or sell any securities of
such issuer, provided, further, that no such purchase shall be made if one or
--------- -------
more of such officers or directors owns beneficially more than 1/2 of 1% of the
shares or securities, or both, of such issuer and such officers and directors
owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities.
Section 5.06. Custodian. The Corporation may act as its own custodian
---------
for the safekeeping of cash and securities or it may designate a custodian or
custodians other than itself to so act, provided that any custodian shall meet
the requirements of the Investment Company Act of 1940.
Section 6.AMENDMENTS
Section 6.01. By Stockholders. These by-laws may be amended or repealed
----------------
at any regular meeting of the stockholders, or at any special meeting thereof if
notice of such amendment or repeal be contained in the notice of such special
meeting, by vote of the holders of the lesser of (1) 67% of the Common Stock of
the Corporation present at a meeting if the holders of more than 50% of the
outstanding Common Stock are present in person or by proxy, or (2) more than 50%
of the outstanding Common Stock of the Corporation.
-14-
<PAGE>
Section 6.02. By Directors. These by-laws may be amended or repealed at
-------------
any regular meeting of the Board of Directors, or at any special meeting thereof
if notice of such amendment or repeal be contained in the notice of such special
meeting.
-15-
<PAGE>
EXHIBIT EX-5
Investment Advisory Agreement dated July 1, 1989 between Registrant
and Stratton Managment Company
<PAGE>
STRATTON MONTHLY DIVIDEND SHARES, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of July 1, 1989 between Stratton Monthly Dividend Shares,
-------
Inc., a Maryland corporation (the "Fund"), an investment company registered
under the Investment Company Act of 1940, and Stratton Management Company, a
Pennsylvania corporation (the "Adviser"), a registered investment adviser under
the Investment Advisors Act of 1940. The Fund hereby engages the Adviser to act
as its investment adviser subject to the terms and conditions herein set forth.
SECTION 1. Investment Advisory Services.
-----------------------------
The Adviser shall use its staff and other facilities to conduct and
maintain a continuous review of the Fund's portfolio of securities and
investments, and shall from time to time recommend to the Fund what securities,
in the Adviser's opinion, should be purchased or sold by the Fund, what portion
of the assets of the Fund should remain uninvested, and the extent to which the
Fund should otherwise use its investment powers. In conducting such review and
making such recommendations, the Adviser shall be guided by the Fund's
investment policies as delineated and limited by the statements contained in
documents filed with the Securities and Exchange Commission as amended from time
to time, by policies adopted by the Fund's Board of Directors (the "Board"), and
by the provisions of the Investment Company Act of 1940 and the rules
promulgated thereunder, so that at all times the Fund shall be in compliance
with its policies and the Investment Company Act of 1940. The Fund agrees to
supply the Adviser with copies of all such documents and to notify the Adviser
of any changes in the Fund's investment policies and restrictions.
In rendering such investment advisory services to the Fund pursuant to this
Agreement, the Adviser may at its own expense employ, retain or otherwise avail
itself of the services or facilities of other persons or organizations, for the
purpose of providing the Adviser or the Fund with such statistical and other
factual information, such advice regarding economic factors and trends, such
advice as to occasional transactions in specific securities and such other
information, advice or assistance as the Adviser may deem necessary, appropriate
or convenient for the discharge of the Adviser's obligations hereunder or
otherwise helpful to the Fund.
<PAGE>
The Adviser and any person performing executive, administrative or trading
functions for the Fund whose services were made available to the Fund by the
Adviser is authorized to recommend that the Fund pay, or cause the Fund to pay,
brokerage commissions to any member of a securities exchange or securities
broker or dealer which may be in excess of the amount which another member of
such an exchange or broker or dealer would have charged for effecting such
transaction, if the Adviser or such officer or employee determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services (as such term is defined in Section 28(e)(3) of
the Securities Exchange Act of 1934 and the rules, regulations and releases of
the Securities and Exchange Commission thereunder) provided by such member or
broker or dealer with respect to the Adviser's services hereunder, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund.
SECTION 2. Resumes and Reports, Etc.
-------------------------
The Adviser should maintain a continuous record of all the investments and
securities which comprise the Fund's portfolio and shall furnish to the Board,
at any time it so requests, a resume of such portfolio in the form prescribed by
the Board. The Adviser shall also render to the Board, at its regularly
scheduled meetings, and at such other times as the Board may request, a report
on all matters pertaining to the Adviser's services hereunder, in the form
prescribed by the Board. In addition, the Adviser shall furnish the Fund with
such reports and other data as the Board shall request, including, without
limitation, industry surveys, news of recent developments, statistical data, and
such other information as may keep the Board properly informed on developments
relating to the Fund's portfolio, or similar data relating to securities which
the Adviser recommends for inclusion in the portfolio of the Fund.
SECTION 3. Other Duties and Services.
-------------------------
The Adviser, or any other entity approved by the Fund's Board, whether or
not such entity is affiliated with the Adviser and directors and officers of the
Fund, shall keep the books and financial records of the Fund, and on behalf of
the Fund shall compute the net asset value of the Fund's shares (in accordance
<PAGE>
with any instructions of the Board) at such times as the Board may direct. In
compliance with the requirements of Rule 31a-3 of the Rules and Regulations of
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended, the Adviser hereby agrees it will surrender and will cause any other
entity that maintains the Fund's books and financial records hereunder to
surrender promptly to the Fund any of such records upon the Fund's request, and
the Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
of such Rules any such records as are required to be maintained by Rule 31a-1
thereof. If requested to provide such services, the Adviser or such other entity
may obtain, at the Fund's expense, pricing information from brokers, dealers or
others to assist the Adviser or such other entity in computing such net asset
value, and the Adviser or such other entity shall perform such other services as
are reasonably incidental to the foregoing duties. The Adviser or such other
entity shall furnish to the Fund and to such other persons as the Fund may
direct, any statements with respect to the net asset value of the Fund and the
net asset value per share, at such times, and in such forms, as the Fund may
prescribe.
When and if the Board so requests, the Adviser or such other entity shall
furnish the Fund with the services of a person or persons satisfactory to the
Fund whose duties shall include (except for the legal and auditing aspects
thereof) the supervision of the Fund's financial statements and reports, the
preparation of reports to shareholders and others, and any statements or reports
required by regulatory authorities of the United States, or states thereof in
which the Fund has registered or qualified its shares for sale.
In addition, the Adviser shall furnish, or arrange and pay for others to
furnish to the Fund, such office space and facilities, including, without
limitation, stenographic, telephone, telegraphic, mailing, and other facilities
as the Board shall request in connection with the operations of the Fund. It is
the intent of this Agreement that through the staff of the Adviser or of another
entity furnishing such services, the Adviser or such other entity shall supply
such services as are deemed by the Board to be necessary or desirable and proper
for the continuous operation of the Fund. However, neither the Adviser nor such
other entity shall be required to perform (a) those services customarily
performed by members of the Board; or (b) those services customarily performed
by the custodian,
<PAGE>
transfer agent, registrar, dividend disbursing agent, independent accountants,
brokers, dealers or legal counsel.
SECTION 4. Multiple Capacities.
-------------------
The Fund understands that the Adviser may act in one or more capacities
on behalf of other investments companies and customers. While information and
recommendations supplied to the Fund shall, in the Adviser's judgment, be
appropriate under the circumstances and in light of the investment objective of
the Fund, they may be different from the information and recommendations
supplied by the Adviser or such affiliate to other investment companies and
customers. The Adviser shall give the Fund equitable treatment under the
circumstances in receiving information, recommendations and any other services
requested of the Adviser, but the Adviser shall not be required to give
preferential treatment to the Fund as compared with the treatment given by the
Adviser to any other investment company or customer.
SECTION 5. Payment of Expenses.
The Adviser shall assume and pay all of its costs and expenses incurred in
performing its duties under this Agreement except that the Fund shall reimburse
the Adviser, or such other entity approved by the Board, whether or not such
entity is affiliated with the Adviser and directors and officers of the Fund,
monthly for (i) the Adviser's or such other entity's costs in providing any
equipment used for the Fund's operations, and (ii) to the extent the Adviser or
such other entity are required or requested by the Fund to provide such services
and the Adviser or such other entity so provides them, the costs of the Adviser
or charges of such other entity in providing administrative and accounting
services to the Fund including costs or charges, as the case may be, without
limitation, for maintaining financial records and bookkeeping, in connection
with the daily computation of net asset value per share, in connection with
registering or qualifying the Fund or shares of the Fund for sale under
applicable federal or state securities laws, in connection with the annual or
special meeting of stockholders, and the allocable portion of the compensation
paid to employees of the Adviser for furnishing the above-mentioned services to
the Fund; provided that, the reimbursement to the Adviser for any such costs
shall not exceed an amount which would cause the Fund's ratio of net operating
expenses to average net assets during any fiscal year to exceed two percent
(2%). The operating expenses of the Fund
<PAGE>
shall be accrued daily and an interim computation shall be made at the end of
each month with respect to such limitation of expenses for the current fiscal
year. If the expenses do not exceed the limitation and the Adviser has
previously made payments to the Fund with respect to the current fiscal year,
the Adviser shall be entitled to the return of such payments up to the amount of
the difference between the limitation and the expenses. Any final adjustment for
the fiscal year shall be made promptly following the completion of the Fund's
annual audit for such year. The Fund agrees to assume and pay, or reimburse the
Adviser or such other entity for, the Fund's operating expenses, including,
without limitation, taxes, interest charges, fees of its attorneys, independent
accountants, accounting services agents, custodians, transfer agents and
registrars, certain directors' fees and costs incurred in producing shareholder
reports and proxy materials. The Fund will also pay brokerage commissions on its
portfolio transactions.
