Registration No. 2-67610
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 17 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 17 [X]
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THE 44 WALL STREET EQUITY FUND, INC.
[Exact name of registrant as specified in charter]
26 Broadway
New York, New York 10004
[Address of principal executive office]
(212) 248-8080
[Registrant's telephone number, including area code]
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MARK D. BECKERMAN
26 Broadway
New York, New York 10004
[Name and address of Agent for Service]
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It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b) of Rule 485
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X 60 days after filing pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a) of Rule 485
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This post-effective amendment designates a new
------ effective date for a previously filed post-effective
amendment
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* Registrant has adopted the indefinite registration procedure.
Registrant's Rule 24f-2 Notice was last filed on August 31, 1995.
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<PAGE>
MATTERHORN GROWTH FUND, INC.
Cross Reference Sheet Showing the Location
in the Prospectus of the Information
Required by the Items of Form N-1A
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Registration Statement Caption or Location
Item and Caption in the Prospectus
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Item 1 - Cover page Front Cover Page
Item 2 - Synopsis SUMMARY OF EXPENSES
Item 3 - Condensed Financial FINANCIAL HIGHLIGHTS
Information
IteM 4 - GeneraL Description MATTERHORN GROWTH FUND,
of Registrant INC.; INVESTMENT
OBJECTIVE AND POLICIES
Item 5 - Management of the Fund MANAGEMENT OF THE FUND;
Back Cover Page; and
incorporated by reference to
the Annual Report to
Shareholders
Item 5A - Management's Discussion (Incorporated by reference
of Fund Performance to the Annual Report to
Shareholders)
Item 6 - Capital Stock and ADDITIONAL INFORMATION;
Other Securities OPERATION OF THE FUND
Item 7 - Purchase of Securities MANAGEMENT OF THE FUND;
Being Offered OPERATION OF THE FUND
Item 8 - Redemption or Repurchase REDEMPTION OF SHARES;
OPERATION OF THE FUND
Item 9 - Pending Legal Proceedings Not Applicable
<PAGE>
PROSPECTUS
March __, 1996
MATTERHORN GROWTH FUND, INC.
301 Oxford Valley Road, Yardley, PA. 19067
(Toll Free - 1-800-637-3901)
(Fax - (215) - )
Price Quote Information
1-800-637-3901
A NO-LOAD FUND
Matterhorn Growth Fund, Inc. ("Fund") seeks long-term capital
appreciation for shareholders through investment in the securities, principally
common stocks, of a relatively few companies.
The Fund's expense ratio for the previous fiscal year is higher than
that realized by most investment companies. Shareholders should carefully
consider the effects of the Fund's expense ratio on an investment in Fund shares
(see "Summary of Expenses," page 2).
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know prior to investing. Investors are
advised to read this Prospectus and retain it for future reference. Additional
information about the Fund has been filed with the Securities and Exchange
Commission in a Statement of Additional Information dated March __, 1996 and is
available without charge upon request to the Fund at the address or telephone
numbers shown above. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
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.
<PAGE>
SUMMARY OF EXPENSES
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The following information is based on the expenses of the Fund for its
fiscal year ended June 30, 1995, restated to reflect the Fund's current expense
arrangement (see "Management of the Fund --Expenses," page __).
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of the offering price) None
Maximum Sales Load Imposed on Reinvested Dividends None
(as a percentage of the offering price)
Deferred Sales Load None
Redemption Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)*
Management Fees 1.00%
12b-1 Fees 0.25%
Other Expenses 2.75%
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Total Fund Operating Expenses 4.00%
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* Actual Total Fund Operating Expenses were 5.18% for the fiscal year ended June
30, 1995. However, as of the date of this Prospectus the Fund entered into
certain new administrative agreements, as well as a new investment advisory
agreement which requires its investment adviser to limit future annual Fund
operating expenses, for the two-year period ended March 15, 1998, to 4.0% of the
Fund's average annual net assets. (See "Management of the Fund," page __.) The
Fund estimates that actual total Fund operating expenses will be __% for the
fiscal year ended June 30, 1996, and no greater than 4% for the fiscal year
ended June 30, 1997.
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<PAGE>
Example
1 year 3 years 5 years 10 years
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You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period, or
alternatively, no redemption: $40 $122 $205 $421
This table is provided to assist the investor in understanding the various costs
and expenses that an investor in the Fund would bear, directly or indirectly.
The example given above should not be considered as a representation of past or
future expenses. Actual expenses may be greater or less than those shown above.
Similarly, the annual rate of return assumed in the example is not an estimate
or guarantee of future investment performance.
FINANCIAL HIGHLIGHTS
--------------------
The following financial highlights have been audited by McGladrey &
Pullen, LLP, independent accountants to the Fund, whose report thereon was
unqualified. The information should be read in conjunction with the financial
statements and notes thereto, which appear in the Fund's annual report to
shareholders incorporated by reference in the Fund's Statement of Additional
Information.
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<PAGE>
<TABLE>
<CAPTION>
Years Ended June 30,
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1995 1994 1993* 1992* 1991* 1990* 1989* 1988*+ 1987+ 1986+
---- ---- ----- ----- ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share operating
performance
(for a share
outstanding
throughout the
year)
Net asset value,
beginning of year $ 5.87 $ 7.09 $ 6.30 $ 5.80 $ 5.63 $ 5.01 $ 4.09 $ 7.21 $ 6.42 $ 4.38
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
investment
operations:
Net investment
loss (0.17) (.17) (.04) (.07) (.06) (.02) (.10) (.26) (.73) (.52)
Net realized
and unrealized
gain (loss)
on investments 1.28 .71 1.77 .57 .23 .64 1.02 (2.86) 1.52 2.56
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from
investment
operations 1.11 0.54 1.73 0.50 0.17 0.62 0.92 (3.12) 0.79 2.04
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Less
distributions:
Distribution
from net
realized gains (0.10) (1.76) (.94) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total
distributions (0.10) (1.76) (.94) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net asset value,
end of year $ 6.88 $ 5.87 $ 7.09 $ 6.30 $ 5.80 $ 5.63 $ 5.01 $ 4.09 $ 7.21 $ 6.42
======= ======= ======= ======= ======= ======= ======= ======= ======= ======
Total return 19.32% 5.60% 28.89% 8.62% 3.02% 12.38% 22.49% (43.27% 12.31% 46.58%
Ratios/
supplemental data:
Net Assets,
end of year
(000 omitted) $8,993 $8,201 $8,048 $4,430 $4,122 $4,407 $4,341 $4,128 $12,089 $12,883
Ratios to
average net assets:
Expenses (excluding
interest) 4.62% 4.87% 4.27% 5.17% 4.42% 4.17% 4.19% 3.39% 2.46% 2.41%
Interest expense .56 .14 .12 .16 -- .11 .49 2.49 2.89 3.70
Net investment
loss (2.50) (2.77) (.62) (1.11) (1.19) (.44) (2.13) (5.23) (4.88) (5.16)
======= ======= ====== ====== ====== ======= ======= ======= ======= ======
Portfolio
turnover rate 72.11% 160.06% 167.27% 135.89% 87.02% 234.84% 237.54% 81.16% 97.67% 82.17%
======= ======= ====== ======= ======= ======= ======= ======= ======= ======
BANK LOANS
Amount outstanding at
end of year (000) $ 366 $ 27 $ -- $ -- $ -- $ -- $ 344 $ -- $ 5,902 $ 6,047
Average amount of bank
loans outstanding during
the year (monthly
average) (000) $ 456 $ 44 $ 49 $ 54 $ -- $ 59 $ 153 $ 1,835 $ 4,769 $ 4,483
Average number of shares
outstanding during
the year (monthly
average) (000) 1,369 1,268 773 662 758 853 912 1,215 1,842 2,198
Average amount of
debt per
share during
the year $ 0.33 $ 0.03 $ 0.06 $ 0.08 $ 0.00 $ 0.07 $ .17 $ 1.51 $ 2.59 $ 2.04
* Based on average month-end shares outstanding.
+ On September 27, 1988, the investment advisor changed, and MDB Asset
Management Corp. became the Fund's investment advisor.
</TABLE>
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<PAGE>
MATTERHORN GROWTH FUND, INC.
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The Fund is an open-end, non-diversified, managed investment company,
incorporated on May 2, 1980 in the State of Maryland, and was formerly known as
The 44 Wall Street Equity Fund, Inc. The Fund's offices are located at 301
Oxford Valley Road, Yardley, Pennsylvania 19067.
As an investment company, the Fund invests the monies received from the
sale of its stock in other securities. As an open-end investment company, the
Fund will pay any investor net asset value for the investor's shares upon demand
for redemption of such shares (see "REDEMPTION OF SHARES," page __).
The Fund invests primarily in common stocks of U.S. corporations and in
securities having investment characteristics similar to common stocks (i.e.,
warrants and convertible debentures). However, the Fund may also engage in
transactions in exchange listed securities options, may obtain leverage by
borrowing from banks, and may invest up to 10% of its assets in the securities
of issuers domiciled in foreign countries.
INVESTMENT OBJECTIVE AND POLICIES
---------------------------------
The sole objective of the Fund is to achieve capital appreciation
through investment in the securities of relatively few companies, which will be
selected for potential long-term performance. The generation of current income
is not a primary criterion for selecting portfolio investments. While the Fund
will seek to invest in the securities of companies undervalued by the
marketplace, the Fund nevertheless intends to invest in companies with assets
which its investment advisor, MDB Asset Management Corporation ("Asset
Management"), deems sufficiently valuable to support the Fund's investment.
The Fund intends to be fully invested in common stocks and other
securities having investment characteristics similar to common stocks (i.e.,
warrants and convertible debentures). The Fund may for defensive purposes from
time to time, when Asset Management determines that market conditions warrant,
temporarily invest an unlimited portion of its assets in U.S. Government
securities, repurchase agreements collateralized by U.S. Government securities,
or high grade commercial paper (rated either A-1 by Standard & Poor's
Corporation or Prime-1 by Moody's Investors Service, Inc.). At such times as the
Fund assumes a defensive posture which prompts the Fund to invest a substantial
portion of its assets in the interest bearing instruments described above, the
Fund will not then be pursuing its primary method for seeking its investment
objective of capital appreciation.
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<PAGE>
RISK FACTORS
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The Fund has certain features involving risk, which may be viewed as
being more speculative than features found in other investment companies, and
there can be no assurance that the Fund will achieve its investment objective.
Except when described herein as a "fundamental policy", the policies so
described are not fundamental policies and may be changed at any time without
shareholder vote. For a list of certain of the Fund's fundamental policies see
the Fund's Statement of Additional Information under the caption "Investment
Limitations."
Equity Securities
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Like all equity securities, the value of the common stocks purchased by
the Fund will vary from time to time based on a variety of factors, including
general market and economic conditions as well as the earnings and prospects of
the issuers. In addition, the Fund has no restriction on the market
capitalization (the market value of the outstanding stock) of any issuer in
which it invests. Accordingly, the Fund's portfolio investments may include the
common stocks of large, established companies with market capitalizations in
excess of $1 billion, as well as smaller companies with market capitalizations
as low as [$100] million. Smaller companies often have limited product lines,
markets or financial resources, and may be dependent upon one or few key persons
for management. The securities of such companies may be subject to more volatile
market movements than securities of larger, more established companies, both
because the securities typically are traded in lower volume and because the
issuers typically are more subject to changes in earnings and prospects. To the
extent that the Fund's portfolio is invested in smaller capitalization
companies, its net asset value per share can be expected to experience
above-average fluctuations.
Non-Diversified Status
- ----------------------
The Fund is a non-diversified investment company. This means that the
Fund is not restricted by the provisions of the Investment Company Act of 1940
with respect to the diversification of its investments. As a matter of
fundamental policy, however, as to 50% of the Fund's total assets the Fund will
not invest in individual companies in which the Fund has invested 5% in value of
its assets or has acquired more than 10% of the outstanding voting securities of
such company, measured at the time of each such investment. In addition, it
generally will be the Fund's intention to adhere to the diversification
requirements of the Internal Revenue Code applicable to regulated investment
companies (see "Dividends, Distributions and Taxes," page __). This means that
the limitations described in this paragraph would be applicable and calculated
at the close of each fiscal quarter. Moreover, no more than 25% of the Fund's
total assets
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<PAGE>
may be invested in the securities of any one issuer, or two or more issuers
which are engaged in similar or related trades or businesses.
As a matter of investment strategy, the Fund will not purchase the
securities of any issuer as to which the Fund has invested 10% in value of its
assets or has acquired more than 10% of the outstanding voting securities of
such company, measured at the time of each such investment.
Because the Fund's "non-diversified status" permits the investment of a
greater portion of the Fund's assets in the securities of individual companies
than would be permissible under a "diversified status", the Fund's
"non-diversified status" is considered to subject the Fund to a greater degree
of risk than a "diversified" investment company. The Fund reserves the right to
operate as a diversified investment company if such a course appears desirable
in the opinion of management, in which event 75% in value of the Fund's total
assets would have to be invested in companies in which the Fund had not invested
5% or more in value of its assets and in which the Fund did not own 10% or more
of the company's outstanding voting securities. Once diversified as a result of
a change in policy, the Fund may not thereafter resume nondiversified operations
without approval by the holders of a majority of its shares.
Leverage
- --------
The Fund intends to borrow from banks from time to time and invest the
borrowed funds. To the extent that borrowed money is utilized, the Fund's net
asset value per share will tend to appreciate or depreciate more rapidly than
would otherwise be the case.
Pursuant to the provisions of the Investment Company Act of 1940, the
Fund may borrow only from banks, and only if immediately after such borrowing
the value of the assets of the Fund (including the amount borrowed), less its
liabilities (not including any borrowings), is at least three times the amount
of its borrowing. The amount of any borrowing would also be limited by the
applicable regulations of the Federal Reserve Board. If, due to market
fluctuations or other reasons, the value of the Fund's assets, computed as
provided above, becomes at any time less than three times the amount of its
outstanding bank debt, the Fund, within three days (not including Sundays and
holidays), would be required to reduce its bank debt to the extent necessary to
meet the required 300% net asset coverage.
The Fund has a revolving credit agreement with its custodian bank under
which the Fund can make borrowings. The maximum month-end and the average
borrowings outstanding during the fiscal year ended June 30, 1995 were
approximately $1,152,000 and $456,000, respectively. The Fund will not pledge
more than 75% of its assets as security for money borrowed.
-7-
<PAGE>
Foreign Securities
- ------------------
Investments will be made primarily in securities of companies domiciled
in the United States, but the Fund has authority to make investments in
securities of issuers domiciled in any foreign country. Such securities involve
risks that are different from those of domestic issuers, including possibly
different or adverse political and economic developments and consequences, and
also involve such other considerations as the then current exchange rate if such
issuer pays interest or dividends in a foreign currency. Not more than 10% in
value of the Fund's investments may be made in the securities of issuers
domiciled in foreign countries, and such investments only will consist of
foreign securities either listed on a U.S. securities exchange or traded in the
U.S. over-the-counter market. (For further information on foreign securities,
see the Fund's Statement of Additional Information under the caption "Investment
Objective and Policies.")
Over-the-Counter Securities
- ---------------------------
The Fund may invest in over-the-counter securities, as well as in
securities listed on a national securities exchange. Over-the-counter securities
may not be traded every day or in the volume typical of securities trading on a
national securities exchange. As a result, disposition by the Fund of portfolio
securities to meet shareholder redemptions or for other purposes may require the
Fund to sell such securities at a discount from market prices, to sell during
periods when such disposition is not otherwise desirable, or to make many small
sales over a lengthy period of time.