SECTION 6. Compensation for Services.
-------------------------
As compensation for the Adviser's services, the Fund will pay to the
Adviser, except as otherwise provided in Section 5 hereof, on the last day of
each month a fee at the annual rate of 5/8 of 17 of the Fund's average daily net
asset value. The fee shall be prorated for any portion of a month during which
the fee is payable.
The net asset value of the Fund shall be defined as the total assets of
Fund, less its liabilities, and shall be determined in accordance with
instructions of the Board.
SECTION 7. Liability of the Investment Adviser.
-----------------------------------
The Adviser shall be liable only for willful misfeasance, bad faith or
gross negligence in the performance of its duties or reckless disregard of its
obligations under this Agreement, and nothing herein shall protect the Adviser
against any such liability to the Fund or its shareholders. The Adviser shall
not be liable for the acts and omissions of any agent (other than a director,
officer or employee of the Adviser) employed by the Adviser, nor for those of
any bank, trust company, broker or other person with whom or into whose hands
any moneys, shares of the Fund or securities and investments may be deposited or
come, pursuant to the provisions of this Agreement. The Adviser shall not be
liable for any defects in title of any property acquired,
<PAGE>
nor for any loss unless it shall occur through the Adviser's own willful
default.
SECTION 8. Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective on the first day of the month
following approval of this Agreement by the vote of a majority of the
outstanding shares of the Fund, and unless sooner terminated as provided herein,
this Agreement shall continue until June 30, 1991, and from year to year
thereafter for successive annual periods ending on June 30, but only so long as
such continuance is specifically approved at least annually (i) by the Board,
including a majority of the directors who are not parties to the Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval; or (ii) by vote of a majority of the
outstanding shares of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty, by vote of the Board or by vote of a majority of the outstanding shares
of the Fund, or by the Adviser, on sixty (60) days' written notice to the other
party.
This Agreement shall automatically terminate in the event of its
assignment.
SECTION 9. Use of the Name "Stratton" by the Fund.
--------------------------------------
The Adviser, whose principal shareholder and chief executive officer is
James W. Stratton, hereby consents to use by the Fund of the name "Stratton" in
its corporate name. The Fund shall be entitled to use such name so long as the
Adviser acts as investment adviser to the Fund. The Fund agrees that its use of
the name "Stratton" in its corporate name shall not prevent the Adviser or any
other corporation affiliated with it, or its successors or assigns, from using
or permitting the use of the name "Stratton," alone or with any other word or
words, for, by or in connection with any other entity or business, whether or
not the same directly or indirectly competes or conflicts with the Fund or its
business.
In the event that the Adviser shall cease to act as investment adviser to
the Fund, the Fund shall cease to use the name "Stratton," and the Fund shall
take all appropriate or necessary steps to change its corporate name and to
terminate use
<PAGE>
of the name "Stratton" in connection with its business; provided, however, at
the sole option of the Adviser, the Fund may continue to use the name "Stratton"
so long as all prospectuses and other material intended for investors is
appropriately marked to indicate that the Adviser is no longer the Fund's
investment adviser.
SECTION 10. Definitions.
------------
When used in this Agreement, the terms "assignment," "interested person"
and "vote of a majority of the outstanding shares" shall have the meanings given
such terms in Sections 2(a)(4), 2(a)(19) and 2(a)(42), respectively, of the
Investment Company Act of 1940, as amended.
SECTION 11. Notices.
-------
Until further notice to the other party, it is agreed that the address
of the Fund and of the Adviser to which any notice hereunder is to be delivered
or mailed shall be 610 W. Germantown Pike, Suite 361, Plymouth Meeting,
Pennsylvania 19462.
SECTION 12. Concerning Applicable Provisions of Law, Etc.
--------------------------------------------
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the Investment
Company Act of 1940, as amended. To the extent that any provisions herein
contained conflict with any such applicable provisions of law, the latter shall
control.
The laws of the Commonwealth of Pennsylvania shall be controlling and shall
govern the construction, validity and effect of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
STRATTON MONTHLY DIVIDEND
SHARES, INC.
Attest:__________________________ By:_____________________________
Secretary Gerald E. Heffernan
President
STRATTON MANAGEMENT COMPANY
Attest:__________________________ By:_____________________________
Secretary James W. Stratton
President
<PAGE>
FEE WAIVER
Stratton Management Company("SMC"), Investment Adviser to Stratton Monthly
Dividend Shares, Inc., ("the Fund"), does hereby waive $15,000 per year of its
Advisory Fee from the Fund in order to offset a significant portion of the
$20,000 annual Administrative Fees that will he incurred hy the Fund by the
delegation of certain administrative responsibilities] to Fund/Plan Services,
Inc. This waiver is being executed in connection with the execution of an
Administration Agreement dated as of March 1, 1990 between the Fund and
Fund/Plan Services, Inc. This waiver may be terminated or reduced by SMC upon 60
days prior written notice to the Fund.
STRATTON MANAGEMENT COMPANY
By:__________________________
Title:_______________________
Date: March 1, 1990
------------------------
<PAGE>
EXHIBIT EX-6
Underwriting Agreemeent dated June 22, 1993 between Registrant
and Fund/Plan Broker Services, Inc.
<PAGE>
UNDERWRITING AGREEMENT
----------------------
This agreement, made as of June 22, 1993 by and between Stratton Monthly
Dividend Shares, Inc. (the "Fund"), and Fund/Plan Broker Services, Inc. (the
"Underwriter").
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and Underwriter are desirous of entering into an
agreement providing for the promotion and distribution by Underwriter of shares
of the Fund (the "Shares");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
------------
The Fund hereby appoints Underwriter as its agent for the distribution of
the Shares, and Underwriter hereby accepts such appointment under the terms of
this Agreement.
2. Sale and Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Fund, to sell
Shares to the public against orders therefor at the public offering price (as
defined in sub-paragraph 2(d) hereof.)
(b) Underwriter will also have the right, as agent for the Fund, to
sell Shares at their net asset value to such persons as may be approved by the
Board of Directors of the Fund, all such sales to comply with the provisions of
the Act, the Securities Act of 1933 and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
(c) Underwriter will also have the right to take, as agent for the
Fund, all actions which, in Underwriter's judgement, are necessary to carry into
effect the distribution of the Shares.
(d) The public offering price shall be the net asset value of Shares.
(e) The net asset value of the Shares shall be determined in the
manner provided in the then current prospectus and statement of additional
information relating to the Shares (the "Prospectus"), and when determined shall
be applicable to transactions as provided for in the Prospectus. The net asset
value of the Shares shall be calculated by the Fund or by another entity on
behalf of the Fund. Underwriter shall have no duty to inquire into or liability
for the accuracy of the net asset value per Share as calculated.
<PAGE>
(f) If Underwriter receives any funds for the purchase of shares, it
will deliver the applicable net asset value of the Shares promptly.
(g) Upon receipt of purchase or redemption instructions, Underwriter
will transmit such instructions to the Fund or its transfer agent for
registration of the Shares purchased or redeemed.
(h) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or such
affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly agrees that it will not
for its own account purchase any shares of the Fund except for investment
purposes and that it will not for its own account sell any such shares except by
redemption of such shares by the Fund, and that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Fund under this Agreement.
(i) Underwriter will maintain all regulatory books and records in
correct form with its obligations under this Agreement.
3. Rules of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Fund, undertakes to sell Shares on a best efforts
basis only against orders therefor.
The Fund reserves the right to refuse at any time or times to sell any
of its Shares for any reason deemed adequate by it.
4. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of Fair Practice of the
NASD and the securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
selling agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and Underwriter shall
not withhold the placing of purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Fund sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate time for the Fund to file and clear them with
the proper authorities before they are put in use, and not to use them until so
filed and cleared.
(d) Underwriter, at its own expense, will qualify as a dealer or
broker, or otherwise, under all applicable state or federal laws required in
order that the Shares may be sold in
<PAGE>
such states as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or authorize any representative,
Service Organization, broker or dealer to make, in connection with any sale or
solicitation of a sale of the Shares, any representations concerning the Shares
except those contained in the Prospectus covering the Shares and in sales
materials approved by the Underwriter as information supplemental to such
Prospectus. Copies of the Prospectus will be supplied by the Fund to
Underwriter in reasonable quantities upon request.