Convertible Debentures and Warrants
- -----------------------------------
The Fund may invest in convertible debentures and warrants. Convertible
debentures are interest-bearing securities which may be converted into shares of
the issuer's common stock at the option of the holder. Convertible debentures
generally pay interest and provide for participation in the appreciation of the
underlying common stock, but at a lower level of risk because the yield is
higher and the security is senior to common stock. The value of a convertible
security is a function of its "investment value" (determined by its yield in
comparison with the yields of other securities of comparable maturity and
quality that do not have a conversion privilege) and its "conversion value" (the
security's worth, at market value, if converted into the underlying common
stock). The credit standing of the issuer and other factors may also affect the
investment value of a convertible security. Like other debt securities, the
market value of convertible debentures tends to vary inversely with the level of
interest rates. A convertible security may be subject to redemption at the
option of the issuer at a fixed price and, if it is called for redemption, the
Fund will be required to permit the issuer to redeem
-8-
<PAGE>
the security, convert it into the underlying common stock, or sell it
to a third party.
The Fund may invest up to 5% of its assets in warrants, which may be
exercised to acquire a predetermined number of shares of the issuer's common
stock at the option of the holder during a specified time period and at a
specified price. However, not more than 2% of the Fund's net assets may be
invested in warrants not listed on a national securities exchange. (For further
information on warrants, see the Fund's Statement of Additional Information
under the caption "Investment Objective and Policies.")
"Restricted Securities" and Non-Liquid Assets
- ---------------------------------------------
The Fund has authority to invest up to 5% of its net assets in
non-liquid assets. Non-liquid assets consist of assets which are not readily
marketable, and may include (i) repurchase agreements, the maturity of which
exceeds seven days, (ii) securities as to which no "bid" has been made or as to
which trading has been suspended, (iii) securities which may require
registration under the Securities Act of 1933 prior to sale to the public (i.e.,
"restricted securities") and (iv) securities of unseasoned issuers (for this
purpose, an unseasoned issuer is an entity which has been in operation for less
than three years, including all predecessors). Non-liquid assets, if acquired,
will be valued at fair value as determined in good faith by the Board of
Directors of the Fund. (For further information on restricted securities, see
the Fund's Statement of Additional Information under the caption "Investment
Objective and Policies.")
Options
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The Fund may engage in transactions in exchange listed stock options. A
stock option is a right to buy or sell a particular stock at a certain price for
a limited period of time. Options consist of puts, calls or combinations
thereof. A call option gives the purchaser the right, but not the obligation, to
buy from the seller (or "writer") during the term of the option a designated
security at an agreed upon price. Conversely, a put gives the purchaser the
right, but not the obligation, to sell the designated security to the seller of
the option at an agreed upon ("exercise") price. The Fund may purchase or write
options, limited to "covered" put and call options. The writer of the option
must own the underlying security (or have segregated assets sufficient to
purchase the underlying security) in order for the Fund to write the applicable
option contract.
Some of the strategies employed with options may be considered to be
speculative. One type of transaction which is inherently speculative is the
purchase of calls. With the purchase of a call, the Fund could lose, and would
be "at risk" for, the amount of the premium paid for the call if the underlying
security does not rise
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<PAGE>
above the "exercise" price during the life of the call. Accordingly, the Fund
will follow the practice of limiting the net "at risk" amounts with respect to
the purchase of puts or calls to 10% of the Fund's net assets, determined on the
date of purchase.
The use of certain strategies involving options may tend to limit any
potential gain which might result from an increase in the value of any such
position. The ability of the Fund to utilize these strategies successfully will
depend upon the ability of the Fund's investment adviser to forecast pertinent
market movements, which cannot be assured.
MANAGEMENT OF THE FUND
----------------------
Investment Adviser
- ------------------
Pursuant to an investment advisory agreement dated March 15, 1996,
which was initially approved by the Fund's Board of Directors on November 29,
1995, Asset Management renders investment advice to and provides supervisory
management services for the Fund, subject to the control and overall supervisory
authority of the Fund's Board of Directors. Asset Management is a New York
corporation formed in March 1988, and is controlled by Sheldon E. Goldberg and
Gregory Church. Mr. Church is the President, Secretary and a director of the
Fund. Asset Management is registered as an investment adviser under the
Investment Advisers Act of 1940.
Mark D. Beckerman has served as the Portfolio Manager of the Fund since
September 1988. From September 1988 to March 1996, he was the President and sole
shareholder of Asset Management. Since the acquisition of Asset Management by
Messrs. Goldberg and Church in March 1996, he has been employed as Portfolio
Manager by Asset Management.
Asset Management provides the Fund with advice and recommendations with
respect to investments, investment policies, the purchase and sale of portfolio
securities and management of the cash balances of and credit extended to the
Fund. For its services, Asset Management is compensated at the annual rate of 1%
of the value of the Fund's average daily net assets, payable monthly. The rate
of compensation remains constant whether or not there are fluctuations in the
Fund's net assets. Such annual rate is higher than the rate paid by most
registered investment companies, but is similar to the rate contracted for by
other mutual funds with comparable investment policies.
Except as described below, the Fund will pay all of its expenses,
including commissions, interest, taxes, legal and accounting fees, fees of
custodians, transfer agents, registrars and dividend disbursing agents,
registration and filing fees, the cost of stock
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<PAGE>
certificates, costs in connection with annual or special meetings of
shareholders (including the preparation and distribution of proxy soliciting
materials), fees and expenses of Fund directors who are not "interested persons"
(as defined in the Investment Company Act of 1940) of Asset Management, office
space, office furnishings, office supplies and office equipment, including
telephone service, insurance premiums, printing costs (which do not include
printed material sent to persons who are not shareholders), 12b-1 fees, travel
expenses, salaries and related compensation of any non-officer employees,
postage, association dues and extraordinary and non-recurring expenses.
Pursuant to its investment advisory agreement with the Fund, Asset
Management has agreed until March 15, 1998 to limit the Fund's annual operating
expenses (excluding interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses) to 4% of
the Fund's average annual net assets. Asset Management will reimburse the Fund
for expenses in excess of this limitation. In addition, Asset Management will be
obligated to reimburse the Fund if Fund expenses exceed those set forth in any
statutory or regulatory formula prescribed by any state in which Fund shares are
registered. Because Fund shares currently are not registered in any state which
requires the Fund to be reimbursed for such excess expenses, it is not expected
that Asset Management will be required to reimburse the Fund under this
provision.
For the fiscal year ended June 30, 1995, Fund expenses (including
interest expense and the 1% management fee) were 5.18% of the Fund's average
daily net assets. The expense limitation provision, described above, was not in
effect during fiscal 1995.
Administrator
- -------------
Investment Company Administration Corporation, a Delaware corporation,
is the Administrator of the Fund. Pursuant to an administration agreement with
the Fund, and subject to the supervision of the Board of Directors of the Fund,
the Administrator supervises the overall administration of the Fund. Its
responsibilities include preparing and filing all documents required for
compliance by the Fund with applicable laws and regulations, arranging for the
maintenance of books and records of the Fund and supervision of other
organizations that provide services to the Fund. Certain officers of the Fund
are also provided by the Administrator. For the services it provides to the
Fund, the Administrator receives a monthly fee at the annual rate of 0.10% of
the Fund's average daily net assets, subject to a minimum annual fee of $45,000
the first year and $40,000 thereafter.
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<PAGE>
Co-Distributors
- ---------------
Cumberland Brokerage Corporation ("Cumberland") and Bainbridge & Co.
("Bainbridge") act as co-distributors for shares of the Fund. Both Cumberland
and Bainbridge are registered with the Securities and Exchange Commission as
broker-dealers under the Securities Exchange Act of 1934. Cumberland is a New
Jersey corporation controlled by Sheldon E. Goldberg, an officer and shareholder
of Asset Management. Bainbridge is a Pennsylvania corporation controlled by
Gregory Church (an officer and director of the Fund and Asset Management) and
his wife.
Cumberland and Bainbridge act as co-distributors for shares of the Fund
pursuant to a distribution agreement dated March 15, 1996, which was initially
approved by Fund's Board of Directors on November 29, 1995. Fund shares are sold
to the public at net asset value, without any sales charge or commission.
Cumberland and Bainbridge pay the cost of sales material, including the cost of
printing prospectuses other than those used to register Fund shares or otherwise
comply with Federal or state law or sent to existing shareholders.
Distribution Plan
- -----------------
Rule 12b-1 (the "Rule") under the Investment Copy Act of 1940 permits
an investment company such as the Fund to use its assets to pay the expenses of
distributing its shares if it complies with the various conditions of the Rule.
In accordance with the Rule, the Fund has adopted a Distribution Plan which,
among other things, permits the Fund to pay Cumberland and Bainbridge, the
co-distributors of Fund shares, a monthly distribution fee out of the Fund's net
assets, which may be spent on any activities or expenses primarily intended to
result in the sale of Fund shares. Under the Distribution Plan, the Fund will
pay Cumberland and Bainbridge an aggregate distribution fee which is accrued
daily and paid monthly at the rate of .25% per year of the Fund's average daily
net assets. The Distribution Plan is a "compensation" plan, which means that the
distribution fees paid by the Fund are intended to compensate Cumberland and
Bainbridge for services rendered, even if the amounts paid exceed their actual
expenses (in which case Cumberland and Bainbridge would realize a profit). The
Distribution Plan provides for quarterly written reports to the Board of
Directors of expenditures pursuant to the Distribution Plan, including the
purposes of such expenditures.
The Board of Directors, including a majority of the directors who are
not "interested persons" of the Fund (as defined in the Investment Copy Act of
1940) and who have no direct or indirect financial interest in the operation of
the Distribution Plan, adopted the Distribution Plan on November 29, 1995 after
determining that there is a reasonable likelihood that the Plan is in the best
interests of and will benefit Fund shareholders. Any change in the
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<PAGE>
Distribution Plan that would materially increase the distribution costs requires
shareholder approval; otherwise, the Distribution Plan may be amended by the
directors.
The Distribution Plan may be terminated by the vote of a majority of
the directors who are not "interested persons" of the Fund or by the vote of a
majority of the outstanding shares of the Fund. The Distribution Plan will
continue in effect so long as within each one-year period such continuance is
specifically approved by the vote of a majority of the directors (which also
must include a majority of the directors who are not "interested persons" of the
Fund).
PURCHASE OF SHARES
------------------
By Mail
- -------
Shares of the Fund initially may be purchased by sending a check
($1,000 minimum) together with the completed application form to the Fund, c/o
American Data Systems, Inc., P.O. Box 1122, Cincinnati, Ohio 45264-1122.
Subsequent investments may be made by mailing a check ($100 or more) together
with the detachable stub from the Transaction Advice (see "General," page __).
Mail orders without payment enclosed will not be accepted. Third-party checks
will not be accepted for payment of purchase orders.
By Telephone
- ------------
Initial and subsequent investments may be made by telephone ($1,000
minimum purchase order) by calling 1-800-637-3901. On an initial purchase,
telephone orders are limited to $2,500 or less. For existing shareholders,
telephone purchase orders may be placed in an amount ($1,000 minimum) not
exceeding $10,000 or ten times the shareholder's then current account balance,
whichever is less. Investors desiring to purchase Fund shares in excess of the
allowable limits for telephone purchase orders or to make initial purchases
otherwise than by mail may transmit payment for Fund shares by bank wire (see
"By Bank Wire," below). Telephone orders will be taken in dollar amounts only,
with full and fractional shares being issued. Each telephone purchase order will
be assigned a control number (see "General," page __). Payment for shares
purchased must be received by the fourth day after purchase. No bill will be
sent to the investor, and it will be the responsibility of the investor to make
payment within the time limitation described herein.
In order for shareholders to participate in the telephone purchase and
redemption service, they must elect to do so in writing. The election may be
made on the initial application form or by writing to American Data Systems,
Inc. with the shareholder's signature guaranteed. A shareholder who wants to
change any telephone service option previously elected may do so by filing with
American Data
-13-
<PAGE>
Systems, Inc. an amended application form with the shareholder's signature
guaranteed. Telephone purchase orders will not be processed unless the
shareholder gives the full name and account number at the time of placing the
purchase order.
Control numbers are assigned to telephone purchase orders to
distinguish payment for those purchase orders from mail purchase orders. If an
investor who utilizes the telephone purchase order service fails to include the
control number on payment for the purchase order, the investor should be aware
that American Data Systems, Inc., acting as agent, may treat this as a separate
and additional subscription order. If such an event occurs, resulting from the
investor's failure to include the control number assigned to the purchase order,
the investor's account will be charged for any loss incurred from the
cancellation of the purchase order.
By Bank Wire
- ------------
Shares of the Fund may be purchased by bank wire. Investors
establishing new accounts, prior to sending the bank wire, should telephone
American Data Systems, Inc. at 1-800-637-3901 in order to obtain an account
number. The wire order must contain registration instructions (i.e., full names
of all investors, address, social security number or other taxpayer
identification number and account number for new accounts, or only the account
number for existing accounts). The name of the Fund must appear on the wire for
proper credit. The investor must have the bank wire order transmitted to Star
Bank, N.A. CINTI/TRUST _________________________________________________ ABA
#0420-0001-3, Attn: MATTERHORN GROWTH FUND, INC., DDA# 483897641, Account
Name_____________________, Shareholder Account No. _____________. Wire orders
received by American Data Systems, Inc. will be executed at the Fund's net asset
value per share as next determined after receipt of the wired funds. Banks may
charge fees for wiring funds.
Through Broker-Dealers
- ----------------------
Investors may, if they so desire, purchase Fund shares through
registered broker-dealers. Such broker-dealers may make a reasonable charge to
the investor for their services. Such fees and services may vary among
broker-dealers, and such brokerdealers may impose higher initial or subsequent
investment requirements than those established by the Fund. Services provided by
broker-dealers may include the ability to establish a margin account and to
borrow on the value of the Fund shares in that account. Broker-dealers are
responsible for forwarding payment promptly to American Data Systems, Inc.
General
- -------
Purchase orders received, either by the Fund's transfer agent or the
investor's broker-dealer, prior to the close of trading
-14-
<PAGE>
business on the New York Stock Exchange (currently 4:00 P.M., Eastern time) on a
given day will be executed at the net asset value per share computed as of the
close of business on that day.
Conditional purchase orders will not be accepted. All checks should be
made payable to the Fund and should be drawn on a U.S. bank. Checks drawn on a
foreign bank will not be accepted unless provision is made for payment through a
U.S. bank in U.S. dollars. If payment for any purchase order is not received as
specified herein, or if the investor's check is not honored upon presentment,
the order is subject to cancellation, and the purchaser's existing account with
the Fund immediately will be charged for any loss incurred. The Fund reserves
the right to accept orders at its office, to waive the minimum and maximum
limitations for purchase orders, to reject any order in whole or in part, to
suspend or modify the continuous offering of its shares, or to change or
discontinue without prior notice the procedures for or availability of telephone
service for purchase orders. Although telephone service is provided, investors
should be aware that telephone lines are not available at all times, and usually
are busy shortly prior to 4:00 P.M., Eastern time. Therefore, investors are
urged to place telephone orders as early in the day as possible.
Each investor will be sent a Transaction Advice by the Fund's transfer
agent in lieu of a certificate, reflecting full and fractional shares, unless a
certificate is specifically requested in writing by all registered owners. It is
recommended to all shareholders that a certificate not be requested unless
needed for a specific purpose. This eliminates the trouble and expense of
safeguarding the stock certificate and the cost of a lost instrument bond in the
event of loss or destruction and is a condition to the election of telephone
service.
REDEMPTION OF SHARES
--------------------
Redemptions by Mail
- -------------------
Shares of the Fund may be redeemed by an investor by mail by writing
directly to the transfer agent, American Data Systems, Inc., 24 West Carver St.,
2nd Floor, Huntington, New York 11743, and enclosing a duly endorsed share
certificate, if issued. There are no special forms for redemption. However, a
written request for redemption must be signed by all owners, with all such
signatures guaranteed, as described below. In the case of shares held by a
corporation, the redemption request must be signed in the name of the
corporation by an officer whose title must be stated, and a by-law provision or
resolution of the Board of Directors, recently certified, authorizing the
officer to so act must be furnished. In the case of a trust or partnership, the
signature must be that of a trustee or partner in whose name the account is
registered, and must include the title of
-15-
<PAGE>
the person signing. If the trustee's or partner's name is not registered on the
account, a recently certified copy of the trust instrument or partnership
agreement must be furnished to the Fund's transfer agent. Investors can obtain a
signature guarantee from most banks, credit unions or savings associations, or
from brokerdealers, national securities exchanges, registered securities
associations or clearing agencies deemed to be eligible guarantor institutions.
A notary public is not acceptable. Shareholders residing abroad may obtain a
signature verification from any U.S. Consulate under official seal.
Redemptions by Telephone, Telegram or Overseas Cable
- ----------------------------------------------------
Shares of the Fund may be redeemed by an investor by calling American
Data Systems, Inc., the Fund's transfer agent, at 1-800-637-3901, or by sending
a telegram or overseas cable to American Data Systems, Inc., 24 West Carver
Street, 2nd Floor, Huntington, New York 11743. In order to utilize the procedure
for redemption by telephone, telegram or overseas cable, a shareholder
previously must have elected this option in writing, the shareholder account
previously must have been opened by and be reflected as such in the computer
records of the Fund's transfer agent, the shares being redeemed must be held by
the transfer agent and the redemption proceeds must be transmitted directly to
the shareholder's predesignated account at a domestic bank (see "General," page
__). The Fund's transfer agent will not be liable for acting upon any
instruction it reasonably believes to be genuine and in accordance with the
procedures described herein. Nevertheless, the Fund and/or the transfer agent
may be liable for losses resulting from unauthorized or fraudulent telephone
transactions in the event these procedures are not followed.
A shareholder may elect at any time to use the telephone redemption
service, which includes redemptions by telegram or overseas cable. Such election
may be made on the initial application form or on other forms prescribed by the
Fund. Any changes or exceptions to the original election must be made in
writing, with signatures guaranteed, and will be effective upon receipt by the
transfer agent. When utilizing the telephone redemption service, the shareholder
must give the full name, number of shares to be redeemed (if less than all
remaining shares) and account number, or the redemption request will not be
processed. For a redemption by overseas cable, you must also include the Fund
name. Redemptions by telegram or overseas cable will not become effective until
the writing constituting the telegram or overseas cable is received by the
Fund's transfer agent.
The Fund reserves the right to change or discontinue without prior
notice the procedures for or availability of telephone service for redemption
requests. Although telephone service is provided, investors should be aware that
telephone lines are not available at all times, usually are busy shortly prior
to 4:00 P.M., Eastern time
-16-
<PAGE>
and may not be available during periods of severe market or economic conditions.
Therefore, investors are urged to place telephone orders as early in the day as
possible.
General
- -------
The redemption price for shares upon written request, telegram,
overseas cable or telephone redemption will be the net asset value per share as
next determined after receipt of such request in good order by the Fund's
transfer agent (see "Net Asset Value," page __). The proceeds of all redemptions
will be mailed or wired, as elected by the shareholder, on the next business day
after redemption if being transmitted to the investor's account at the
broker-dealer through which the Fund shares were purchased, or on the third
business day after the redemption if being transmitted otherwise. However,
redemption proceeds will not be transmitted until the investor's check for the
purchase of Fund shares has cleared, which may take up to 15 days from the time
the check is received. Where a shareholder simultaneously redeems shares for
which payment has been made and shares for which the shareholder's check has not
cleared, the shareholder authorizes the Fund to delay transmittal of that
portion of the redemption proceeds equal to the amount of the check which has
not then cleared until the shareholder's check has cleared, but such portion of
the redemption proceeds will be transmitted promptly after such clearance. Where
a shareholder has elected to have the redemption proceeds transmitted directly
to the shareholder's predesignated account at a domestic bank, the proceeds will
be wired if the account is at a commercial bank and will be sent by mail if the
account is at a savings bank or if the proceeds are less than $1,000. The Fund's
transfer agent will not honor any redemption request that contains a restriction
as to the time, date or share price at which the redemption is to be effective.
The right of redemption may be suspended or the payment date postponed
during any period when: (a) the New York Stock Exchange is closed for other than
customary weekend and holiday closings; (b) trading on the New York Stock
Exchange is restricted, as determined by the Securities and Exchange Commission;
(c) an emergency as defined by rules of the Securities and Exchange Commission
exists; or (d) the Commission has, by order, permitted such suspension. In case
of suspension of the right of redemption, the shareholder may withdraw the
request for redemption or the shareholder will receive payment of the net asset
value next determined after the suspension has been terminated.
The Fund has the right to involuntarily redeem after written notice the
shares of an investor, the aggregate value of whose shares is less than $500 due
to redemptions. Notice of redemption will be given by first class mail to the
investor at the address on the Fund's records. The notice will fix a date of not
less than 30 days in advance of the date on which it was mailed, and the shares
will be
-17-
<PAGE>
redeemed at net asset value as of the close of business on that date, unless
before then the investor purchases sufficient additional shares. A check for the
proceeds of redemption, which may be less or more than the purchase price of the
shares, will be mailed to the investor at the address of record.
TRANSFER OF SHARES
------------------
To transfer Fund shares from an existing account, a letter requesting
the transfer signed by each registered owner must be sent directly to the Fund's
transfer agent, American Data Systems, Inc., 24 West Carver Street, 2nd Floor,
Huntington, New York 11743. The letter should give the full name, address and
social security number (or taxpayer identification number) of the transferee. A
stock power signed by each registered owner, with signatures guaranteed, must
accompany the letter. A notary public is not an acceptable guarantor. A new
application completed in its entirety and signed by the new owner also is
required. Application forms may be obtained by calling the transfer agent
at 1-800-637-3901 (toll-free).
OPERATION OF THE FUND
---------------------
Net Asset Value
- ---------------
The net asset value of the Fund's shares will be determined as of the
close of trading on the New York Stock Exchange (which currently is 4:00 P.M.,
Eastern time) on each day on which the New York Stock Exchange is open for
trading and on which there is a sufficient degree of trading in the Fund's
portfolio of investments that such net asset value might be materially affected
by the changes in the underlying values of such portfolio securities. Net asset
value per share will be computed by dividing the market value of all securities
and other assets, less liabilities, by the number of the Fund's outstanding
shares. Such determination is made by valuing portfolio securities listed or
traded on a national securities exchange on which the security is primarily
traded at the last sale price, or if there has been no sale that day, at the
mean between the last bid and asked prices. Securities traded in the
over-the-counter market are valued at their last bid price, and all other
portfolio securities and assets, including restricted securities, will be valued
at fair value as determined in good faith by or under the direction of the Board
of Directors.
Dividends, Distributions and Taxes
- ----------------------------------
The policy of the Fund is to distribute at least annually substantially
all of its net ordinary income and net realized capital gains, if any. In so
doing, the Fund intends to comply with Subchapter M of the Internal Revenue
Code, which relieves complying
-18-
<PAGE>
investment companies which distribute substantially all of their net income from
Federal income tax on the amount distributed. The Fund qualified as a regulated
investment company during the year ended June 30, 1995, and it intends to so
qualify in future years if it is in the best interests of Fund shareholders to
do so.
It is the present policy of the Fund to declare and pay annually net
ordinary income as dividends and to declare and distribute annually all net
capital gains realized in excess of all then available capital loss
carryforwards. These dividends and distributions are payable in Fund shares,
although shareholders may elect to receive such dividends and distributions in
cash upon written request to the Fund, which request must be received by the
Fund prior to the close of business on or before the record date for payment of
the particular dividend or distribution. Checks issued pursuant to a
shareholder's request for payment in cash of a dividend or distribution are sent
by first class mail to the shareholder's address as reflected in the transfer
agent's records. If any such check is returned to the Fund, it automatically
will be deemed to be a request by the shareholder to reinvest those proceeds and
all future dividends and distributions in Fund shares unless and until the
shareholder subsequently elects in writing to be paid in cash. All dividends and
distributions are taxable to the shareholder whether received in cash or in Fund
shares. Reinvestment in Fund shares of the dividend or distribution will be made
on the payable date.
Distributions of dividends and short-term capital gains are taxable to
a shareholder as ordinary income. The dividends (but not the capital gains)
qualify for the 70% dividends received deduction for corporations, unless they
are derived from interest or other non-dividend income or dividends from foreign
corporations.
In January of the year after the distribution, the Fund will send
shareholders a Form 1099, notifying shareholders of the status of each
distribution for Federal income tax purposes.
In the event a shareholder fails to furnish a taxpayer identification
number and to certify to the accuracy thereof, or the Internal Revenue Service
notifies the Fund that a shareholder's taxpayer identification number is
incorrect or that withholding is otherwise required, the Fund will commence
withholding on such shareholder's account. Once withholding is established, all
withheld amounts will be paid to the Internal Revenue Service, from whom such
shareholder should seek any refund. If withholding is commenced with respect to
any shareholder account, the shareholder should consult with the shareholder's
attorney or tax adviser or contact the Internal Revenue Service directly. In
addition, the IRS levies a fine for each incorrect or uncertified taxpayer
identification number. Any such fine levied against the Fund will be assessed
against the shareholder account responsible therefor.
-19-
<PAGE>
Any dividend or distribution declared shortly after an investor has
purchased Fund shares will have the effect of reducing the net asset value of
the investor's shares by the amount of the dividend or distribution. Such a
dividend or distribution, although in a sense a return of capital, is subject to
taxation, as described above.
Brokerage
- ---------
Decisions to buy and sell securities on behalf of the Fund are made by
Asset Management. The commission rate on all exchange orders is subject to
negotiation, and Asset Management will be responsible for negotiating such
commission rates on behalf of the Fund. In selecting brokers or dealers to
execute portfolio transactions for the Fund, an attempt will be made to
negotiate the best commission rate among those brokers or dealers who in the
opinion of Asset Management can obtain best price and execution for the Fund.
Subject to the foregoing, in the allocation of portfolio brokerage business,
Asset Management may consider the extent to which brokers sell Fund shares. In
addition, as authorized by Section 28(e) of the Securities Exchange Act of 1934,
Asset Management also may consider research and brokerage services provided by
brokers, and is authorized to cause the Fund to pay to a broker a commission
rate or amount in excess of the rate or amount another broker would have charged
for effecting that transaction if Asset Management determines in good faith that
such rate or amount of commission is reasonable in relation to the value of the
research and brokerage services provided. Research services include investment
recommendations, statistical research and other services, including economic and
market information. Such research and brokerage services are considered to be in
addition to and not in lieu of the services required to be performed by Asset
Management under its contract with the Fund. Research services furnished by
brokers and dealers through whom the Fund effects securities transactions may be
used by Asset Management in servicing all of the accounts of Asset Management,
just as any research services provided by such brokers and dealers with respect
to securities transactions for such other accounts may be used by Asset
Management in servicing the Fund. Section 17(e) of the Investment Copy Act of
1940 limits to "the usual and customary broker's commission" the amount which
can be paid by the Fund to affiliated persons acting as broker in connection
with transactions effected on a securities exchange.
Transactions in a security traded over-the-counter normally will be
made through a principal market maker for such security unless, taking into
consideration all factors, including the size of the transaction, a more
favorable result is obtainable elsewhere. The Fund will not engage in any
transaction in which Asset Management, Cumberland or Bainbridge would be a
principal. Cumberland and Bainbridge have advised the Fund that they will not
receive reciprocal
-20-
<PAGE>
brokerage business as a result of brokerage business placed or principal
transactions made by the Fund with others.
ADDITIONAL INFORMATION
----------------------
Transfer and Shareholder Service Agent. American Data Systems, Inc., 24 West
Carver Street, 2nd Floor, Huntington, New York 11743 acts as shareholder
servicing and transfer agent for the Fund. Questions concerning shareholder
accounts should be directed to Matterhorn Growth Fund, Inc., c/o American Data
Systems, Inc., P.O. Box Huntington, New York 11743, or call 1-800-637-3901
Telephone requests for information of a confidential nature will be answered by
letter to the shareholder's address of record. Procedural inquiries will be
answered immediately.
Custodian. Star Bank, Post Office Box 1118, Cincinnati, Ohio 45201 serves as
custodian of the Fund's cash and securities.
Accountants. McGladrey & Pullen, LLP will serve as the independent certified
public accountants for the Fund and will examine and report on the Fund's
financial condition.
Reports. Each shareholder will receive semi-annual and annual financial reports
of the Fund. Annual financial reports will be audited.
Retirement Plans. The Fund has available for investors a prototype retirement
plan, a prototype Individual Retirement Account ("IRA") and a tax sheltered
retirement plan in accordance with Section 403(b) of the Internal Revenue Code
for employees of public school systems and certain other charitable
organizations. For further information or application forms for these retirement
plans, please write or call the Fund at the address or telephone numbers shown
on the cover page.
Investment Plans. The Fund also sponsors an Automatic Accumulation Plan and an
Automatic Withdrawal Plan. For further information or application forms for
these plans, please write or call the Fund.
Capital Stock. The authorized capital of the Fund consists of 100,000,000 shares
of common stock, par value $.001 each. Currently, all Fund shares are of the
same class with equal voting rights. The Board of Directors has the authority to
issue additional classes of shares if deemed desirable. Fund 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 all of the directors
if they choose to do so, and in such event the holders of the remaining shares
so voting will not be able to elect any directors. Shares of the Fund have equal
rights with respect to dividends, assets and liquidation. Shares are fully paid
and nonassessable when issued, are transferable without restriction, and have no
preemptive or conversion rights.
-21-
<PAGE>
As a Maryland corporation, the Fund is not required to hold annual
meetings of shareholders except when required by the Investment Company Act of
1940. The Fund has undertaken that, (i) if requested to do so by the holders of
at least 10% of the Fund's then outstanding shares, it will call a meeting of
shareholders for the purpose of voting upon the removal of any director, and
(ii) it will assist in the communication with Fund shareholders, to the extent
required by Section 16(c) of the Investment Company Act of 1940.
Performance Information. From time to time the Fund may advertise its total
return. These figures are based on historical earnings and are not intended to
indicate future performance. Total return shows how much an investment in the
Fund would have increased (or decreased) over a specified period of time (i.e.,
one, five or ten years or since the inception of the Fund) assuming that all
distributions and dividends by the Fund to investors of the Fund were reinvested
on the reinvestment dates during the period. Total return does not take into
account any federal or state income taxes which may be payable by the investor.
The Fund also may include comparative performance information in advertising or
marketing Fund shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business periodicals,
rating services and market indices.
Additional Information. This Prospectus, including the Statement of Additional
Information which has been incorporated by reference herein, does not contain
all the information set forth in the Registration Statement filed by the Fund
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended. Copies of the Fund's Registration Statement may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
office of the Commission in Washington, D.C.
-22-
<PAGE>
INVESTMENT ADVISER TRANSFER AGENT
MDB Asset Management Corporation American Data Systems, Inc.
301 Oxford Valley Road 24 West Carver Street, 2nd Floor
Yardley, Pennsylvania 19067 Huntington, New York. 11743
1-800-637-3901
CO-DISTRIBUTORS
---------------
Cumberland Brokerage Corporation Bainbridge & Co.