5. Records to be Supplied by the Fund.
-----------------------------------
The Fund shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Fund by independent
public accountants.
6. Expenses.
---------
(a) The Fund will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient
copies of the prospectus and statements of additional information
for distribution to shareholders, and the distribution of same to
the shareholders.
(ii) preparation, printing and distribution or reports and
other communications to shareholders;
(iii) registration of the Shares under the federal securities
laws;
(iv) qualifications of the Shares for sale in the
jurisdictions mutually agreed upon by the Fund and the
Underwriter;
(v) qualification of the Fund as a dealer under the laws of
jurisdictions designated by Underwriter if Underwriter determines
that such qualification is necessary or desirable for the purpose
of facilitating sales of the Shares:
(vi) maintaining facilities for the issue and transfer of the
Shares;
(vii) supplying information, prices and other data to be
furnished by the Fund under this Agreement; and
(viii) any original issue taxes or transfer taxes applicable to
the sale or delivery of the Shares or certificates therefor.
<PAGE>
(b) Underwriter will pay all other expenses incident to the sale and
distribution of the Shares sole hereunder.
7. Fee.
----
(a) For its services under this Agreement, The Underwriter shall be
entitled to the fees contained on Schedule B attached hereto, as amended from
time to time. The services provided include acting as primary
underwriter/distributor of the Fund and licensing/regulatory agent for Stratton
Management Company personnel including employees who are registered as Fund/Plan
Broker Services, Inc. representatives, and maintaining the regulatory books and
records of Fund/Plan Broker Services in connection with this agreement on behalf
of the Fund.
8. Liability of Underwriter.
-------------------------
(a) Underwriter, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgement or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Underwriter in the
performance of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Underwriter, who may be or become an officer, director,
trustee, employee or agent of the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund (other than services or
business in connection with Underwriter's duties hereunder), to be rendering
such services to or acting solely for the Fund and not as a director, officer,
employee, shareholder or agent, or one under the control or direction of
Underwriter even though paid by it.
(c) The Fund agrees to indemnify and hold harmless Underwriter, and
each person, if any, who controls Underwriter within the meaning of Section 15
of the Securities Act of 1933 (the "Securities Act") or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") against any and all losses,
claims, damages and liabilities, joint or several (including any reasonable
investigative, legal and other expenses incurred in connection therewith) to
which they, or any of them, may become subject under the 1940 Act, the
Securities Act, The Exchange Act or other federal or state law or regulation, at
common law or otherwise insofar as such losses, claims, damages or liabilities
(or actions, suits or proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in a Prospectus, Statement of Additional Information, supplement
thereto, sales literature or other written information prepared by the Fund and
furnished by it to Underwriter for Underwriter's use hereunder, disseminated by
the Fund or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. Such indemnity shall not, however, inure
to the benefit of Underwriter (or any person controlling Underwriter) on account
of any losses, claims, damages or liabilities (or actions, suits or proceedings
in respect thereof) arising from the sale of the shares of the Fund to any
person by
<PAGE>
Underwriter (i) if such untrue statement or omission or alleged untrue statement
or omission was made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by Underwriter specifically for use
therein or (ii) if such losses, claims, damages or liabilities arise out of or
are based upon an untrue statement or omission or alleged untrue statement or
omission in the Prospectus, Statement of Additional Information, or supplement,
sales or other literature, if the Fund shall correct the untrue statement or
omission or the alleged untrue statement or omission which is the basis of the
loss, claim, damage or liability for which indemnification is sought and a copy
of the Prospectus was not sent or given to such person at or before the
confirmation of the sale to such persons, unless such failure to deliver the
prospectus was a result of noncompliance by the Fund with the obligation to
furnish copies of the Prospectus and any supplements thereto.
(d) Underwriter agrees to indemnify and hold harmless the Fund, each
person, if any, who controls the Fund within the meaning of Section 15 of the
Securities Act of Section 20 of the Exchange Act, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement of a material fact contained
in a Prospectus or Statement of Additional Information or any supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if based upon information furnished in
writing to the Fund by Underwriter specifically for use therein.
9. Termination of this Agreement.
------------------------------
This Agreement shall automatically terminate in the event of its
assignment. This Agreement may be terminated with respect to the Fund at any
time, without payment of any penalty, by vote of a majority of the members of
the Board of Directors of the Fund including a majority of the directors who are
not interested persons of the Fund or by vote of a majority of the outstanding
voting securities of the Fund or by Underwriter on sixty (60) days' written
notice to the other party.
10. Effective Period of this Agreement.
-----------------------------------
This Agreement shall be effective on June 22, 1993 and shall remain in
full force and effect for a period of two (2) years thereafter (unless
terminated as set forth in Paragraph 10), and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund or by a majority of the outstanding
voting securities of the Fund, (ii) by a majority of the Directors of the Fund
who are not parties to this Agreement or interested persons of any such party by
vote cast in person at a meeting called for the purpose of voting on such
approval, and (iii) By Underwriter.
The provisions of paragraph 8 hereof shall survive the termination of
this Agreement.
11. Amendments.
-----------
No amendments to this Agreement shall be executed or become effective
unless its terms have been approved; (a) by a majority of the directors of the
Fund or by the vote of a majority
<PAGE>
of the outstanding voting securities of the Fund, and (b) by a majority of those
directors who are not interested persons of the Fund or of any party to this
Agreement.
12. Reports.
--------
Underwriter shall prepare reports for the Board of Directors of the
Fund on a quarterly basis showing such information as from time to time shall be
reasonably requested by such Board.
13. Severability.
-------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of the
Agreement, which shall continue to be in force.
14. Governing Law.
--------------
This agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the Fund and Underwriter have each caused this
Agreement to be signed in duplicate, as of the day and year first above written.
WITNESS: FUND:
_____________________ STRATTON MONTHLY DIVIDEND SHARES, INC.
By: ___________________________________
Name: James W. Stratton
Title: Chairman
WITNESS: UNDERWRITER:
_____________________ FUND/PLAN BROKER SERVICES, INC.
By:_____________________________
Name: Kenneth J. Kempf
Title: President
<PAGE>
FUND/PLAN BROKER SERVICES, INC.
FEE SCHEDULE
FOR
STRATTON MONTHLY DIVIDEND SHARES, INC.
- --------------------------------------------------------------------------------
Underwriter will serve as sole underwriter of Stratton Monthly Dividend Shares,
Inc., a no-load fund, for the exclusive purpose of facilitating the
registration of its shares of beneficial interest for sale in various states.
Fee: $3,000 per portfolio, annually
$2.00 per kit for inquiry/fulfillment
Underwriter will license employees of the Fund's Advisor, Stratton Monthly
Company, who are engaged in the sale of shares.
Fee: $1,000 per licensed representative, annually
All fees will be paid by the Fund's Advisor, Stratton Management Company. Out-
of-pocket expenses, including telephone, postage, telecommunications and travel,
will be billed separately.
<PAGE>
FEE SCHEDULE FOR
THE STRATTON FAMILY OF FUNDS
STRATTON MONTHLY DIVIDEND SHARES
STRATTON GROWTH FUND
STRATTON SMALL-CAP YIELD FUND
<TABLE>
<CAPTION>
=============================================================================================================
PRESENT PROPOSED
- -------------------------------------------------------------------------------------------------------------
SMDS SGF SMDS SGF SSCY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACCOUNTING $21,000 $20,000 $26,000 $20,000 $20,000
(flat fee, no basis points included)
- -------------------------------------------------------------------------------------------------------------
CUSTODY Same as Same as Same as
.00065 on 10 million ) present present present
.00035 next 20 million ) Applies to SMDS & SGF
.00025 next 20 million )
.000175 next 50 million )
.00015 over 100 million )
DTC $14.00
Physical $24.50
- -------------------------------------------------------------------------------------------------------------
TRANSFER AGENT $12.00 $9.60 $13.00 $13.00 $13.00
(per account fee, no monthly minimums imposed)
- -------------------------------------------------------------------------------------------------------------
ADMINISTRATION $20,000 $20,000 $30,000 $30,000 $10,000
(flat fee, no basis points included)
- -------------------------------------------------------------------------------------------------------------
BROKER/DEALER $3,000 $3,000 $3,000 $3,000 $3,000
(flat annual fee; plus $2.00 per kit for inquiry/fulfillment)
=============================================================================================================
</TABLE>
Note: New fees effective 3/1/93
<PAGE>
EXHIBIT EX-10(b)
Opinion and Consent of Counsel Under Rule 24e-2 of the 1940 Act
<PAGE>
May 22, 1996
Stratton Monthly Dividend Shares, Inc.
Plymouth Meeting Executive Campus
610 W. Germantown Pike, Suite 300
Plymouth Meeting, Pennsylvania 19462
RE: Shares Registered By Post-Effective Amendment No. 16 to Registration
------------
Statement on Form N-1A (File No. 2-42379)
------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Stratton Monthly Dividend Shares, Inc. (the
"Company") in connection with the preparation and filing with the Securities and
Exchange Commission of Post-Effective Amendment No. 16 to the Company's
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, registering 930,164 shares of the Company's common stock, $1.00 par
value per share, ("Common Stock") to be issued and sold by the Company. The
registration of such Common Stock has been made in reliance upon Rule 24e-2
under the Investment Company Act of 1940, as amended.
In this connection, we have reviewed originals or copies, certified or
otherwise identified to our satisfaction, of the Company's Certificate of
Incorporation, By-Laws, resolutions of its Board of Directors and such other
documents and corporate records as we deem appropriate for the purpose of giving
this opinion. We express no opinion concerning the laws of any jurisdiction
other than the Maryland General Corporation Law and the Federal Law of the
United States of America.
Based upon the foregoing, it is our opinion that the foregoing shares of
Common Stock, when issued for payment as described in the Company's Prospectus
for not less than $1.00 per
<PAGE>
Stratton Monthly Dividend Shares, Inc.
May 22, 1996
Page 2
share, will be validly issued, fully paid and non-assessable shares of Common
Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to Post-
Effective Amendment No. 16 to the Company's Registration Statement.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
<PAGE>
EXHIBIT EX 11 (a)
Consent of Tait Weller & Baker
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement, (Form
N-1A), and related Statement of Additional Information of Stratton Monthly
Dividend Shares, Inc. and to the inclusion of our report dated February 9, 1996
to the Shareholders and Board of Directors of Stratton Monthly Dividend Shares,
Inc.
/s/ TAIT, WELLER & BAKER
------------------------
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
May 29, 1996
<PAGE>
EXHIBIT EX 11(b)
Consent of Drinker Biddle & Reath
<PAGE>
Exhibit 11(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Legal Counsel" in the Prospectus that is included in Post-
Effective Amendment No. 16 to the Registration Statement (No. 2-42379) on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940, as
amended, of Stratton Monthly Dividend Shares, Inc. This consent does not
constitute a consent under Section 7 of the Securities Act of 1933, and in
consenting to the use of our name and the references to our Firm under such
caption we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
Section 7 or the rules and regulations thereunder of the Securities and Exchange
Commission.
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
May 22, 1996
<PAGE>
Ex 99B.14.a
403 (B) (7) PLAN
Dear Investor:
Enclosed are instructions, applications and a summary of Stratton Management
Company's 403 (b) (7) Plan, along with appropriate prospectuses and financial
reports. The Plan is set up to permit you to choose either or all of our funds:
STRATTON MONTHLY DIVIDEND SHARES invests in high yielding common stocks as
well as convertible bonds and preferred stocks. The Fund offers high
current monthly income as well as solid growth potential for the future.
STRATTON SMALL-CAP YIELD FUND is a small company stock portfolio of
dividend-paying companies in various industries. The Fund attempts to
capture the capital appreciation potential of small-cap stocks while
reducing the variability of return typically associated with small-cap
portfolios.
STRATTON GROWTH FUND holds a diversified portfolio of common stocks of well
established, high dividend paying companies. The Fund seeks long-term
appreciation of capital with reasonable current income.
If you sign and return the enclosed telephone exchange form along with your
403 (b) (7) applications, you may switch your investment at a later date
simply by calling the number on the form.
Complete step-by-step instructions on how to open your 403 (b) (7) account
are enclosed. If you should have any questions, please feel free to call
(800) 634-5726. Thank you for considering Stratton Mutual Funds.
Sincerely,
John L. Grieco
Director of Mutual Fund Services
JLG/clr
enclosures
2/94
<PAGE>
403 (b) (7)
-----------
NEW ACCOUNT
-----------
SHAREHOLDER INSTRUCTIONS
------------------------
1) Stratton Management Company will provide employee with:
-------------------------------------------------------
1 Instruction Sheet
1 Features of the Plan Booklet
1 403 (b) (7) Retirement Plan Document
1 Open Account Application
1 Designation of Beneficiary Form
2 Salary Reduction Agreements
1 Business Reply Envelope
1 Exclusion Allowance Worksheet
Financial Reports & Prospectus on Fund(s)
2) Employee will complete:
-----------------------
1 Open Account Application
1 Designation of Beneficiary Form
2 Salary Reduction Agreements
1 Exclusion Allowance Worksheet (working with the Employee Benefits
Department of his/her institution)
3) Employee will ask Employer to:
------------------------------
Approve Exclusion Allowance Worksheet
Sign 2 copies of Salary Reduction Agreement (Employer retains 1 copy)
Arrange with the Payroll Department to reduce employee's salary
periodically, in accordance with the Salary Reduction Agreement, and have a
check made payable to the Fund(s) selected, mailed to Fund/Plan Services,
Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874, Attn:
Retirement Plans Department.
4) Employee will return to Stratton Mutual Funds, 2 W. Elm Street, P.O. Box
------------------------------------------------------------------------
874, Conshohocken, PA 19428-0874, Attn: Retirement Plans Department:
---------------------------------------------------------------------
1 completed Open Account Application
1 completed Designation of Beneficiary Form
1 completed Salary Reduction Agreement
An investment will be made in the fund shares you have selected and a
confirmation of the purchase will be provided.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
403 (B)(7) RETIREMENT PLAN
FEATURES OF THE PLAN
--------------------
The Employee Retirement Income Security Act of 1974 (the "Act") allows
employees of certain exempt organizations and schools to have a portion of their
compensation set aside for their retirement years in a mutual fund custodial
account plan. The employee is not taxed on the amount set aside or the earnings
thereon until he draws out his/her accumulated funds, normally at retirement.
In the past these plans were available only if the employee was willing to
have his/her funds used to purchase an annuity contract from an insurance
company. Customarily, a significant portion of the employee's contribution was
used to pay front end commissions to an insurance salesman, and unless the
employee was willing to purchase a so-called "variable annuity", the rate of
return was fixed for the duration of the contract and there was no possibility
of capital growth.
Now, it is possible for you to specify a mutual fund for the investment of
your employer's contributions. This means that no sales commissions are
deducted from the contribution. Under the Stratton Management Company Plan your
contributions are invested in shares of one or more of the investment companies
advised by Stratton Management Company, Stratton Monthly Dividend Shares, Inc.,
Stratton Growth Fund, Inc. or Stratton Small-Cap Yield Fund.
If you think you would like to participate, please read on for a further
explanation of the key features of the Act and Plan. If you would like
additional information or assistance in enrolling in the Plan, please contact
our Transfer Agent, Fund/Plan Services, Inc. at 800-634-5726.
ELIGIBILITY
- -----------
Any employee of a qualifying tax-exempt organization is eligible to
participate. Thus, teachers, administrators, ministers, employees of hospitals,
libraries, community chests, funds, and foundations, and many others may be
eligible. The employer must be an organization described in Section 501 (C) (3)
of the Internal Revenue Code and must be exempt from tax under Section 501 (a)
of the Code. In addition, any employee of most public educational institutions
is eligible if his/her employer is a State or a political subdivision of a
State, or an agency or instrumentality of either. The text of Section 501 (C)
(3) is set forth below for your convenience in determining whether your employer
may be one of the many qualifying organizations.
Code Section 501 (C) (3)
------------------------
"Corporations, and any community chest, fund, or foundation,
organized and operated exclusively for religious, charitable,
scientific, testing for public safety, literary, or educational
purposes, or for the prevention to cruelty of children or
animals, no part of the net earnings of which inures to the
benefit of any private shareholder or individual, no substantial
part of the activities of which is carrying on propaganda, or
otherwise attempting to influence legislation, and which does not
participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of
any candidate for public office."
<PAGE>
- 2 -
As noted above, an employer organization that is one of the types of
organizations described in Section 501 (C) (3) must also be exempt under Section
501 (a) to be a qualified employer organization.
An eligible individual is not disqualified from participation by reason of
the fact that his/her employer provides a retirement plan for its employees.
However, the contributions under this or any other 403 (b) plan will be affected
by the employer's contributions to the retirement plan. The employer does not
have to adopt this Plan, but is required to cooperate to the extent of agreeing
to reduce the employee's salary and applying the amount of the reduction to
contributions for the employee under this Plan. In lieu of or in addition to a
salary reduction arrangement, an employer may be willing to make contributions
on behalf of all of his/her employees, but an employer is not obligated to do
so. Unlike most corporate and Keogh plans, where the employer is required to
include all qualified employees and contribute funds on their behalf, the 403
(b) (7) Plan may be set up for one person, a few employees or all, and the rate
of contributions may vary from person to person up to the maximum allowable
contribution.