164 Landis Avenue 301 Oxford Valley Road
Vineland, New Jersey 08360 Yardley, Pennsylvania 19067
CUSTODIAN AUDITORS
Star Bank McGladrey & Pullen, LLP
Post Office, Box 1118 555 Fifth Avenue
Cincinnati, Ohio 45201 New York, New York 10017
TABLE OF CONTENTS
Page
SUMMARY OF EXPENSES........................................................
FINANCIAL STATEMENTS.......................................................
MATTERHORN GROWTH FUND, INC................................................
INVESTMENT OBJECTIVE AND POLICIES..........................................
RISK FACTORS...............................................................
Equity Securities ................................................
Non-Diversified Status............................................
Leverage..........................................................
Foreign Securities ...............................................
Over-the-Counter Securities ......................................
Convertible Debentures and Warrants...............................
"Restricted Securities" and Non-Liquid Assets.....................
Options...........................................................
MANAGEMENT OF THE FUND.....................................................
Investment Adviser................................................
Administrator ....................................................
Co-Distributors...................................................
-23-
<PAGE>
Distribution Plan.................................................
PURCHASE OF SHARES.........................................................
By Mail...........................................................
By Telephone......................................................
By Bank Wire......................................................
Through Broker-Dealers............................................
General...........................................................
REDEMPTION OF SHARES.......................................................
Redemptions by Mail...............................................
Redemptions by Telephone, Telegram or Overseas Cable..............
General...........................................................
TRANSFER OF SHARES.........................................................
OPERATION OF THE FUND......................................................
Net Asset Value...................................................
Dividends, Distributions and Taxes................................
Brokerage.........................................................
ADDITIONAL INFORMATION.....................................................
Transfer and Shareholder Service Agent............................
Custodian.........................................................
Accountants.......................................................
Reports...........................................................
Retirement Plans..................................................
Investment Plans..................................................
Voting Rights.....................................................
Capital Stock ....................................................
Performance Information ..........................................
Additional Information ...........................................
- --------------------------------------------------------------------------------
No dealer, salesman, or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund. This Prospectus does not constitute an
offering in any state or jurisdiction in which such offering may not lawfully be
made.
-Back Cover-
-24-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
March __, 1996
MATTERHORN GROWTH FUND, INC.
301 Oxford Valley Road, Yardley, Pennsylvania 19067
(Toll Free - 1-800-637-3901
(Fax - (215)
Price Quote Information
1-800-637-3901
Matterhorn Growth Fund, Inc. ("Fund") seeks long-term capital
appreciation for shareholders through investment in the securities, principally
common stocks, of relatively few companies.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. RATHER, IT SHOULD
BE READ IN CONJUNCTION WITH THE FUND'S PROSPECTUS DATED MARCH __, 1996, A COPY
OF WHICH MAY BE OBTAINED FROM THE FUND AT THE ADDRESS AND THE TELEPHONE NUMBERS
SHOWN ABOVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES CONTAIN INFORMATION
WHICH MAY BE OF INTEREST TO INVESTORS.
B-1
<PAGE>
SUMMARY
Matterhorn Growth Fund, Inc. (the "Fund") was organized as a Maryland
corporation on May 2, 1980. From its inception to March __, 1996, the Fund was
known as The 44 Wall Street Equity Fund, Inc.
The Fund is an open-end, non-diversified investment company which seeks
long-term capital appreciation for its shareholders through investment in the
securities (principally common stocks, but also may include warrants and
convertible debentures) of a relatively few companies. The Fund may engage in
transactions in exchange listed options, may obtain leverage by borrowing from
banks, and may invest up to 5% of its assets in warrants (up to 2% of the net
assets in unlisted warrants).
Fund shares may be purchased by mail through its transfer agent,
American Data Systems, Inc. at the address listed on the back cover page, or by
telephone (toll-free 1-800-637-3901), telegram or overseas cable (see "PURCHASE
OF SHARES," page __). There is no sales charge or commission, and Fund shares
are sold at net asset value. Shares are redeemable by mail or by telephone at
their net asset value, as next determined after receipt of a redemption request.
The minimum initial investment is $1,000, and subsequent investments may be made
at any time in amounts of $100 or more.
The Fund has available for its investors the following specialized
accounts: an Automatic Accumulation Plan, retirement plans and an Automatic Cash
Withdrawal Plan. (See "SPECIAL ACCOUNTS," page __).
The Fund has certain features involving greater risk, which may be
viewed as being more speculative, than features found in other investment
companies. Such features include the Fund's non-diversified status (see
"Investment Objectives and Policies," page __), the Fund's ability to utilize
leverage (see "Leverage," page __) and the Fund's ability to invest in exchange
listed options, warrants, foreign securities, securities of unseasoned issuers
and "restricted" securities (see "Investment Objectives and Policies," page __).
The Fund relies on the investment advice of MDB Asset Management
Corporation ("Asset Management"), which receives for its services a monthly fee
equal to the annual rate of 1% of the Fund's average net assets. While such
annual rate of compensation is higher than the average rate paid by most
registered investment companies, the Fund believes that the rate is comparable
to that charged to investment companies which also seek to achieve their
investment objective by employing those investment techniques utilized by the
Fund. All Fund expenses are payable by the Fund, except that until March 15,
1998 Asset Management is required to reimburse the Fund for expenses in excess
of 4% of average daily net assets. Expenses
B-2
<PAGE>
payable by the Fund include legal and accounting fees, custodial and transfer
agency fees, registration and filing fees, brokerage commissions, interest,
taxes, office facilities, 12b-1 fees, travel, printing, postage, clerical and
administrative salaries and expenses of an extraordinary and nonrecurring
nature.
The Fund has relied upon the investment advice of Asset Management
since September 1988. From September 1988 to March 1996, Asset Management was
wholly owned by Mark D. Beckerman, its then President and Portfolio Manager. In
March 1996, ownership of Asset management was transferred to Sheldon E. Goldberg
and Gregory Church. Mr. Beckerman continues to serve as the Fund's Portfolio
Manager pursuant to a five-year employment agreement.
The Fund's financial statements for the fiscal year ended June 30, 1995
are incorporated by reference to the Fund's 1995 Annual Report to Shareholders.
A copy of the Fund's Annual Report can be obtained at no charge by calling the
toll free number on page 1 or writing the Fund at its address on page 1.
INVESTMENT OBJECTIVE AND POLICIES
---------------------------------
The Fund's sole objective is to achieve capital appreciation through
investment in the securities of relatively few companies, which will be selected
for potential long-term performance. The Fund intends to be fully invested in
common stocks and other securities having investment characteristics similar to
common stocks (i.e., warrants and convertible debentures). The Fund may invest
in privately offered and over-the-counter securities as well as in securities
listed on a national securities exchange. Asset Management will utilize
research, financial analysis and other tools of business evaluation for
selecting companies and industries with above average performance or prospects.
While the rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate, given the Fund's investment objective,
its annual portfolio turnover rate generally should not exceed 100%. For fiscal
years 1993, 1994 and 1995, the Fund's annual portfolio turnover rates were
167.3%, 160.1% and 72.1%, respectively. Portfolio turnover rates exceeding 100%,
as occurred in fiscal 1993 and 1994, tend to increase the amount of brokerage
commissions paid, and in the future could adversely impact upon the Fund's
ability to meet one of the requirements for qualifying as a regulated investment
company under the Internal Revenue Code, which is that gains realized on
securities held for less than three months must be limited to 30% of the Fund's
gross income.
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Warrants
- --------
The Fund may invest up to 5% of its assets in warrants. Such warrants
may be unlisted (over-the-counter) or listed on a national securities exchange.
Warrants convey no rights to dividends, ownership or voting rights but only an
option to purchase equity securities of the issuer at a fixed price for a fixed
period of time. If such securities appreciate, the warrants may be exercised or
sold at a gain, but a loss will be incurred if such securities decrease in value
or the term of the warrant expires before it is exercised. Thus, warrants are
considered speculative.
Defensive Investments
- ---------------------
The Fund may invest for defensive purposes in U.S. Government
securities, repurchase agreements collateralized by U.S. Government securities,
or high grade commercial paper.
Securities issued or guaranteed by the U.S. Government or its agencies
and instrumentalities in which the Fund may invest include U.S. Treasury
securities, which differ only in their interest rates, maturities and times of
issuance. Treasury bills have initial maturities of one year or less; Treasury
notes have initial maturities of one to ten years; and Treasury bonds generally
have initial maturities of more than ten years. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, for example,
Government National Mortgage Association ("GNMA") pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow money
from the Treasury; others, such as those issued by the Federal National Mortgage
Association, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. While the U.S. Government provides financial support
to U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so, since it is not so obligated by law. The Fund
will invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities only when Asset Management is satisfied that the credit risk
with respect to the issuer is minimal.
In a repurchase agreement, the Fund purchases securities and the seller
agrees to repurchase them from the Fund at a mutually agreed-upon time and
price. The period of maturity is usually overnight or a few days, although it
may extend over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed-upon rate of return effective for the
period of time the Fund's money is invested in the security. The Fund's
repurchase agreements will at all times be fully collateralized in an
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amount at least equal to [102%] of the purchase price, including accrued
interest earned on the underlying securities. The instruments held as collateral
are valued daily and, if the value of the instruments declines, the Fund will
require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss. If bankruptcy proceedings are commenced with respect to the seller,
realization upon the collateral by the Fund may be delayed or limited. The Fund
will only enter into repurchase agreements involving securities in which it
could otherwise invest and with selected financial institutions and brokers and
dealers which meet certain creditworthiness and other criteria.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Non-Liquid Assets
- -----------------
The Fund has authority to invest up to 5% of its net assets in
non-liquid assets. Investments in unseasoned issuers are subject to a greater
degree of risk than investment in seasoned issuers, because of the lack of
earnings or operating histories. The restrictions upon the disposition of
"restricted" securities may adversely affect their liquidity and marketability.
Non-liquid assets, if acquired, will be valued at fair value as determined in
good faith by the Board of Directors of the Fund, and the value of "restricted"
securities may be less than the market value of unrestricted securities of the
same type.
Foreign Securities
- ------------------
Investments will be made primarily in securities of companies domiciled
in the United States. Although the Fund has authority to make investments in
securities of issuers domiciled in any foreign country, the Fund currently
intends to exercise such authority only as to foreign issuers whose securities
are traded in the U.S. securities markets through dollar-denominated American
Depository Receipts ("ADRs"). ADRs are certificates issued by an American bank
to evidence ownership of original foreign shares. The original foreign stock
certificate is deposited with a foreign branch or correspondent bank of the
issuing American bank. ADRs are considered to be "sponsored" when the foreign
issuer has designated a single U.S. financial institution to act as the transfer
agent for that ADR. Unsponsored ADRs are organized independently and without the
cooperation of the foreign issuer of the underlying securities; as a result,
available information regarding the issuer may not be as current as for
sponsored ADRs, and the prices of unsponsored ADRs may be more volatile than if
they were sponsored by the issuers of the underlying securities.
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<PAGE>
The securities of foreign issuers involve risks that are different from
those of domestic issuers, including possibly different or adverse political and
economic developments, possible imposition of governmental restrictions and
possible curtailment of dividends or principal, subject to currency blockage, at
the source, and also involve such other considerations as the then current
exchange rate if such issuer does not pay interest or dividends, as the case may
be, in U.S. dollars. In addition, it may be more difficult to obtain and enforce
a judgment against a foreign issuer, there may be less publicly available
information about the foreign issuer and foreign issuers generally are not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to domestic issuers.
Not more than 10% in value of the Fund's investments may be made in the
securities of issuers domiciled in foreign countries.
Securities Options
- ------------------
The Fund has authority to engage in transactions in exchange listed
securities options, as such transactions are currently defined and may be
defined in the future, and not just the particular types of options transactions
which are described herein merely by way of example. Listed options are issued
by the Options Clearing Corporation (the "OCC"), which guarantees the
performance of the obligations of the parties to such options.
Among the reasons why the Fund may purchase a call option is to achieve
a greater amount of leverage than would otherwise be possible by buying the
underlying stock. This is so because only the amount of the "premium" need be
paid when purchasing a call, rather than the full purchase price for the
underlying stock. On the other hand, one reason why the Fund may engage in the
selling (or "writing") of call options is to earn the premium income. The risk
to the Fund in the purchase of calls is the loss of the premium paid if the
price of the security has not risen during the term of the option. The risk to
the Fund for writing calls is that the Fund could lose any price appreciation on
the securities upon which calls have been written when those calls are exercised
by the purchasers.
The Fund will only write "covered calls." This means that the Fund must
own the underlying security in order for the Fund to write the applicable
options contract, or must have the absolute right to acquire the underlying
security without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount are held in a
segregated account by the Fund's Custodian).
Another strategy involving options which the Fund may use is the
purchase of put options. The principal reason why the Fund may purchase puts
would be to reduce the risk in any investment position taken by the Fund in any
security. This strategy would allow the Fund
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<PAGE>
to continue holding a particular security for any anticipated further price
appreciation and at the same time would protect the Fund from any decline in the
value of the security. However, such a strategy would effectively increase the
cost of a security by the cost of the option and thereby reduce the return, if
any, on that security.
In addition to purchasing puts, the Fund also may write covered puts. A
put option is "covered" if the Fund holds cash or liquid high-grade debt
securities in a segregated account with its Custodian in an amount sufficient to
acquire the security, or holds a put option on the same security with the same
or a greater exercise price (or with a lesser price and with the balance
maintained as cash or liquid high grade debt securities). The principal reason
for the Fund to write a put would be to earn the premium income thereon. The
Fund has not written any puts since the inception of its authority to engage in
transactions in exchange listed securities options.
The Fund may also engage in options transactions in various
combinations, two of which are known as "spreads" and "straddles". A spread
involves the simultaneous buying and writing of the same type of option (whether
a put or a call) on the same underlying stock, with the options having different
exercise prices or different exercise dates, or both. A straddle involves the
simultaneous buying (or writing, as the case may be) of a put and a call on the
same underlying security, usually for different exercise prices. The risks of
straddle writing are greatest where the underlying stock has a high degree of
price volatility.
A separate and additional risk to the Fund with respect to engaging in
options transactions may be that the Fund will not be able to close out its
position in a particular option if and when the Fund desires to do so. The Fund
closes out an option which it has purchased by selling an option of the same
series as the option previously purchased, and closes out an option which it has
written by buying an option of the same series as the option previously written.
The Fund's ability to close out its position as a purchaser of an exchange
listed option would be dependent upon the existence of a liquid secondary market
on option exchanges (i.e., the CBOE, the American, Pacific and Philadelphia
Stock Exchanges). Among the possible reasons for the absence of a liquid
secondary market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities; (iv)
interruption of the normal operations of an exchange; (v) inadequacy of the
facilities of an exchange or the OCC to handle current trading volume; or (vi) a
decision by one or more of the exchanges to discontinue the trading of options,
in which event the secondary market on the exchange would cease to exist,
although outstanding options on that exchange that had been listed by the OCC
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<PAGE>
as a result of trades on that exchange would generally continue to be
exercisable in accordance with their terms.
Some of the strategies employed with options may be considered to be
speculative. One type of transaction which is inherently speculative is the
purchase of calls. With the purchase of a call, the Fund is considered to be "at
risk" for the amount of the premium paid for the call if the underlying security
does not rise above the "exercise" price during the life of the call.
Accordingly, the Fund will follow the practice of limiting the net "at risk"
amounts with respect to the purchase of puts or calls to 10% of the Fund's net
assets, determined on the date of purchase.