CONTRIBUTIONS
- -------------
The amount you may have your employer contribute to the Plan and which you
may exclude from your taxable income is subject to the following limitations.
You may wish to refer to the Contribution Worksheet which appears later in this
descriptive material for assistance in determining how those limitations would
apply to your own situation.
Contributions may not exceed (I) 25% of compensation, or (ii) $25,000,
whichever is less, in any one year. The dollar limit increases each year based
on the increases in the cost of living which is $41,500 for 1981. Within that
overall limitation, your employer may contribute to the Plan and you may exclude
from your taxable income, an amount equal to the excess, if any, of (I) 20% of
includible compensation times your number of years of service, over (ii) the
aggregate amount contributed by the employer previously for 403 (b) plans for
other qualified retirement plans and excluded from your gross income for prior
tax years. "Includible Compensation" is current compensation from the school or
organization plus any excluded sick pay. It does not include (I) amounts paid
by a public school system to a teacher's retirement Plan which were not
currently taxed to the teacher or (ii) 403 (b) contributions.
If you are employed by an educational institution, hospital or home health
service agency, you may elect to be governed by one of three alternate
limitations. First, you may elect contributions which are equal to the lesser
of (I) 25% of includible compensation plus $4,000 or (ii) the limit explained in
the above paragraph. Such contributions may not exceed $15,000 in any one year.
Second, you may, in the alternative, elect to be governed by one simple
limitation which is the lesser of 25% of your compensation or $25,000 (as
adjusted as discussed above). Finally, for the year in which employment
terminates, contributions can be made in an amount which is equal to the
contributions which could have been made, but were not, under Code Section 403
(b) during the ten-year period ending on the date of termination. This final
"catch-up" contribution cannot exceed $25,000 (as adjusted as discussed above)
and may only be used once.
The optional limitations available to employees of educational
institutions, hospitals and home health service agencies are mutually exclusive.
An election of one of the options is irrevocable.
<PAGE>
- 3 -
EARNINGS AND CHARGES
- --------------------
Your contributions will be used to purchase shares of one or more of the
investment companies advised by Stratton Management Company -- Stratton Monthly
Dividend Shares, Inc., Stratton Growth Fund, Inc. or Stratton Small-Cap Yield
Fund -- all no load, which means that no sales commission is charged. Any
dividends or capital gains distributions on the shares will be reinvested in
additional shares of the same fund automatically. These additional shares will
represent your earnings in the account.
The Custodian of the Plan is Semper Trust Company. Fund/Plan Services,
Inc. serves as the fiduciary agent for Semper Trust Company and in such capacity
is responsible for all record keeping, applicable tax reporting and fee
collection in connection with the Plan account. Fund/Plan Services, Inc. is
also the transfer agent for the Funds.
The law states that the shares must be held by the Custodian, but you will
be entitled to vote the shares. The Custodian charges an annual fee of $12.00.
The Custodian shall be entitled to deduct this fee by liquidating shares
annually in September, unless the annual maintenance fee is paid to Fund/Plan
Services, Inc.
The Custodian will send you a statement of the account annually, including
such information as the law may require, and in particular, a statement of the
exact amount of contributions, earnings, distributions and total value at the
end of the year. The Custodian will also send the statement to the Internal
Revenue Service as required by law.
DISTRIBUTIONS
- -------------
You may withdraw funds from your account when you terminate employment by
retirement or otherwise. You may also withdraw funds in the event you become
disabled. Provided you do so at least sixty (60) days before you terminate your
employment, you may make an irrevocable election to postpone the date of
withdrawal to any specific subsequent date you wish so long as that date is not
later than your 75th birthday.
Your account may at your option be distributed to you in the following
ways: (1) a lump sum payment of your entire account, in cash or Fund shares; (2)
monthly, quarterly or annual payments over any period you designate which is no
longer than your life expectancy; or (3) installment payments over the joint
life expectancy of yourself and your spouse. You must elect the form that
distribution will take at least sixty (60) days prior to the date when you will
first be entitled to distribution of your funds. If you fail to specify the
form of the distribution you prefer, distribution will be made in the form of a
single sum cash payment.
In the event of death, your beneficiary or beneficiaries will receive the
balance in your account. You may designate a beneficiary and change
beneficiaries from time to time. If you do not designate a beneficiary and are
not survived by a spouse to whom you have been married for one year at the time
of your death, your estate will receive the balance in your account.
<PAGE>
- 4 -
HOW TO PARTICIPATE
- ------------------
You may establish a 403 (b) (7) account by completing the Account
Application, and Salary Reduction Agreement, which you will find at the end of
the Plan. Then mail the Application, a copy of the Agreement, and the Ruling
Request to the Custodian with your Employer's first contribution. Be sure not to
----------
send your own funds.
PLAN QUALIFICATION
- ------------------
A Ruling Request was submitted to Internal Revenue Service for a
determination that the Plan meets the requirements of the Act and the Code.
The filing was made on behalf of one of the employees of the No-Load Mutual
Fund Association, a tax-exempt organization. This filing was found to be in
compliance with the requirements of the Act and the Code. However, a favorable
ruling on the Plan in one instance does not provide any assurance that it will
be found acceptable in other similar circumstances. Consequently, you may
consider it prudent to submit a Ruling Request on your own behalf. A form or
request is enclosed with the Plan for your convenience. It should be understood
-----------------------
that neither the Fund nor the Custodian is in a position to render legal or tax
- -------------------------------------------------------------------------------
advice and that the information contained in and the documents furnished with
- -----------------------------------------------------------------------------
this description merely represent the Fund's understanding of the statues and
- -----------------------------------------------------------------------------
regulations affecting the establishment and qualification of a 403 (b) (7) plan.
- --------------------------------------------------------------------------------
Accordingly, you are urged to consult your attorney or tax advisor in connection
- --------------------------------------------------------------------------------
with the adoption of the Plan and the submission of a ruling request on your
- ----------------------------------------------------------------------------
behalf.
- -------
PLEASE NOTE
- -----------
The foregoing is not a complete or definitive explanation of the Plan or of the
provisions of the Act or Code. Please do not complete the Application without
reading the Plan and the Fund prospectus which must always accompany the Plan.
Consult your financial or tax advisor if you are uncertain that a 403 (b) (7)
Plan is an appropriate program. You may obtain additional information about 403
(b) (7) Plans from your nearest Internal Revenue Service district office.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
SECTION 403 (B)(7) RETIREMENT PLAN
----------------------------------
A Retirement Plan under Section 403 (b)(7) has been established by Stratton
Management Company ("Stratton"), (Investment Adviser to Stratton Monthly
Dividend Shares, Inc., Stratton Growth Fund, Inc. and Stratton Small-Cap Yield
Fund, all regulated investment companies), and is intended for the use of
eligible persons who may wish to have their Employer's contributions invested in
shares of one or a combination of these investment companies, herein called
"fund shares", upon the following terms and conditions and in accordance with
the provisions of the Employee Retirement Income Security Act of 1974 (the
"Act") and the Internal Revenue Code of 1954, as amended (the "Code").
I. ELIGIBILITY
-----------
Any person who performs services as an employee for an employer which is an
organization described in Section 501 (C) (3) of the Code and is exempt
from tax under Section 501 (a) of the Code, or who performs services for an
educational institution (as defined in Section 151 (e) (4) of the Code)
maintained by an employer which is a State or a political subdivision of a
State or an agency or instrumentality of either, and who obtains the
consent of such employer (the "Employer") to participate herein, is
eligible to adopt this Plan.
II. PARTICIPATION
-------------
An eligible person who wishes to adopt this Plan (the "Individual") may do
so by signing and mailing to the bank named in the Account Application, as
Custodian (the "Custodian") a copy of the Account Application, Designation
of Beneficiary Form and Salary Reduction Agreement which are incorporated
herein by reference as part of the Plan. Acceptance by Semper Trust
Company, as Custodian is evidenced by the statement confirmation issued by
Fund/Plan Services, Inc., the Custodian's fiduciary agent, reflecting the
investment of your monies in the selected Stratton Fund(s).
III. An Employer may contribute cash to the Individual's account (the "Custodial
Account") in any taxable year in any amount which is not an "excess
contribution" as that expression is defined in Section 4973 (C) of the
Code. In addition, the Employer may transfer or cause to be transferred to
the Custodial Account the cash surrender or redemption value of an annuity
or variable annuity for which the Employer previously made contributions on
the Individual's behalf.
Neither Stratton or the Custodian shall be responsible for determining the
amount an Employer may contribute on behalf of the Individual, or shall
either be responsible to recommend or compel Employer contributions to the
Custodial Account. If during any taxable year the Employer contributes an
amount which is an "excess contribution", such excess contribution and any
income attributable thereto shall, upon the written request of the
Individual, be paid to him by the Custodian, or, at the Individual's
election, be applied toward a contribution for the current or the next
subsequent year.