On the other hand, certain strategies involving options are deemed to
be conservative and may tend to minimize the risk of loss due to a decline in
the value of the underlying security position. At the same time, the use of
these strategies may also tend to limit any potential gain which might result
from an increase in the value of any such position. The ability of the Fund to
utilize this strategy successfully will depend upon Asset Management's ability
to forecast pertinent market movements, which cannot be assured.
Investment Limitations
- ----------------------
Except as described below, the Fund's policies are not fundamental
policies and may be changed at any time without shareholder vote.
The Fund has adopted the following limitations, which cannot be changed
without approval of the holders of a majority of its shares. The term "majority"
means 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. These limitations
provide that the Fund shall not:
1. Invest in companies for the purpose of exercising management or
control or invest more than 25% of its assets in a particular industry;
2. Purchase (i) the securities of any unseasoned issuer if by reason
thereof and immediately after making such purchase the value of the Fund's
aggregate investments in the securities of all such unseasoned issuers shall
equal or exceed 5% of the Fund's total assets (for this purpose an unseasoned
issuer shall be deemed to be an entity which has been in operation for less than
three years, including all predecessors), or the equity securities of any issuer
which are not readily marketable, (ii) repurchase agreements, the maturity of
which exceeds seven days, and the aggregate of which repurchase agreements
exceeds 5% of the Fund's total assets, or (iii) "restricted" securities, except
that the Fund may invest no more than 5% of the
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<PAGE>
value of its assets (at the time of investment) in portfolio securities under
circumstances in which the Fund might not be free to sell such securities
without being deemed an underwriter for purposes of the Securities Act of 1933
and without registration of such securities under such Act, in which case the
Fund might be obliged to pay all or part of the expenses of such registration;
3. Invest in commodities, commodity contracts or real estate, except
that the Fund may invest in securities of real estate trusts or companies;
4. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may purchase marketable securities of
any issuer engaged in oil, gas or other mineral exploration or development
programs;
5. Make loans, except by the purchase of bonds or other obligations of
types commonly sold privately to financial institutions (also see 2) (the
purchase of a portion of an issue of publicly distributed bonds, debentures or
other obligations is not considered the making of a loan);
6. Borrow money, except from banks in an amount which will not cause
the Fund's net assets (including the amount borrowed) to be less than 300% of
such borrowed amount;
7. Make short sales (but if securities, such as warrants or convertible
debentures, are being tendered for conversion, the Fund may sell the securities
to be acquired, provided that upon receipt such securities are used to close the
sale);
8. Purchase or retain securities of an issuer if the officers and
directors of the Fund or Asset Management owning individually more than 1/2 of
1% of the securities of such issuer together own more than 5% of the securities
of such issuer;
9. Purchase the securities of any other investment company, except as
part of a merger, consolidation or acquisition;
10. With respect to 50% of the value of its assets, invest more than 5%
of the value of its assets in any one issuer, excluding United States Government
securities, or purchase more than 10% of the outstanding securities of any one
issuer. With respect to the other 50% of the value of its assets, the Fund will
not invest more than 25% of its assets in the securities of any one issuer or
any two or more issuers which pursuant to regulations under the Internal Revenue
Code may be deemed to be controlled by the Fund and engaged in the same or
related trades or businesses; and
11. Write, purchase or sell puts, calls or combinations thereof (this
restriction does not refer to warrants), except for
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<PAGE>
puts, calls or combinations thereof listed on any national securities exchange.
Leverage
- --------
Although the Fund's custody agreement with its custodial bank provides
for the custodian bank to make periodic loans to the Fund on an "overdraft"
basis, no borrowings have been made thereunder in light of the existence of the
revolving credit agreement with the custodian bank. Interest on any borrowings
under the custody agreement would accrue at a rate equal to 1/2% over the
custodian bank's prime commercial lending rate.
To the extent that borrowed money is utilized and the amount borrowed
is substantial, the Fund's net asset value per share may tend to appreciate or
depreciate more rapidly than would otherwise be the case. This is the
speculative factor known as "leverage". Interest on borrowed money would be an
expense of the Fund which it would not otherwise incur, so that the Fund's net
investment income could expect to be adversely impacted during periods when the
Fund's borrowings are substantial.
The Fund may not pledge more than 75% of its assets as security for
money borrowed.
MANAGEMENT OF THE FUND
----------------------
Investment Advisor
- ------------------
Asset Management was organized in 1988 to act as investment adviser to
the Fund. Its sole client is the Fund. The amount of the advisory fee paid by
the Fund to Asset Management for the years ended June 30, 1993, 1994 and 1995
was $50,109, $87,235 and $82,466 respectively.
The Fund's investment advisory agreement with Asset Management provides
that Asset Management will not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
the agreement relates, except for losses resulting from willful misfeasance, bad
faith, or gross negligence in the performance of Asset Management's duties on
behalf of the Fund or from reckless disregard by Asset Management of its duties
under the agreement. The agreement provides that it will terminate in the event
of its assignment (as such term is defined in the Investment Company Act of
1940). The agreement may be terminated by the Board of Directors of the Fund or
vote of a majority of the outstanding voting securities of the Fund (as defined
in the 1940 Act) or Asset Management, upon 60 days' written notice, without
payment of any penalty. The agreement will continue in effect after March 15,
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<PAGE>
1998, only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act of 1940.
Sheldon E. Goldberg and Gregory A. Church own in equal proportions an
aggregate of 76% of the outstanding shares of Asset Management. They acquired
their ownership pursuant to a Stock Purchase Agreement dated as of November 10,
1995 with Mark D. Beckerman, the prior owner of all of the outstanding shares of
Asset Management. The Stock Purchase Agreement was consummated on March __,
1996, following Fund shareholder approval of the advisory agreement between
Asset Management and the Fund under Asset Management's new ownership structure.
Upon the consummation of the Stock Purchase Agreement, wherein Messrs. Goldberg
and Church acquired 100% of the outstanding shares of Asset Management from Mr.
Beckerman, Messrs. Goldberg and Church sold 24% of such shares to eight
individual investors. Messrs. Goldberg and Church have entered into a voting
agreement which requires them to vote jointly all shares of Asset Management
held by them.
In consideration for the transfer to Messrs. Goldberg and Church of
100% of the outstanding shares of Asset Management, Mr. Beckerman received a
five-year employment agreement with Asset Management, pursuant to which Mr.
Beckerman will continue to serve as the Portfolio Manager for the Fund. Under
the employment agreement, Asset Management will pay Mr. Beckerman annual
compensation equal to 0.75% of the first $15 million of average daily net assets
of the Fund. This amount may be proportionally reduced by the amount of any
reduction in the management fee received by Asset Management from the Fund as a
result of Asset Management's obligation to limit Fund expenses to 4% of average
daily net assets. In addition, Mr. Beckerman has an option entitling him to
acquire a 10% interest in each class of outstanding shares of Asset Management
during the fifth year of the employment agreement. Alternatively, Mr. Beckerman
may collect from Asset Management $150,000 in five equal installments beginning
on June 30, 2001. These amount are payable to Mr. Beckerman unless he is
terminated "for cause" or he voluntarily resigns as Portfolio Manager, and are
not obligations of the Fund.
Administrator
- -------------
The Administrator of the Fund is Investment Company Administration
Corporation, 4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018.
Pursuant to an administration agreement with the Fund, the
Administrator is responsible for performing all administrative services required
for the daily business operations of the Fund, subject to the supervision of the
Board of Directors of the Fund. The Administrator has no supervisory
responsibility over the investment operations of the Fund. The management or
administrative services of
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the Administrator for the Fund are not exclusive under the terms of the
administration agreement and the Administrator is free to, and does, render
management and administrative services to others.
In connection with its management of the corporate affairs of the Fund,
the Administrator pays the salaries and expenses of all its personnel and pays
all expenses incurred in connection with managing the ordinary course of the
business of the Fund, other than expenses assumed by the Fund as described
below.
Under the terms of the Administration Agreement, the Fund is
responsible for the payment of the following expenses: (a) the fees and expenses
incurred by the Fund in connection with the management of the investment and
reinvestment of its assets, (b) the fees and expenses of Directors and officers
of the Fund who are not affiliated with the Administrator, Asset Management or
the co-distributors, (c) out-of-pocket travel expenses for the officers and
Directors of the Fund and other expenses of Board of Director meetings, (d) the
fees and certain expenses of the Custodian, (e) the fees and expenses of the
Transfer and Dividend Disbursing Agent that relate to the maintenance of each
shareholder account, (f) the charges and expenses of the Fund's legal counsel
and independent accountants, (g) brokerage commissions and any issue or transfer
taxes chargeable to the Fund in connection with securities transactions, (h) all
taxes and corporate fees payable by the Fund to federal, state and other
governmental agencies, (i) the fees of any trade association of which the Fund
may be a member, (j) the cost of maintaining the Fund's existence, (k) taxes and
interest, (l) the cost of fidelity and liability insurance, (m) the fees and
expenses involved in registering and maintaining the registration of the Fund
and of its shares with the Commission and registering the Fund as a broker or
dealer and qualifying their shares under state securities laws, including the
preparation and printing of the Fund's registration statement, prospectuses and
statements of additional information, (n) allocable communication expenses with
respect to investor services and all expenses of shareholders' and Board of
Directors' meetings and of preparing, printing and mailing prospectuses and
reports to shareholders, (o) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the business of
the Fund, and (p) expenses assumed by the Fund pursuant to any plan of
distribution adopted in conformity with Rule 12b-1 under the Investment Company
Act.
The administration agreement provides that the Administrator will not
be liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which the administration agreement relates,
except a loss resulting from the Administrator's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties. The administration
agreement will terminate automatically if assigned, and may be terminated
without penalty by either the Administrator or the Fund (by the Board of
Directors of the
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Fund or vote of a majority of the outstanding voting securities of the Fund, as
defined in the Investment Company Act of 1940), upon 60 days' written notice.
The administration agreement will continue in effect only so long as such
continuance is specifically approved at least annually in conformity with the
Investment Company Act of 1940.
Directors and Officers of the Fund
- ----------------------------------
The following persons are directors and officers of the Fund:
*GREGORY A. CHURCH, President, Secretary and Director, 301 Oxford
Valley Road, Yardley, Pennsylvania 19067. President, Church Capital Management,
Inc. and G. A. Church & Company (registered investment advisers) since June
1987; Chairman, Bainbridge & Co. (registered broker-dealer) since October 1994.
R. BARRY BORDEN, Director, P.O. Box 677, Bala Cynwyd, PA. 19004.
President, LMA Group, Inc. (general management consulting) since April 1990.
KEVIN M. COVERT, Director, 76 Euclid Avenue, Haddonfield, New Jersey
08083. Shareholder, Kulzer & DiPadova, P.A. (law firm) since 1984.
DOMINICK A. CRUCIANI, JR., M.D., Director, 1360 Wyoming Avenue,
Scranton, Pa. 18503. Physician since 1958. A director of Cumberland Growth Fund,
Inc. from October 1989 to September 1992.
GERALD PRINTZ, Director, 4450 Hickory Ridge Road, Jackson, MS 39211.
President, AMSADOR, Ltd. (computer security and disaster recovery planning
consultant), since March 1994; consultant, IBM, 1988 to February 1994.
Attendance fees of $250 per meeting have been authorized for those
directors who are not "interested persons" (as such term is defined in the
Investment Company Act of 1940) of Asset Management, Cumberland or Bainbridge.
Set forth below is the compensation in tabular form of the individuals
who were directors of the Fund prior to March __, 1996.
- -------------
*Mr. Church is an "interested persons" of the Fund, as defined in the
Investment Company Act of 1940.
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<PAGE>
<TABLE>
COMPENSATION TABLE
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Total
Person, Compensation Retirement Annual Compensation
Position from Benefits Benefits from
Registrant Accrued as Upon Registrant
Part of Fund Retirement and Fund
Expenses Complex**
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert $ 750 0 0 $ 1,500
Gruber
(Director)
Andrew D. $ 750 0 0 $ 1,500
Sherman
(Director)
Myer M. $ 750 0 0 $ 1,500
Alperin
(Director)
Dominick A. $ 750 0 0 $ 1,500
Cruciani
(Director)
</TABLE>
- -------------------
** From June 1994 to February 1996, Asset Management acted as the investment
adviser for Progressive Portfolios Series ("PPS"), a registered investment
company. PPS was liquidated in February 1996.
CO-DISTRIBUTORS
---------------
Distribution Agreement
- ----------------------
Pursuant to their distribution agreements with the Fund, each of the
co-distributors has agreed to use its best efforts to effect sales of shares of
the Fund, but is not obligated to sell any specified number of shares. The
distribution agreement contains provisions with respect to renewal and
termination similar to those in the investment advisory agreement discussed
above. Pursuant to the distribution agreement, the Fund has agreed to indemnify
the co-distributors to the extent permitted by applicable law against certain
liabilities under the Securities Act of 1933.
- -----------------
** From June 1994 to February 1996, Asset Management acted as the investment
advisor for Progressive Portfolios Series ("PPS"), a registered investment
company. PPS was liquidated in February 1996.
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<PAGE>
Distribution Plan
- -----------------
Under a Distribution Plan for the Fund adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 and the distribution agreements, each
co-distributor incurs the expense of distributing shares of the Fund. The
Distribution Plan provides for compensation to each of the co-distributors for
the services it provides, and the costs and expenses it incurs, related to
marketing shares of the Fund. The co-distributor is paid for: (a) expenses
incurred in connection with advertising and marketing shares of the Fund,
including but not limited to any advertising by radio, television, newspapers,
magazines, brochures, sales literature, telemarketing or direct mail
solicitations; (b) periodic payments of fees or commissions for distribution
assistance made to one or more securities brokers, dealers or other industry
professionals such as investment advisers, accountants, estate planning firms
and the co-distributor itself in respect of the average daily value of shares
owned by clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Fund's prospectuses and statements of
additional information.
Brokerage
- ---------
The aggregate brokerage commissions paid by the Fund during the fiscal
years ended June 30, 1993, 1994 and 1995 were $26,476, $ 45,780 and $ 22,640,
respectively, of which $25,332 (95.68%), $ 44,432 (97.06%) and $22,292 (98.46%),
respectively, was paid to firms which provided research or other services to
Asset Management.
Rule 17e-1 under the 1940 Act provides that a commission, fee or other
remuneration does not exceed the usual and customary broker's commission if it
is "reasonable and fair compared to the commission, fee or other remuneration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time...." Rule 17e-1 also requires the Board of Directors
of the Fund, including a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund, of Asset Management, of
Cumberland or of Bainbridge, to adopt procedures reasonably designed to provide
that the commissions paid are consistent with the above standard, to assure that
the procedures continue to be appropriate, and to determine at least quarterly
that the transactions have been effected in compliance with those procedures.
During the fiscal year ended June 30, 1995, gross commissions aggregating $5,617
were paid to Beckerman and Company, Inc., a broker-dealer which previously was
an affiliated entity of the Fund; these transactions represented 24.81% of the
aggregate dollar amount of the Fund's commission transactions for such year.
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<PAGE>
With respect to purchase orders for Fund shares which are paid for by
check, if the check is not honored upon presentment, the purchase order is
subject to cancellation, and the purchaser's account with the Fund immediately
is charged for any loss incurred. In the event the shareholder's account balance
is insufficient to cover the loss, Cumberland or Bainbridge is required
immediately to reimburse the Fund for the difference; conversely, if the
cancellation results in a gain, Cumberland or Bainbridge will be entitled to
such gain, as they shall determine.
SPECIAL ACCOUNTS
----------------
Automatic Accumulation Plan
- ---------------------------
The Automatic Accumulation Plan is a convenient method for purchasing
shares ($1,000 minimum and $100 each subsequent investment) on a regular basis
without the need to write and mail a check each time. Upon completion of the
form which pertains to the Automatic Accumulation Plan, the investor designates
Cumberland or Bainbridge, through their agent, American Data Systems, Inc., by
pre-authorized checks, to charge the regular bank account of the shareholder on
a specific date in each month or quarter to provide automatic additions at net
asset value to the account of such shareholder. The Automatic Accumulation Plan
may be changed or cancelled at any time upon receipt by the Fund's transfer
agent of written instructions or an amended application from the shareholder,
with signatures guaranteed. It will be terminated automatically whenever a check
is returned as being uncollected for any reason.
Self-Employed Retirement Plan ("Keogh")
Individual Retirement Accounts ("IRA")
Tax Sheltered Retirement Plan ("403(b)")
- ----------------------------------------
For those self-employed individuals who wish to purchase shares of the
Fund in connection with a retirement plan, the Fund has available a prototype
Retirement Plan and Custodial Agreement. Alternatively, self-employed
individuals may establish their own retirement plan and invest in shares of the
Fund. Fund shares may also be purchased through an Individual Retirement Account
("IRA") established under the Employee Retirement Income Security Act of 1974
("ERISA"). ERISA also permits employees of public school systems and employees
of certain other charitable organizations to enter into tax sheltered plans in
accordance with Section 403(b) of the Internal Revenue Code. Share purchases
under retirement plans, IRA accounts and 403(b) accounts are made at net asset
value per share. Star Bank serves as the custodian under such retirement plans.
Accumulated contributions in existing retirement plans may be transferred to the
Fund's retirement plans with the necessary letters of transmittal. The minimum
initial investment for all Fund retirement programs is $1,000 and $100 for
subsequent investments. Except for "roll-overs",
B-16
<PAGE>
payment must accompany the establishment of the plan and the purchase of Fund
shares thereunder. All share redemptions under these plans will be made at net
asset value. For further information concerning the Fund's retirement plans,
including the fees of the custodian, write or telephone the Fund.
Because adoption of these retirement plans may involve important tax
considerations or consequences, including the imposition of a tax penalty for
early withdrawals, consultation with an attorney or qualified tax adviser
regarding the retirement plan is recommended.
Automatic Cash Withdrawal Plan
- ------------------------------
An Automatic Cash Withdrawal Plan (the "Withdrawal Plan") is available
to any investor who purchases a minimum of $10,000 of Fund shares or who has
acquired Fund shares which have attained a total net asset value of $10,000.
Upon adoption of the Withdrawal Plan and surrender of the investor's stock
certificates, if any, an account will be set up and maintained in the investor's
name. American Data Systems, Inc. will liquidate a sufficient number of shares
on the 26th calendar day of the month preceding such monthly or quarterly
distribution to provide for periodic payments to the investor of $25 or any
multiple of $5 above that amount. If the 26th calendar day is not a business
day, the shares will be liquidated on the next business day. The plan will be
continued until the investor's shares have been fully liquidated, either the
Fund or American Data Systems, Inc. gives written notice of termination, or the
investor requests that the plan be terminated. The investor may request at any
time that payments be changed from monthly to quarterly, or from quarterly to
monthly, or have payments increased or decreased to $25 or any multiple of $5
above that amount. The investor also may request that a specified amount be
liquidated or that the Withdrawal Plan be terminated and the remaining shares be
delivered to the investor.
All dividends and distributions declared on shares held in the
Withdrawal Plan account are reinvested at net asset value, and additional shares
so acquired are added to the share balance in the account. To the extent that
withdrawals exceed income, such excess represents a return of principal.
TAXES
-----
The Fund intends to comply with Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), if it is in the best interests of Fund
shareholders to do so, which relieves complying investment companies which
distribute substantially all of their net income of Federal income tax on the
amount distributed. For its taxable year ended June 30, 1995, the Fund qualified
for treatment as a regulated investment company under Subchapter M.
B-17
<PAGE>
As a regulated investment company, the Fund will not be liable for
federal income tax on its income and gains provided it distributes all of its
income and gains currently. Qualification as a regulated investment company
under the Code requires, among other things, that the Fund (a) derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
foreign currencies, or other income (including, but not limited to, gains from
options), derived with respect to its business of investing in such securities;
(b) derive less than 30% of its gross income from the sale or other disposition
of stock, securities, options, and certain other investments held less than
three months; (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. Government securities and securities of other
regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the Fund's assets and 10% of the
outstanding voting securities of such issuer) and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government or foreign government securities or the securities of other
regulated investment companies), or two or more issuers which the Fund controls
and which are determined to be engaged in the same or similar trades or
businesses; and (d) distribute at least 90% of its investment company taxable
income (which includes dividends, interest, and net short-term capital gains in
excess of net long-term capital losses each taxable year).
The Fund generally will be subject to a nondeductible excise tax of 4%
to the extent that it does not meet certain minimum distribution requirements as
of the end of each calendar year. To avoid the tax, the Fund must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income and net capital gain (not taking into account any capital gains
or losses as an exception) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (and adjusted for certain ordinary
losses) for the twelve month period ending on October 31 of the calendar year,
and (3) all ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year if it is declared by the Fund in October,
November, or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders (other than those not subject to
federal income tax) in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Dividends paid by the Fund from ordinary income, and distributions of
the Fund's net realized short-term capital gains, are taxable to its
shareholders as ordinary income. Distributions to
B-18
<PAGE>
corporate shareholders will be eligible for the 70% dividends received deduction
to the extent that the income of the Fund is derived from dividends on common or
preferred stock of domestic corporations. Dividend income earned by the Fund
will be eligible for the dividends received deduction only if the Fund has
satisfied a 46-day holding period requirement with respect to the underlying
portfolio security (91 days in the case of dividends derived from preferred
stock). In addition, a corporate shareholder must have held its shares in the
Fund for not less than 46 days (91 days in the case of dividends derived from
preferred stock) in order to claim the dividend received deduction. Not later
than 60 days after the end of its taxable year, the Fund will send to its
shareholders a written notice designating the amount of any distributions made
during such year which may be taken into account by its shareholders for
purposes of such deduction provisions of the Code. Net capital gain
distributions are not eligible for the dividends received deduction.
Under the Code, any distributions designated as being made from net
capital gains are taxable to the Fund's shareholders as long-term capital gains,
regardless of the holding period of such shareholders. Such distributions of net
capital gains will be designated by the Fund as a capital gains distribution in
a written notice to its shareholders which accompanies the distribution payment.
Any loss on the sale of shares held for less than six months will be treated as
a long-term capital loss for federal tax purposes to the extent a shareholder
receives net capital gain distributions on such shares. The maximum federal
income tax rate applicable to long-term capital gains is currently 28% for
individual shareholders and 35% for corporate shareholders. Dividends and
distributions are taxable as such whether received in cash or reinvested in
additional shares of a Portfolio.
Any loss realized on a sale, redemption or exchange of shares of the
Fund by a shareholder will be disallowed to the extent the shares are replaced
within a 61-day period (beginning 30 days before the disposition of shares).
Shares purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
Special Tax Considerations
- --------------------------
The options contracts used by the Fund are "section 1256 contracts."
Any gains or losses on section 1256 contracts are generally credited 60%
long-term and 40% short-term capital gains or losses ("60/40") although gains
and losses from hedging transactions may be treated as ordinary in character.
Also, section 1256 contracts held by the Fund at the end of each taxable year
(and, for purposes of the 4% excise tax, on certain other dates as prescribed
under the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss, depending on the circumstances.
B-19
<PAGE>
Generally, the hedging transactions and certain other transactions in
options undertaken by the Fund may result in "straddles" for U.S. federal income
tax purposes. The straddle rules may affect the character of gains (or losses)
realized by the Fund. In addition, losses realized by the Fund on positions that
are part of a straddle may be deferred under the straddle rules, rather than
being taken into account in calculating the taxable income for the taxable year
in which such losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences of transactions
in options, futures and forward contracts to the Portfolio are not entirely
clear. The transactions may increase the amount of short-term capital gain
realized by the Portfolio which is taxed as ordinary income when distributed to
shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because applications of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to the shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.
The 30% limit on gains from the disposition of certain options
contracts held less than three months and the qualifying income and
diversification requirements applicable to the Funds' assets may limit the
extent to which the Fund will be able to engage in option transactions.
The Fund may be required to withhold for U.S. federal income taxes 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal tax liability.
The Fund may also be subject to state or local taxes in certain other
states where it is deemed to be doing business. Further, in those states which
have income tax laws, the tax treatment
B-20
<PAGE>
of the Fund and of the shareholders of the Fund with respect to distributions by
the Fund may differ from federal tax treatment. Distributions to shareholders
may be subject to additional state and local taxes. Shareholders should consult
their own tax advisers regarding specific questions as to federal, state or
local taxes.
PERFORMANCE INFORMATION
-----------------------
The Fund may from time to time advertise total return, compare Fund
performance to various indices, and publish rankings of the Fund prepared by
various ranking services. Any performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the its portfolio, and the market conditions during the given time
period, and should not be considered to be representative of what may be
achieved in the future.
Total Return
- ------------
The total return for the Fund is computed by assuming a hypothetical
initial payment of $1,000. It is assumed that all investments are made at net
asset value and that all of the dividends and distributions by the Fund over the
relevant time periods are invested at net asset value. It is then assumed that,
at the end of each period, the entire amount is redeemed without regard to any
redemption fees or costs. The average annual total return is then determined by
calculating the annual rate required for the initial payment to grow to the
amount which would have been received upon redemption. Total return does not
take into account any federal or state income taxes.
Total return is computed according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = Average annual total return.
n = Number of years.
ERV = ending redeemable value at the end
of the period (or fractional portion
thereof) of a hypothetical $1,000
payment made at the beginning of the
period.
Total returns for the Fund for the periods indicated are set forth
below: one year ended December 31, 1995 - 25.28%; five year ended December 31,
1995 - 15.70%; Inception to December 31, 1995 - 13.54%
Comparison to Indices and Rankings
- ----------------------------------
B-21
<PAGE>
Performance information for the Fund may be compared to various
unmanaged indices, such as the Standard & Poor's 500 Stock Price Index, the Dow
Jones Industrial Average, and indices prepared by Lipper Analytical Services.
Unmanaged indices generally do not reflect deductions for administrative and
management costs and expenses.
Performance rankings are prepared by a number of mutual fund ranking
entities that are independent of the Fund and its affiliates. These entities
categorize and rank funds by various criteria, including fund type, performance
over a given period of years, total return, standardized yield, variations in
sales charges and risk/reward considerations.
B-22
<PAGE>
INVESTMENT ADVISER TRANSFER AGENT
MDB Asset Management Corporation American Data Systems, Inc.
301 Oxford Valley Road 24 West Carver Street, 2nd Floor
Yardley, Pennsylvania 19067 Huntington, New York 11743
1-800-637-3901
CO-DISTRIBUTORS
Cumberland Brokerage Corporation Bainbridge & Company
614 Landis Avenue 301 Oxford Valley Road
Vineland, New Jersey 08360 Yardley, Pennsylvania 19067
CUSTODIAN AUDITORS
Star Bank McGladrey & Pullen, LLP
Post Office Box 1118 555 Fifth Avenue
Cincinnati, Ohio 45201 New York, New York 10017
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
SUMMARY...................................................................
INVESTMENT OBJECTIVE AND POLICIES.........................................
Warrants.........................................................
Defensive Investments............................................
Non-Liquid Assets................................................
Foreign Securities...............................................
Securities Options...............................................
Investment Limitations...........................................
Leverage.........................................................
MANAGEMENT OF THE FUND....................................................
Investment Advisor...............................................
Administrator....................................................
Directors and Officers of the Fund...............................
CO-DISTRIBUTORS...........................................................
Distribution Agreement...........................................
Distribution Plan................................................
Brokerage........................................................
SPECIAL ACCOUNTS..........................................................
Automatic Accumulation Plan......................................
Self-Employed Retirement Plan ...................................
Tax Sheltered Retirement Plan ("403(b)").........................
B-23
<PAGE>
TAXES.....................................................................
Special Tax Considerations.......................................
PERFORMANCE INFORMATION...................................................
Total Return.....................................................
Comparison to Indices and Rankings...............................
-------------------------------------------------------------------------------
No dealer, salesman, or other person has been authorized to give any
information or to make any representations other than those contained in the
Prospectus in connection with the offer contained in the Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund. The Prospectus does not constitute an
offering in any state or jurisdiction in which such offering may not lawfully be
made.
-Back Cover-
B-24
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Included in the Prospectus:
Accountants' Report (a).
Statement of Assets and Liabilities as at June
30, 1995 (a).
Statement of Operations for the year ended June 30,
1995 (a)
Statement of Changes in Net Assets for the year
ended June 30, 1995 (a).
Statement of Portfolio of Investments in
Securities as at June 30, 1995 (a).
Notes to Financial Statements (a).
Included in Part C of the Registration Statement:
Consent of Independent Certified Public Accountants.
(b) Exhibits:
(1) (a) Copies of the charter (b).
(b) Form of Amendment to the Charter dated March 15,
1996 (c).
(2) Copies of the existing By-Laws or instruments
corresponding thereto (b);
(4) Specimens or copies of each security
issued by the Registrant, including
copies of all constituent instruments,
defining the rights of the holders of
such securities, and copies of each
security being registered (b);
(5) Form of Investment Advisory Agreement relating
to the management of the assets of the
Registrant (c);
(6) Form of Distribution Agreement between the
Registrant and Cumberland Brokerage Corporation
and Bainbridge & Company, Inc., the
co-distributors;
C-1
<PAGE>
(8) Form of Custody Agreement between the Registrant
and Star Bank;
(9) (a) Form of Administration Agreement between the
Registrant and Investment Company
Administration Corporation;
(b) Form of Transfer Agency and Service
Agreement between the Registrant and
American Data Services, Inc.;
(c) Form of Fund Accounting Service Agreement
between the Registrant and American Data
Services, Inc.
(10) An opinion and consent of counsel as to the
legality of the securities being registered,
indicating whether they will when sold be
legally issued, fully paid and non-assessable
(d);
(11) Consent of Independent Accountants;
(15) Form of Distribution Plan (c);
(16) Schedule of Performance Computations.
- -------------
(a) Incorporated in Part B by reference to Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1995.
(b) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-l, filed October 7, 1980.
(c) Incorporated by reference to the Registrant's Notice and Proxy Statement
dated January 15, 1996.
(d) Incorporated by reference to Pre-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, filed November 12, 1991.
C-2
<PAGE>
Item 25. Persons Controlled by or Under Common Control With
Registrant
--------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
(1) (2)
Number of Record
Title of Class Holders
-------------- ----------------
Common Stock (3,801 as at December 29, 1995)
Item 27. Indemnification
---------------
Article Five of Registrant's By-Laws provides as follows:
(a) 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 against expenses
(including attorney's fees), judgments, 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 as determined by independent legal
counsel 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.
(b) For purposes of subparagraph (a) hereof, the termination of
any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, or itself, create a
presumption that any person did not act in good faith as
determined by independent legal counsel 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 c~n~l~ct was unlawful.
(c) 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 judgment in its
favor by reason of the fact that he is or was a director or
officer of the Corporation against expenses (including
attorney's fees) actually and reasonably incurred by him in
connection with
C-3
<PAGE>
the defense or settlement of such action or suit if he
acted in good faith as determined by independent legal
counsel and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation.
(d) No person shall be indemnified under subparagraph (c)
hereof in respect to 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 the
court of law 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 said court shall deem
proper, provided such director or officer is not found to
be grossly negligent in the performance of his duty to the
Corporation and/or adjudged to be liable by reason of his
willful misconduct.
(e) Any indemnification under subparagraphs (a) or (c) hereof
(unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director or
officer is proper in the circumstances because such
determination is based upon an opinion of independent legal
counsel.