<PAGE>
- 2 -
The interest of the Individual in the Custodial Account shall be non-
forfeitable at all times, may not be assigned, and shall not be subject to
alienation, assignment, trustee process, garnishment, attachment, execution or
levy of any kind, except with regard to payment of the expenses of the Custodian
as authorized by the provisions of this Plan.
IV. INVESTMENT OF CONTRIBUTIONS
---------------------------
All contributions made by or at the instigation of the Employer shall be
used by the Custodian to purchase fund shares. The Individual may specify the
shares of either one or more of the Stratton Funds for the investment of the
Employer's contributions, and may direct the transfer of Custodial Account
assets from one to another at any time and from time to time. All income
dividends and capital gains distributions shall be reinvested in additional fund
shares in the same proportion as designed by the Individual.
V. DISTRIBUTIONS
-------------
A. Except as provided in Paragraph B, below, the Individual, or his/her
beneficiary or estate in the event of his/her death, shall be entitled to
distribution of the assets in his/her Custodial Account as follows:
1. Upon termination of his employment;
2. Upon becoming disabled;
3. At his retirement;
4. At his death.
For the purpose of this Plan the Individual shall be considered disabled if
he/she is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long continued and indefinite duration.
B. The Individual shall be entitled to distribution of the assets in his/her
Custodial Account upon termination of employment by retirement or otherwise
unless he/she makes an irrevocable election at least sixty (60) days prior to
the expected date of termination of defer distribution, or the commencement of
distribution, to any specific date subsequent to termination which he/she may
specify, provided the date is not later than the date of his/her 75th birthday.
Such election shall be made by notice in writing to the Custodian.
C. The Individual may elect a form of distribution from among the following
alternatives:
1. A single sum payment in cash or fund shares; or
2. Equal or substantially equal monthly, quarterly or annual payments
over a period certain not extending beyond the life expectancy of the
Individual and his/her spouse; or
3. Equal or substantially equal monthly, quarterly or annual payments
over a period certain not extending beyond the joint life and last
survivor of the Individual and his/her spouse.
<PAGE>
- 3 -
Such election shall be made at least sixty (60) days prior to the date on
which distribution is expected to be made or to begin. Such election shall be
irrevocable and shall be made in writing in such form as shall be acceptable to
the Custodian. In no event shall the Custodian have any responsibility for
determining, or giving advice with respect to life expectancies.
D. If the Individual fails to elect any of the methods of distribution
described above within the time specified for such election, then distribution
shall be made in the form of a single sum cash payment. If the individual elects
a mode of distribution under subparagraphs 2 or 3 of Paragraph C above, the
amount of the monthly, quarterly or annual payments shall be determined by
dividing the entire interest of the Individual in the Custodial Account at the
beginning of each year by the number of years remaining in the period specified
by the Individual's said election.
E. If the Individual dies before his/her entire interest in the Custodial
Account is distributed to him/her, or if distribution has been commenced as
provided in C (3) above to his/her surviving spouse and such surviving spouse
dies before the entire interest is distributed to such spouse, the entire
interest or the remaining undistributed balance of such interest shall be
distributed in the form of a single sum cash payment to the beneficiary or
beneficiaries, if any, designated by the Individual or his/her spouse as the
case may be, or if no such beneficiary has been designated, then to the
Individual's surviving spouse, or to the Individual's estate, in that order,
each to take to the exclusion of those following.
F. The Individual and the spouse of the Individual, if such spouse is entitled
to distribution payments by reason of the Individual's election under Paragraph
C (3) hereof, may designate a beneficiary or beneficiaries of his/her own
choosing, and may, in addition, name a contingent beneficiary. Such designation
shall be made in writing in a form acceptable to the Custodian. The Individual,
or his/her spouse, may at any time revoke his/her designation of a beneficiary
or change the beneficiary by filing notice of such revocation or change with the
Custodian. If no designation of a beneficiary shall have been made,
distribution shall be made to the estate of the Individual or his/her spouse, as
the case may be.
VI. ADMINISTRATION
--------------
The Custodian shall have the following duties:
(1) To receive contributions pursuant to the provisions of this Plan
(2) To hold, invest and reinvest the contributions in Stratton Fund shares
(3) To register any property held by the Custodian in its own name, or in
nominee or bearer form that will pass delivery and
(4) To make distributions from the Custodial Account in cash or in
Stratton Fund shares
<PAGE>
- 4 -
The Custodian shall mail to the Individual all proxies, proxy soliciting
materials, and periodic reports or other communications that may come into the
Custodian's possession by reason of its custody of fund shares. The Custodian
shall sign all proxies prior to mailing them to the Individual, it being
intended that the Individual shall vote the proxy, notwithstanding the fact that
the Custodian may be the registered owner of the fund shares, and the Custodian
shall have no further liability or responsibility with respect to the voting of
such shares.
The Custodian shall keep accurate and detailed account of its receipts,
investments and disbursements. As soon as practicable after December 31st each
year, and whenever required by Regulations adopted by Internal Revenue Service
under the Act or the Code, the Custodian shall file with the Individual a
written report of the Custodian's transactions relating to the Custodial Account
during the period from the last previous account, and shall file such other
reports with Internal Revenue Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a report
within 60 days after its receipt, the Individual shall be deemed to have
approved such report, and in such case the Custodian shall be forever released
and discharged with respect to all matters and things included therein. The
Custodian may seek a judicial settlement of its accounts. In any such
proceeding the only necessary party thereto in addition to the Custodian shall
be the Individual.
All written notices or communications to the Individual or the Employer
shall be effective when sent by first class mail to the last known address of
the Individual or the employer on the Custodian's records. All written notices
or communications to the Custodian shall be mailed or delivered to the Custodian
at its designated mailing address, and no such written notice or communication
shall be effective until the Custodian's actual receipt thereof. The Custodian
shall be entitled to rely conclusively upon, and shall be fully protected in any
action taken by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives and
which appear to have been sent by the Individual, the Employer, or any other
person.
The Custodian shall make payments from the Custodial Account in accordance
with written directions received from the Individual, and it need not make
inquiry as to the rightfulness of such distribution. If the Custodian has
reason to believe that a distribution may be due, it may, but shall not be
required to make the distribution at the request of any beneficiary who appears
to be entitled thereto.
The Custodian shall use ordinary care and reasonable diligence in the
performance of its duties as Custodian. The Custodian shall have no
responsibilities other than those provided for herein or in the Act or Code and
shall not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence, except as
provided by the Act or regulations promulgated thereunder.
<PAGE>
- 5 -
The Individual agrees to indemnify and hold the Custodian harmless from and
against any liability that the Custodian may incur in the administration of the
Custodial Account, unless arising from the Custodian's own negligence or willful
misconduct or from a violation of the provisions of the Act or regulations
promulgated thereunder.
The Custodian shall be under no duty to question any direction of the
Individual in respect to the investment of contributions, or to make suggestions
to the Individual with respect to the investment, retention or disposition of
any contributions or assets held in the Custodial Account.
The Custodian shall pay out of the Custodial Account expenses of
administration, including the fees of counsel employed by the Custodian, taxes
and its fees for maintaining the Custodial Account which are set forth in the
Application or in accordance with any schedule of fees subsequently adopted by
the Custodian. The Custodian may sell Fund shares and use the proceeds of sale
to pay the foregoing expenses.
The Custodian may resign as Custodian of any Individual's Custodial Account
upon sixty (60) days prior notice to the Fund and thirty (30) days prior notice
to each Individual who will be affected by such resignation.
VII. AMENDMENT AND TERMINATION
-------------------------
The Individual delegates to Stratton the power to amend this Plan
(including retroactive amendment).
The Individual may amend his/her Application (including retroactive
amendment) by submitting to the Custodian: (1) a copy of such amended
Application, and (2) evidence satisfactory to the Custodian that the Plan as
amended by such amended Application will continue to qualify under the
provisions of Section 403 (b) (7) of the Code.
No amendment shall be effective if it would case or permit: (a) any part
of the Custodial Account to be diverted to any purpose that is not for the
exclusive benefit of the Individual and his/her beneficiaries; (b) the
Individual to be deprived of any portion of his/her interest in the Custodial
Account, or (C) the imposition of an additional duty on the Custodian without
its consent.
The Individual reserves the right to terminate further contributions to
this Plan by agreement with the Employer provided that the Individual shall file
with the Custodian an executed copy of such agreement. The Individual also
reserves the right to terminate his/her adoption of the Plan in the event that
he/she shall be unable to secure a favorable ruling from the Internal Revenue
Service with respect to this Plan. In the event of such termination, the
Custodian shall distribute the Custodial Account to the Individual. The
Individual also reserves the right to transfer the assets of his/her Custodial
Account to such other form of the 403 (b) (7) Retirement Plan as he may
determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require.