(f) Expenses incurred in defending 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
manner provided in subparagraph (e) upon receipt of a bond
provided by and on behalf of the director or officer, to
repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation
hereunder.
(g) The indemnification provided hereunder shall not be deemed
exclusive of any other rights to which those who are
required to be, or who may be, indemnified hereunder might
be entitled under any other provisions hereof, agreement,
vote of stockholders or vote of disinterested directors or
otherwise, 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 of officer, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(h) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of
the Corporation against any liability asserted against him
and incurred by him in any such capacity arising out of his
status as such. However, in no event will the Corporation
C-4
<PAGE>
purchase insurance to indemnify any such person for any act
which the Corporation itself is not permitted to indemnify
him.
(i) Nothing herein contained shall protect or purport to
protect any director or officer of the Corporation against
any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved; in the conduct of his
office.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
During the two fiscal years ended June 30, 1995, the Fund's investment
adviser, MDB Asset Management Corporation, has engaged principally in the
business of providing investment advisory services to registered investment
companies. All of the additional information required by this Item 28 with
respect to MDB Asset Management Corporation is set forth in the Form ADV, as
amended, of MDB Asset Management Corporation (File No. 801-32050), which is
incorporated herein by reference.
Item 29. Principal Underwriters
----------------------
(a) Neither Cumberland Brokerage Corporation nor Bainbridge & Company
acts as principal underwriter, depositor or investment adviser to any other
investment company.
(b) The following information is provided with respect to each
director, officer or partner of Cumberland Brokerage Corporation and Bainbridge
& Company:
(1) (2) (3)
Name and Principal Positions and Offices Position of Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- -------------------
Gregory A. Church Director and Chairman Director and
Bainbridge & Co. President
301 Oxford Valley Rd.
Yardley, PA. 19057
Maureen A. Church Director None
Bainbridge & Co.
Melinda P. Berardino Director, Chief None
Bainbridge & Co. Executive Officer,
Chief Financial Officer
C-5
<PAGE>
Sheldon E. Goldberg Director and President None
Cumberland Brokerage Corp.
614 Landis Ave.
Vineland, NJ. 08360
Ellyn H. Bruce Executive Vice President None
Cumberland Brokerage Corp.
Robert B. Solms Vice President None
Cumberland Brokerage Corp.
Antonia A. Alperin Secretary None
Cumberland Brokerage Corp.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
the Fund by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1
to 31a-3 promulgated thereunder, are maintained at the following locations:
Matterhorn Growth Fund, Inc., 301 Oxford Valley Road, Yardley, Pennsylvania
19067, and 95 Briar Road, Nanuet, New York 10954; Investment Company
Administration Corporation, 2025 East Financial Way, Suite 101, Glendora,
California 91740; and American Data Systems, Inc., 24 West Carver Street,
Huntington, New York 11743.
Item 31. Management Services
-------------------
Not Applicable
Item 32. Undertakings
------------
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest Annual Report to
Shareholders, upon request and without charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 17 to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of New York,
and State of New York, on the 27th day of December 1995.
THE 44 WALL STREET EQUITY FUND, INC.
By: s/Mark D. Berkerman
---------------------------------
(Mark D. Beckerman, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 17 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------------------- ------------------ -----------------
s/Mark D. Berkman
- ---------------------
(Mark D. Beckerman) President, Treasurer and December 27, 1995
Director (Principal
Executive Officer and
Principal Financial
Accounting Officer)
s/Albert Gruber
- ---------------------
(Albert Gruber) Director December 27, 1995
s/Andrew D. Sherman
- ---------------------
(Andrew D. Sherman) Director December 27, 1995
- ---------------------
(Myer M. Alperin) Director December , 1995
- ---------------------
(Dominick A. Cruciani) Director December , 1995
C-7
<PAGE>
EXHIBIT INDEX
MATTERHORN GROWTH FUND, INC.
POST-EFFECTIVE AMENDMENT NO. 17
(1) (a) Copies of the charter (b);
(b) Form of Amendment to the Charter dated March 15,
1996 (c);
(2) Copies of the existing By-Laws or instruments
corresponding thereto (b);
(4) Specimens or copies of each security
issued by the Registrant, including
copies of all constituent instruments,
defining the rights of the holders of
such securities, and copies of each
security being registered (b);
(5) Form of Investment Advisory Agreement relating to
the management of the assets of the Registrant
(c);
(6) Form of Distribution Agreement between the
Registrant and Cumberland Brokerage Corporation
and Bainbridge & Company, Inc., the
co-distributors;
(8) Form of Custody Agreement between the Registrant
and Star Bank;
(9) (a) Form of Administration Agreement between the
Registrant and Investment Company
Administration Corporation;
(b) Form of Transfer Agency Agreement between
the Registrant and American Data Services,
Inc.;
(c) Form of Ford Accounting Agreement between
the Registrant and American Data Services,
Inc.
(10) An opinion and consent of counsel as
to the legality of the securities
being registered, indicating whether
they will when sold be legally issued,
fully paid and non-assessable (d);
(11) Consent of Independent Accountants;
(15) Form of Distribution Plan (c);
(16) Schedule of Performance Computations.
C-8
<PAGE>
- -------------
(a) Incorporated in Part B by reference to Registrant's Annual Report to
Shareholders for the fiscal year ended June 30, 1995.
(b) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-l, filed October 7, 1980.
(c) Incorporated by reference to the Registrant's Notice and Proxy Statement
dated January 15, 1996.
(d) Incorporated by reference to Pre-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, filed November 12, 1991.
C-9
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT, made as of March 15, 1995 between THE MATTERHORN GROWTH
FUND, INC., a Maryland corporation (the "Fund"), and CUMBERLAND BROKERAGE
CORPORATION (the "Distributor")
WHEREAS, the Fund is an open-end, non-diversified, management type
investment company registered as such under the Investment Company Act of 1940
(the "1940 Act");
WHEREAS, Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act"); and
WHEREAS, the Fund desires to retain Distributor as its co- distributor
to provide for the sale and distribution of the shares of the Fund's Common
Stock ("Shares"), and Distributor is willing to furnish such services;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, it is agreed between the Fund and Distributor as follows:
1. Appointment. The Fund hereby appoints Distributor as the
co-distributor of Fund Shares which may from time to time be registered under
the Securities Act of 1933 (the "1933 Act") for the period and on the terms set
forth in this Agreement. Distributor hereby accepts such appointment and agrees
to render the services herein set forth.
2. Duties as Distributor. Except as otherwise provided herein, the Fund
agrees to sell Shares (whether authorized but unissued or treasury shares, in
the Fund's sole discretion) through Distributor, as the Fund's agent, and to
deliver Shares which Distributor orders from the Fund and for which Distributor
has received and confirmed unconditional purchase orders, subject to the
following:
(a) Distributor may sell and distribute Shares in such manner not
inconsistent with the provisions hereof as Distributor may determine from time
to time; provided, however, that Distributor shall comply with all laws, rules
and regulations applicable to it, including, without limitation, all applicable
rules or regulations under the 1940 Act and of any securities association
registered under the 1934 Act.
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(b) All sales literature and advertisements used by Distributor in
connection with the sale of the Fund's Shares shall be subject to the approval
of the Fund.
(c) All purchase orders from Distributor shall be subject to acceptance
and confirmation by the Fund; provided, however, that no Shares shall be sold
through Distributor or by the Fund under this Agreement and no purchase orders
shall be confirmed or accepted by the Fund if and so long as the Fund's
Registration Statement shall not be effective under the 1933 Act.
(d) The Fund's Board of Directors or, upon authority from the Board,
the Fund's officers, at any time such action is deemed advisable, may suspend or
terminate sales of Fund Shares, give Distributor notice of such suspension or
termination, and decline to accept or confirm any purchase orders for or make
any sales of Shares under this Agreement until such time as may be deemed
advisable.
(e) The Fund may from time to time set upper and lower limits on the
number of Shares for which a purchaser may subscribe and may limit sales of
Shares to then existing stockholders.
(f) Distributor may from time to time, at its own expense, employ or
associate with itself such persons or entities as it believes necessary to
assist it in carrying out its obligation sunder this Agreement.
3. Offering Price. All Shares offered for sale and sold by Distributor
shall be offered for sale and sold by Distributor at an amount equal to the net
asset value per share next determined after the receipt by the Fund's transfer
agent, by Distributor, or by any dealer with whom Distributor has entered into a
selling agreement, of a purchase order for Shares, without any sales charge.
The Fund shall determine and promptly furnish to Distributor a
statement of the offering price at such times and with such frequency as the
Board of Directors of the Fund from time to time shall specify. Each offering
price shall become effective at that time and shall remain in effect during the
period specified in the statement.
Purchases of Shares shall be made for full and fractional Shares.
4. Certificates for Shares. If certificates for shares are requested by
the purchaser, they shall be delivered as promptly as practicable. Ownership of
Shares sold hereunder shall be registered in such names and denominations as are
specified in writing to the Fund or to its agent designated for the purpose.
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5. Expenses; Compensation. During the term of this Agreement,
Distributor shall bear the expenses incurred in connection with (i) the
qualification of Distributor as dealer or broker under Federal or state laws,
(ii) the prospectuses delivered by it, other than to stockholders of the Fund,
and (iii) all sales and promotional literature and advertising used by
Distributor in connection with the offering of Shares for sale to the public.
The Fund shall pay all of its expenses, including those incurred in
connection with (i) the preparation, printing and distribution to stockholders
of the Fund's prospectus and reports and other communications to stockholders,
(ii) registration of its Shares under the 1933 Act, (iii) qualification of its
Shares in those jurisdictions designated by Distributor, (iv) qualification of
the Fund as a broker or dealer under the laws of any jurisdiction designated by
Distributor, if Distributor determines that such qualification is necessary or
desirable to facilitate the sales of Fund Shares, (v) maintaining facilities by
the Fund under this Agreement, and (vii) any taxes applicable to the sale or
delivery of Shares or certificates therefor.
6. Indemnification. The Fund agrees to indemnify and hold harmless
Distributor and each officer and director of Distributor and each person who
controls Distributor within the meaning of Section 15 of the 1933 Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the 1933 Act, under the 1940
Act, under any other statute, at common law or otherwise, and to reimburse the
Distributor and such officers, directors and other persons for any legal or
other expenses (including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection with investigating or
defending any such losses, claims, damages or liabilities arising out of, or
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement covering the Shares filed under the 1933
Act or the prospectus contained therein, or 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; provided, however, that such indemnity
shall not apply to any such losses, claims, damages or liabilities arising out
of, or based upon, any such untrue statement or alleged untrue statement or
omission or alleged omission which was made in reliance upon information
furnished in writing to the Fund by or on behalf of Distributor for inclusion in
the Registration Statement or the prospectus. Nothing herein contained shall,
however, be deemed to protect or purport to protect Distributor against any
liability to the Fund or its stockholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the reckless disregard by
Distributor of its obligations and duties under this Agreement.
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(b) Distributor agrees to indemnify and hold harmless the Fund, its
directors and officers and each person who controls the Fund within the meaning
of Section 15 of the 1933 Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the 1933 Act, the 1940 Act, or under any other statute, at
common law or otherwise, and to reimburse the Fund, its directors, officers and
each such controlling person for any legal or other expenses (including the cost
of any investigation and preparation) reasonably incurred by them or any of them
in connection with investigating or defending against any such losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
prospectus or 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, which statement or omission was made in reliance upon information
furnished in writing to the Fund by or on behalf of Distributor for inclusion in
the Registration Statement or the prospectus.
7. Duration and Termination. (a) This Agreement shall become effective
and the term hereof shall commence as of the date hereof. Unless sooner
terminated as provided herein, or otherwise by law, this Agreement shall
continue in force until the date of the next annual meeting of shareholders of
the Fund or until the second anniversary of the execution hereof, whichever is
sooner, and from year to year thereafter, but only so long as such continuance
is specifically approved at least annually by the Board of Directors of the
Fund, including a majority of the Fund's directors who are not interested
persons (as defined in the 1940 Act) of Distributor, or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of the Fund and a
majority of those directors who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of Distributor.
(b) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
(c) This Agreement may be terminated by either party at any time,
without the payment of any penalty, upon sixty days written notice to the other
party, except that the Fund may terminate this Agreement under this Section 7(c)
only if such termination is authorized by resolution of its Board of Directors
or by vote of a majority of its outstanding voting securities (as defined in the
1940 Act).
(d) The indemnification provisions contained in Section 6 above shall
remain operative and in full force and effect regardless of any termination
hereof, it being understood, however, that such
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provisions only apply to acts and events which occur while this agreement is in
effect.
8. Providing of Information. (a) With respect to the services rendered
hereunder by it in connection with the offering or sale of Shares, Distributor
agrees to supply to the Fund such information as it may possess and as the Fund
may require in order to meet the reporting or registration requirements of the
Securities and Exchange Commission (the "Commission") and any other governmental
agency or body.
(b) The Fund agrees to supply Distributor with copies of all documents
and instruments filed with the Commission. The Fund hereby authorizes
Distributor and its agents and registered representatives and any registered
dealer entering into a selling agreement with Distributor to use the prospectus
in connection with the distribution and sale of Shares.
9. Governing Law. This Agreement shall be governed by the laws of the
State of New York and may be executed in several counterparts, each of which
shall be deemed an original against any person by whom it is manually signed,
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE MATTERHORN GROWTH FUND, INC.
By
-----------------------------------
CUMBERLAND BROKERAGE CORPORATION
By
-----------------------------------
President
5
EXHIBIT 8
CUSTODY AGREEMENT
Agreement made as of the ______ day of ___________, 1996, between
Matterhorn Growth Fund, Inc. (the "Fund"), a Maryland Corporation and having its
office at _______________________ acting for and on behalf of all mutual fund
portfolios as are currently authorized and issued by the Trust or may be
authorized and issued by the Trust subsequent to the date of this Agreement (the
"Fund"), which is operated and maintained by the Trust for the benefit of the
holders of shares of the Fund, and Star Bank, N.A. (the "Custodian"), a national
banking association having its principal office and place of business at Star
Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202, which Agreement provides
for the furnishing of custodian services to the Funds.
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth the
Trust, on behalf of the Funds, and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to include the President,
Secretary, and the Vice President, or any other person, whether or
not any such person is an officer or employee of the Trust, duly
authorized by the Board of Trustees of the Trust to give Oral
Instructions on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time, subject in each case to
any limitations on the authority of such person as set forth in
Appendix A or any such Certificate.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities,
its successor or successors and its nominee or nominees, provided the
Custodian has received a certified copy of a resolution of Board of
Trustees of the Trust specifically approving deposits in the
Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to
the Custodian which is signed on behalf of the Fund by an Officer of
the Trust and is actually received by the Custodian.
4. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange
Commission, its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
or clearing agency authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and its
nominee or nominees, provided that the Custodian has received a
certified copy of a resolution of the Board of Trustees of the Trust
specifically approving such other person or clearing agency as a
depository.
5. "Dividend and Transfer Agent" shall mean the dividend and transfer
agent active, from time to time, in such capacity pursuant to a
written agreement with the Fund, changes in which the Trust shall
immediately report to the Custodian in writing.
6. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to principal
and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including
certificates of deposit, bankers' acceptances, repurchase and reverse
repurchase agreements with respect to the same) and bank time
deposits of domestic banks that are members of Federal Deposit
Insurance Trust, and short-term corporate obligations where the
purchase and sale of such securities normally require settlement in
federal fund or their equivalent on the same day as such purchase or
sale.
7. "Officers" shall be deemed to include the President, the Secretary,
and Vice President of the Trust listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by
the Custodian from time to time.