<PAGE>
- 6 -
VIII. PROHIBITED TRANSACTIONS
-----------------------
Except as provided in Section 408 of the Act or Section 4975 of the Code,
the Custodian:
(a) Shall not cause the plan to engage in a transaction if it knows or
should know that such transaction constitutes a direct or indirect--
1. sale or exchange, or leasing, or any property between the plan
and a party in interest;
2. lending of money or other extension of credit between the plan
and a party in interest;
3. furnishing of goods, services, or facilities between the plan and
a party in interest;
4. transfer to, or use by or for the benefit of, a party in
interest, of any assets of the plan; or
5. acquisition, on behalf of the plan, of any employer security or
employer real property in violation of Section 407 (a) of the
Act.
(b) Shall not permit the plan to hold any employer security or employer
real property if it knows or should know that holding such security or
real property violates Section 407 (a) of the Act,
(C) Shall not deal with the assets of the plan in its own interest or for
its own account,
(d) Shall not in any capacity act in any transaction involving the plan on
behalf of a party (or represent a party) whose interests are adverse
to the interests of the plan or the interests of its participants or
beneficiaries, and
(e) Shall not receive any consideration for its own account from any party
dealing with the Plan in connection with a transaction involving the
assets of the Plan; provided that nothing in this Section VIII shall
be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
IX. STRATTON MANAGEMENT COMPANY
---------------------------
The Individual delegates to Stratton the following powers with respect to
the Plan: (a) to remove the Custodian and select a successor Custodian; and (b)
to amend this Plan as provided in Section VII hereof.
The powers herein delegated to Stratton shall be exercised by such officer
thereof as Stratton may designate from time to time, and shall be exercised only
when similarly exercised with respect to all other Individuals adopting the
Plan.
<PAGE>
- 7 -
Neither Stratton or its investment adviser, nor any officer, director,
board committee employee or member of the Funds or the adviser shall have any
responsibility with regard to the administration of the Plan except as provided
in this Section IX or the Plan, and none of them shall incur any liability of
any nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any power or
authority herein delegated to Stratton.
The Individual agrees to indemnify and hold Stratton harmless from and
against any and all liabilities and expenses, including attorney's and
accountant's fees, incurred in connection with the exercise of, or omission to
exercise, any of the powers delegated to it under this Section, except such
liabilities and expenses as may arise from Stratton's willful misconduct.
If Stratton shall hereafter determine that it is no longer desirable for it
to continue to exercise any of the powers hereby delegated to it, it may relieve
itself of any further responsibilities hereunder by notice in writing to the
Individual at least sixty days prior to the date on which it proposes to
discontinue the exercise of the powers delegated to it.
STRATTON MANAGEMENT COMPANY
BY:____________________
(President)
CUSTODIAN:
SEMPER TRUST COMPANY
Fund/Plan Services, Inc., Plan Administrator
BY:____________________
<PAGE>
STRATTON MANAGEMENT COMPANY
403 (B)(7) RETIREMENT PLAN
APPLICATION
I. REGISTRATION OF SHARES
I have received a copy of the current prospectus of the Fund or Funds
selected below, and of the Plan Document of the 403 (b) (7) Retirement
Plan, the provisions of which shall be governed by the law of the State of
Pennsylvania.
Name: _________________________________________________________________
Address: _________________________________________________________________
_________________________________________________________________
Social Security Number*______________________Date of Birth________________
Telephone Number: Residence_________________Business______________________
Name of Employer:_________________________________________________________
Address of Employer:______________________________________________________
_____________________________________________________________________
II. CONTRIBUTIONS
Contributions under the Plan by my Employer may be invested in one or more
of the Funds advised by Stratton Management Company. Indicate the initial
dollar amount of investment being made and check the Fund(s) whose shares
you wish to acquire:
Stratton Growth Fund, Inc. $______________
Stratton Monthly Dividend Shares, Inc. $______________
Stratton Small-Cap Yield Fund $______________
Subsequent contributions in the amount of $________________ each will be
made, until further notice in each Fund indicated above.
Check One: Weekly _____ Monthly _____ Annually____
Bi-weekly____ Quarterly ___ Other _____
I previously participated in a plan, meeting the requirements of Section
403 (b) of the Internal Revenue Code, entitled: (If none, so indicate)
________________________________________________________
(Name of previous plan)
with _______________________as Trustee or Custodian, and hereby ELECT to
transfer the assets of said plan to this Plan, in the amount of
$__________________.
<PAGE>
STRATTON MANAGEMENT COMPANY
DESIGNATION OF BENEFICIARY
For:______________________ Name of Fund(s):________________________
(type of plan)
I, the undersigned, having adopted the foregoing Plan, hereby designate the
following persons as my beneficiary and contingent beneficiary under the Plan:
PRIMARY BENEFICIARY:
_________________________________________________________
(name in full)
___________________________________________________________________
(address)
___________________________________________________________________
_______ _________________________ ___________________________
(age) (relationship) (social security number)
Note: If beneficiar(y)(ies) other than spouse is designated, consent of spouse
must be obtained:
________________________________ Date_____________________
(signature of spouse)
CONTINGENT BENEFICIARY:
If my primary beneficiary fails to survive me, then I designate the following
person as my beneficiary:
_________________________________________________________
(name in full)
___________________________________________________________________
(address)
___________________________________________________________________
_______ _________________________ ___________________________
(age) (relationship) (social security number)
__________________________________
(signature of Plan participant)
__________________________________
Dated:_____________ __________________________________
(address)
IMPORTANT NOTICES:
1. You and your spouse may change your beneficiaries at any time by simply
filling out another of these forms and submitting it to the Plan Custodian.
Additional copies are available upon request from the Fund.
2. Be sure to use your full name as it appears on the Account Application when
you sign this form.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
403 (b) (7) RETIREMENT PLAN
---------------------------
SALARY REDUCTION AGREEMENT
--------------------------
AGREEMENT made this _________ day of ___________________, 19____, by and
between _________________________________________________, (the "Employer") and
_________________________________________________ (the "Employee") whereby the
Employer and Employee agrees as follows:
1. The monthly salary of the Employee will be reduced by $ _________________;
or by _________% (minimum of $ _______________ per month).
2. The amount of such reduction shall be paid by the Employer to:
_________________________ (name of Fund selected), Semper Trust Company c/f
_________________________ (name of employer) under Section 403(b)7 of
Internal Revenue Code.
3. The foregoing arrangements shall be subject to the limitation provided
under Section 415 of the Internal Revenue Code as added by the Employee
Retirement Income Security Act of 1974 as well as the limitations of
Section 403 of the Code.
4. This Salary Reduction Agreement is legally binding and irrevocable with
respect to all amounts earned by the Employee while this Agreement is in
effect, provided, however, that the Employee may terminate the entire
Agreement with respect to amounts not earned at the time of termination. It
is further understood and agreed that the Employee will not be permitted to
make more than one Salary Reduction Agreement or vary the amount of the
reduction during any one taxable year of the Employee.
EXECUTED as of the date first written above.
_____________________________
(Employer)
___________________ BY: _________________________
(Employee)
_____________________________
(Title)
<PAGE>
EXCLUSION ALLOWANCE WORKSHEET
-----------------------------
The following method for determining the amount which may be contributed to a
403 (b) (7) Plan is based upon the basic provisions of Sections 403 (b) and 415
of the Internal Revenue Code. It is not feasible to portray all of the possible
variations which may arise from the application of these sections to particular
situations. Accordingly, this form should not be relied upon as a substitute
for advice from competent tax advisers.
A. PRIMARY METHOD
<TABLE>
<CAPTION>
Example 1 Example 2 Yours
--------- --------- -----
<S> <C> <C> <C>
1. Salary (before reduction)
expected from the institution
during the calendar year for
which the calculation is being
made. $ 18,000 $ 50,000 $ _______
2. Contributions by the insti-
tution under its retirement plan
during the current calendar year
(this figure should include all
annuity contributions paid by
your employer which will vest in
the year for which this calculation
is being made). $ 1,800 $ 5,000 $ _______
3. Total tax-deferred contri-
butions made by this institution
in prior years (i.e. the insti-
tution's regular contributions
and other vested employer contri-
butions and any amounts remitted
by the institution for you through
salary reduction). $ 10,200 $ 185,000 $ _______
4. Total of lines 1, 2 and 3 $ 30,000 $ 240,000 * $ _______
5. Enter service factor from
table on last page, based on
your years of service. .66667 .80000 _______
6. Multiply line 4 by line 5 $ 20,000 $ 192,000 $ _______
</TABLE>
* Do not include the figure on line 2 in this total if the institution's plan
is qualified under Section 401 of the Internal Revenue Code.
<PAGE>
<TABLE>
<S> <C> <C> <C>
7. Line 2 plus line 3 $ 12,000 * $ 190,000 * $ _______
8. Line 6 minus line 7 $ 8,000 $ 2,000 $ _______
9. 20% of line 1 $ 3,600 $ 10,000 $ _______
10. 80% of line 2 $ 1,440 $ 4,000 $ _______
11. Line 9 minus line 10 $ 2,160 $ 6,000 $ _______
12. $25,000 minus line 2 $ 23,200 $ 20,000 $ _______
13. Exclusion allowance is
----------------------
the smallest of line 8,
line 11 and line 12 $ 2,160 $ 2,000 $ _______
------- -------
</TABLE>
B. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL, OR HOME HEALTH SERVICE AGENCY, AVAILABLE ONLY
IF OPTIONS C OR D HAVE BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
14. 25% of line 1, plus $4,000 $ 8,500 $ 16,500 $ _______
15. Line 14 divided by 1.25 $ 6,800 $ 13,200 $ _______
16. Exclusion allowance is
-------------------
the smallest of line 8,
line 15 and $15,000 $ 6,800 $ 2,000 $ _______
------- -------
</TABLE>
C. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL OR HOME HEALTH SERVICE AGENCY IN YEAR EMPLOYMENT
TERMINATES, AVAILABLE ONLY ONE TIME, AND IF OPTIONS B OR D
HAVE NEVER BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
17. Line 4 $ 30,000 $ 240,000 $ _______
18. Service factor from table
on last page, unless your years
of service equal or exceed 10 years,
in which case enter .66667. .66667 .66667 _______
19. Line 17 multiplied by
line 18 $ 20,000 $ 160,000 $ _______
20. Line 2 plus line 3 $ 12,000 * $ 190,000 * $ _______
21. Subtract line 20 from line 19 $ 8,000 $ 0 $ _______
22. Exclusion allowance is the
smallest of line 21 and
$25,000 $ 8,000 $ 0 $ _______
------- -------
</TABLE>
* Do not include the figure on line 2 in the total if the institution's plan is
qualified under Section 401 of the Internal Revenue Code.
<PAGE>
D. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL OR HOME HEALTH SERVICE AGENCY, AVAILABLE ONLY IF
OPTION B OR C HAVE NEVER BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
23. Line 1 $ 18,000 $ 50,000 $ _______
24. 25% of line 1 $ 4,500 $ 12,500 $ _______
26. Exclusion allowance is
-------------------
the smaller of line 24
or $25,000 $ 4,500 $ 12,500 $ _______
------- -------
</TABLE>
Factor for Years of Service
Through End of Calendar Year
----------------------------
<TABLE>
<CAPTION>
Years Factor Years Factor Years Factor
- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
1 .16667 11 .68750 21 .80769
2 .28571 12 .70588 22 .81481
3 .37500 13 .72222 23 .82143
4 .44444 14 .73684 24 .82759
5 .50000 15 .75000 25 .83333
6 .54545 16 .76190 26 .83871
7 .58333 17 .77273 27 .84375
8 .61538 18 .78261 28 .84848
9 .64286 19 .79167 29 .85294
10 .66667 20 .80000 30 .85714
</TABLE>
The formula for calculating a service factor is N , with N equal to
-----
N + 5
the total years of service through December 31 of the year for which the
calculation is being made. (After the first year of service, N must reflect
fractional years of service, e.g., for two and one half years of service N =
2.5.) This formula should be used where service is not in whole years or is
more than 30 years.
<PAGE>
STRATTON MUTUAL FUNDS - TELEPHONE EXCHANGE AUTHORIZATION FORM
- ---------------------
STRATTON GROWTH FUND, INC.
--------------------------
STRATTON MONTHLY DIVIDEND SHARES, INC.
--------------------------------------
STRATTON SMALL-CAP YIELD FUND
-----------------------------
The undersigned hereby authorizes Fund/Plan Services, Inc. (the "Transfer
Agent"), acting as the undersigned's attorney in fact, to surrender for
redemption any and all or part of the shares held for the undersigned's account
in any of the three funds listed above comprising the Stratton Mutual Funds
group, pursuant to any telephone request without a signature guarantee,
provided, however, that the proceeds of such redemptions are to be used to
purchase shares for the undersigned's account in the other fund(s) in the
Stratton Mutual Funds group. It is understood that such redemptions of shares
that are to be used to purchase shares in the other fund(s) in the Stratton
Mutual Funds group may be effected only by procedures described in the current
prospectus of the Fund(s) being redeemed. PLEASE NOTE: Shareholders who have
certificated shares in their possession, MUST surrender these shares to our
Transfer Agent, to be held on account in unissued form PRIOR to taking advantage
of this exchange privilege. When returning your certificates for this purpose
only, your signature(s) need NOT be guaranteed.
It is understood that this Authorization Form will continue in effect until the
Transfer Agent receives written notice of its cancellation from the undersigned.
This service may be discontinued or modified without notice. The undersigned
hereby authorizes the Transfer Agent to honor any telephone transfer believed by
the Transfer Agent to be genuine and agrees to be bound by the Transfer Agent's
records of such instructions. Furthermore, the undersigned and his assigns and
successors release and indemnify the Transfer Agent and the Funds in the
Stratton Mutual Funds group and their respective officers and employees from any
and all liability or losses for so acting. A current Prospectus of the Fund(s)
being purchased has been read in advance of purchase hereunder.
Telephone exchanges among the Stratton Mutual Funds can be made by calling the
Transfer Agent directly at (800)-441-6580. Please make a note of this phone
number for future use.
_________________________________ _______________________________________
(print investor's name) (signature of investor)
_________________________________ _______________________________________
(print joint investor's name) (signature of joint owner)
Account Number and Fund if an existing account:
__________________ _______________________________________
(account number) (fund)
__________________ _______________________________________
(account number) (fund)
__________________ _______________________________________
(account number) (fund)
Mail to: STRATTON MUTUAL FUNDS, C/O FUND/PLAN SERVICES, INC., P.O. BOX 874,
CONSHOHOCKEN, PA 19428
<PAGE>
STRATTON MANAGEMENT COMPANY
ACCOUNT TRANSFER INSTRUCTIONS
-----------------------------
To: ____________________________
____________________________
____________________________
(Employer)
Please discontinue payments to the 403 (b) annuity plan heretofore
established by you for me with:
_________________________________________
_________________________________________
(Existing Plan Description)
and direct the insurer to forward the cash-surrender or redemption value
thereof directly to:
SEMPER TRUST COMPANY
P. O. Box 874
Conshohocken, PA 19428
for my account.
Very truly yours,
_________________________
(Employee)
<PAGE>
To:
Sir/Madam:
You are currently acting as custodian for my 403(b)(7) plan.
It is my desire to change the vehicle of investment to the 403(b)(7) plan at
Stratton Management Company. Application has been made to transfer the account
to Semper Trust Company, and they have agreed to assume custodianship of the
plan, as per their attached letter.
You are hereby requested and authorized to:
1) liquidate my entire account in your custody,
2) Remit a check for the proceeds to Fund/Plan Services, Inc.,
fiduciary agent for Semper Trust Co.
403(b)(7) plan account # _____________________
name _________________________________________
3) Mail the check directly to Stratton Funds, c/o Fund/Plan
Services, P.O. Box 874, Conshohocken, PA 19428, Attn: 403(b)(7)
plan.
Following distribution of the proceeds of the above assets, you are relieved of
all responsibility as custodian for said account(s).
Very truly yours,
Date ______________ _________________________________
(signature)
Signature Guaranteed By:
______________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000030137
<NAME> STRATTON MONTHLY DIVIDEND SHARES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 121,839,357
<INVESTMENTS-AT-VALUE> 126,878,260
<RECEIVABLES> 1,711,905
<ASSETS-OTHER> 824,150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 129,414,315
<PAYABLE-FOR-SECURITIES> 40,615
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106,214
<TOTAL-LIABILITIES> 148,829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,084,637
<SHARES-COMMON-STOCK> 4,718,067
<SHARES-COMMON-PRIOR> 5,397,491
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 133,355
<ACCUMULATED-NET-GAINS> (17,856,054)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,038,903
<NET-ASSETS> 129,267,486
<DIVIDEND-INCOME> 9,890,053
<INTEREST-INCOME> 1,008,716
<OTHER-INCOME> 0
<EXPENSES-NET> 1,288,435
<NET-INVESTMENT-INCOME> 9,610,334
<REALIZED-GAINS-CURRENT> 2,695,575
<APPREC-INCREASE-CURRENT> 9,893,647
<NET-CHANGE-FROM-OPS> 22,199,556
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,833,876
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 757,154
<NUMBER-OF-SHARES-REDEEMED> 1,676,173
<SHARES-REINVESTED> 239,595
<NET-CHANGE-IN-ASSETS> (17,164,513)
<ACCUMULATED-NII-PRIOR> 90,187
<ACCUMULATED-GAINS-PRIOR> (20,551,629)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 794,629
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,288,435
<AVERAGE-NET-ASSETS> 130,021,681
<PER-SHARE-NAV-BEGIN> 24.84
<PER-SHARE-NII> 1.88
<PER-SHARE-GAIN-APPREC> 2.60
<PER-SHARE-DIVIDEND> 1.92
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.40
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