8. "Oral Instructions" shall mean oral instructions actually received by
the Custodian from an Authorized Person (or from a person which the
Custodian reasonably believes in good faith to be an Authorized
Person) and confirmed by Written Instructions from Authorized Persons
in such manner so that such Written Instructions are received by the
Custodian on or before the next business day.
9. "Prospectus" or "Prospectuses" shall mean the Fund's currently
effective prospectus and statements of additional information, as
filed with and declared effective by the Securities and Exchange
Commission.
10. "Security or Securities" shall mean Money Market Securities, common
or preferred stocks, options, futures, gold, silver, bonds,
debentures, corporate debt securities, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
11. "Written Instructions" shall mean communication actually received by
the Custodian from one Authorized Person or from one person which the
Custodian reasonably believes in good faith to be an Authorized
Person in writing, telex or any other data transmission system
whereby the receiver of such communication is able to verify by codes
or otherwise with a reasonable degree of certainty the authenticity
of the senders of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Trust, acting for and on behalf of the Fund, hereby constitutes
and appoints the Custodian as custodian of all the Securities and
monies at any time owned by the Fund during the period of this
Agreement ("Fund Assets").
2. The Custodian hereby accepts appointment as such Custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
DOCUMENTS TO BE FURNISHED BY THE TRUST
The Trust hereby agrees to furnish to the Custodian the
following documents:
1. A copy of its Declaration of Trust (the "Declaration of Trust")
certified by its Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. A copy of the resolution of its Board of Trustees appointing the
Custodian certified by its Secretary.
4. A copy of the most recent Prospectuses of the Trust.
5. A Certificate of the President and Secretary setting forth the names
and signatures of the present Officers of the Trust.
ARTICLE IV
CUSTODY OF CASH AND SECURITIES
1. The Trust will deliver or cause to be delivered to the Custodian all
Fund Assets, including cash received for the issuance of its shares,
at any time during the period of this Agreement. The Custodian will
not be responsible for such Fund Assets until actually received by
it. Upon such receipt, the Custodian shall hold in safekeeping and
physically segregate at all times from the property of any other
persons, firms or corporations all Fund Assets received by it from or
for the account of the Fund. The Custodian will be entitled to
reverse any credits made on the Fund's behalf where such credits have
been previously made and monies are not finally collected within 90
days of the making of such credits, provided that the Custodian shall
credit any credit previously reversed in the event months are finally
collected after each 90-day period. The Custodian is hereby
authorized by the Trust, acting on behalf of the Fund, to actually
deposit any Fund Assets in the Book-Entry System or in a Depository,
provided, however, that the Custodian shall always be accountable to
the Trust for the Fund Assets so deposited. Fund Assets deposited in
the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for
customers, including but not limited to accounts in which the
Custodian acts in a fiduciary or representative capacity.
2. The Custodian shall credit to a separate account or accounts in the
name of each respective Fund all monies received by it for the
account of such Fund, and shall disburse the same only:
(a) In payment for Securities purchased for the account of such Fund,
as provided in Article V;
(b) In payment of dividends or distributions, as provided in Article
VI hereof;
(c) In payment of original issue or other taxes, as provided in
Article VII hereof;
(d) In payment for shares of such Fund redeemed by it, as provided
in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting forth
the name and address of the person to whom the payment is to be
made, the amount of such payment and the purpose for which
payment is to be made (the Custodian not being required to
questions such direction) or (ii) if reserve requirements are
established for the Fund by law or by valid regulation, directing
the Custodian to deposit a specified amount of collected funds in
the form of U.S. dollars at a specified Federal Reserve bank and
stating the purpose of such deposit; or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.
3. Promptly after the close of business on each day the Funds are open
and valuing their portfolios, the Custodian shall furnish the Trust
with a detailed statement of monies held for the Fund under this
Agreement and with confirmations and a summary of all transfers to or
from the account of the Fund during said day. Where Securities are
transferred to the account of the Fund without physical delivery, the
Custodian shall also identify as belonging to the Fund a quantity of
Securities in a fungible bulk of Securities registered in the name of
the Custodian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At least
monthly and from time to time, the Custodian shall furnish the Trust
with a detailed statement of the Securities held for the Fund under
this Agreement.
4. All Securities held for the Fund, which are issued or issuable only
in bearer form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held for the Fund may be held by a registered nominee of
the Custodian as the Custodian may from time to time determine, or in
the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Trust
agrees to furnish to the Custodian appropriate instruments to enable
the Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the
Book-Entry System or the Depository, any Securities which it may hold
for the account of the Fund and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System or by the
Depository or a Sub-Custodian in a separate account or accounts in
the name of the Fund, segregated at all times from those of any other
Fund maintained and operated by the Trust and from those of any other
person or persons.
5. Unless otherwise instructed to the contrary by a Certificate, the
Custodian shall with respect to all Securities held for the Fund in
accordance with this Agreement:
(a) Collect all income due or payable to the Fund with respect to
Fund Assets;
(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or retired,
or otherwise become payable;
(c) Surrender Securities in temporary form for definitive
Securities;
(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or
the laws or regulations of any other taxing authority, including
any foreign taxing authority, now or hereafter in effect; and
(e) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of the Fund, all rights and similar securities issued
with respect to any Securities held by the Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the
Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any
Securities may be exercised;
(b) Deliver any Securities held for the Fund in exchange for other
Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation
or recapitalization of any corporation, or the exercise of any
conversion privilege;
(c) Deliver any Securities held for the account of the Fund to any
protective committee, reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery; and
(d) Make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Certificate to
be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund.
7. The Custodian shall promptly deliver to the Trust all notices, proxy
material and executed but unvoted proxies pertaining to shareholder
meetings of Securities held by the Fund. The Custodian shall not vote
or authorize the voting of any Securities or give any consent, waiver
or approval with respect thereto unless so directed by a Certificate
or Written Instruction.
8. The Custodian shall promptly deliver to the Trust all material
received by the Custodian and pertaining to Securities held by the
Fund with respect to tender or exchange offers, calls for redemption
or purchase, expiration of rights, name changes, stock splits and
stock dividends, or any other activity involving ownership rights in
such Securities.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of Securities by the Fund, the Trust
shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate or
Written Instructions, and (ii) with respect to each purchase of Money
Market Securities, Written Instructions, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) The
name of the issuer and the title of the Securities, (b) the principal
amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the
total amount payable upon such purchase and (f) the name of the
person from whom or the broker through whom the purchase was made.
The Custodian shall upon receipt of Securities purchased by or for
the Fund, pay out of the monies held for the account of the Fund the
total amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms to the
total amount payable as set forth in such Certificate, Written
Instructions or Oral Instructions. With respect to any repurchase
agreement transaction for the Funds, the Custodian shall assure that
the collateral reflected on the transaction advice is received by the
Custodian.
2. Promptly after each sale of Securities by the Trust for the account
of the Fund, the Trust shall deliver to the Custodian (i) with
respect to each sale of Securities which are not Money Market
Securities, a Certificate or Written Instructions, and (ii) with
respect to each sale of Money Market Securities, Written
Instructions, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title
of the Security, (b) the principal amount sold, and accrued interest,
if any, (c) the date of sale, (d) the sale price per unit, (e) the
total amount payable to the Fund upon such sale and (f) the name of
the broker through whom or the person to whom the sale was made. The
Custodian shall deliver the Securities upon receipt of the total
amount payable to the Fund upon such sale, as set forth in each
certificate, written instructions, or oral instructions, provided
that the same conforms to the total amount principal as set forth in
such Certificate, Written Instructions or Oral Instructions. Subject
to the foregoing, the Custodian may accept payment in such form as
shall be satisfactory to it, and may deliver Securities and arrange
for payment in accordance with the customs prevailing among dealers
in Securities.
3. Promptly after the time as of which the Trust, on behalf of a Fund,
either -
(a) writes an option on Securities or writes a covered put option in
respect of a Security, or
(b) notifies the Custodian that its obligations in respect of any
put or call option, as described in the Trust's Prospectus,
require that the Fund deposit Securities or additional Securities
with the Custodian, specifying the type and value of Securities
required to be so deposited, or
(c) notifies the Custodian that its obligations in respect of any
other Security, as described in each Fund's respective
Prospectus, require that the Fund deposit Securities or
additional Securities with the Custodian, specifying the type and
value of Securities required to be so deposited, the Custodian
will cause to be segregated or identified as deposited, pursuant
to the Fund's obligations as set forth in such Prospectus,
Securities of such kinds and having such aggregate values as are
required to meet the Fund's obligations in respect thereof. The
Trust will provide to the Custodian, as of the end of each
trading day, the market value of each Fund's option liability if
any and the market value of its portfolio of common stocks.
4. On contractual settlement date, the account of each respective Fund
will be charged for all purchases settling on that day, regardless of
whether or not delivery is made. On contractual settlement date, sale
proceeds will likewise be credited to the account of such Fund
irrespective of delivery.
In the case of "sale fails", the Custodian may request the assistance
of the Fund in making delivery of the failed Security.
ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Trust shall furnish to the Custodian a copy of the resolution of
the Board of Trustees, certified by the Secretary, either (i) setting
forth the date of the declaration of any dividend or distribution in
respect of shares of the Fund, the date of payment thereof, the
record date as of which Fund shareholders entitled to payment shall
be determined, the amount payable per share to Fund shareholders of
record as of that date and the total amount to be paid by the
Dividend and Transfer Agent of the Fund on the payment date, or (ii)
authorizing the declaration of dividends and distributions in respect
of shares of the Fund on a daily basis and authorizing the Custodian
to rely on Written Instructions or a Certificate setting forth the
date of the declaration of any such dividend or distribution, the
date of payment thereof, the record date as of which Fund
shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date and
the total amount to be paid by the Dividend and Transfer Agent on the
payment date.
2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case may be, the Custodian shall
arrange for such payments to be made by the Dividend and Transfer
Agent out of monies held for the account of the Fund.
ARTICLE VII
SALE AND REDEMPTION OF SHARES OF THE FUND
1. The Custodian shall receive and credit to the account of each Fund
such payments for shares of such Fund issued or sold from time to
time as are received from the distributor for the Fund's shares, from
the Dividend and Transfer Agent of the Fund, or from the Trust.
2. Upon receipt of Written Instructions, the Custodian shall arrange for
payment of redemption proceeds to be made by the Dividend and
Transfer Agent out of the monies held for the account of the
respective Fund in the total amount specified in the Written
Instructions.
3. Notwithstanding the above provisions regarding the redemption of any
shares of the Fund, whenever shares of the Fund are redeemed pursuant
to any check redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise subsequently
instructed by Written Instructions shall, upon receipt of any Written
Instructions setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor
the check presented as part of such check redemption privilege out of
the money held in the account of the Fund for such purposes.
ARTICLE VIII
INDEBTEDNESS
In connection with any borrowings, the Trust, on behalf of the Fund, will cause
to be delivered to the Custodian by a bank or broker (including the Custodian,
if the borrowing is from the Custodian), requiring Securities as collateral for
such borrowings, a notice or undertaking in the form currently employed by any
such bank or broker setting forth the amount which such bank or broker will loan
to the Fund against delivery of a stated amount of collateral. The Trust shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such borrowing: (a) the name of the bank or broker, (b) the amount and terms of
the borrowing, which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Trust, acting on behalf of the Fund, or
other loan agreement, (c) the date and time, if known, on which is to be entered
into, (d) the date on which the loan becomes due and payable, (e) the total
amount payable to the Fund on the borrowing date, (f) the market value of
Securities collateralizing the loan, including the name of the issuer, the title
and the number of shares or the principal amount of any particular Securities
and (g) a statement that such loan is in conformance with the Investment Company
Act of 1940 and the Fund's then current Prospectus. The Custodian shall deliver
on the borrowing date specified in a Certificate the specified collateral and
the executed promissory note, if any, against delivery by the lending bank or
broker of the total amount of the loan payable, provided that the same conforms
to the total amount payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank or broker, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank or broker, by virtue of any promissory note or loan agreement. The
Custodian shall deliver in the manner directed by the Trust from time to time
such Securities as additional collateral as may be specified in a Certificate to
collateralized further any transaction described in this paragraph. The Trust
shall cause all Securities released from collateral status to be returned
directly to the Custodian and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the Trust fails
to specify in a Certificate or Written Instructions the name of the issuer, the
title and number of shares or the principal amount of any particular Securities
to be delivered as collateral by the Custodian, the Custodian shall not be under
any obligation to deliver any Securities. The Custodian may require such
reasonable conditions with respect to such collateral and its dealings with
third-party lenders as it may deem appropriate.
ARTICLE IX
CONCERNING THE CUSTODIAN
1. Except as otherwise provided herein, the Custodian shall not be
liable for any loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, except for any such loss
or damage arising out of its negligence or willful misconduct. The
Trust, on behalf of the Fund and only from Fund Assets (or insurance
purchased by the Trust with respect to its liabilities on behalf of
the Fund hereunder), shall defend, indemnify and hold harmless the
Custodian and its Trustees, Officers, Employees and Agents with
respect to any loss, claim, liability or cost (including reasonable
attorneys' fees) arising or alleged to arise from or relating to the
Trust's duties with respect to the Fund hereunder or any other action
or inaction of the Trust or its Trustees, Officers, Employees or
Agents as to the Fund, except such as may arise from the negligent
action, omission or willful misconduct of the Custodian, its
Trustees, Officers, Employees or Agents. The Custodian shall defend,
indemnify and hold harmless the Trust and its Trustees, Officers,
Employees or Agents with respect to any loss, claim, liability or
cost (including reasonable attorneys' fees) arising or alleged to
arise from or relating to the Custodian's duties with respect to the
Fund hereunder or any other action or inaction of the Custodian or
its Trustees, Officers, Employees, Agents, nominees or Sub-Custodians
as to the Fund, except such as may arise from the negligent action,
omission or willful misconduct of the Trust, its Trustees, Officers,
Employees or Agents. The Custodian may, with respect to questions of
law apply for and obtain the advice and opinion of counsel to the
Trust at the expense of the Fund, or of its own counsel at its own
expense, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with the advice or
opinion of counsel to the Trust, and shall be similarly protected
with respect to anything done or omitted by it in good faith in
conformity with advice or opinion of its counsel, unless counsel to
the Fund shall, within a reasonable time after being notified of
legal advice received by the Custodian, have a differing
interpretation of such question of law. The Custodian shall be liable
to the Trust for any proximate loss or damage resulting from the use
of the Book-Entry System or any Depository arising by reason of any
negligence, misfeasance or misconduct on the part of the Custodian or
any of its employees, agents, nominees or Sub-Custodians but not for
any special, incidental, consequential, or punitive damages;
provided, however, that nothing contained herein shall preclude
recovery from the Custodian by the Trust, on behalf of the Fund, of
principal and of interest to the date of recovery on, Securities
incorrectly omitted from the Fund's account or penalties imposed on
the Trust, in connection with the Fund, for any failures to deliver
Securities.
In any case in which one party hereto may be asked to indemnify the
other or hold the other harmless, the party from whom indemnification
is sought (the "Indemnifying Party") shall be advised of all
pertinent facts concerning the situation in question, and the party
claiming a right to indemnification (the "Indemnified Party") will
use reasonable care to identify and notify the Indemnifying Party
promptly concerning any situation which presents or appears to
present a claim for indemnification against the Indemnifying Party.
The Indemnifying Party shall have the option to defend the
Indemnified Party against any claim which may be the subject of the
indemnification, and in the event the Indemnifying Party so elects,
such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party and the Indemnifying
Party will so notify the Indemnified Party and thereupon such
Indemnifying Party shall take over the complete defense of the claim
and the Indemnifying Party shall sustain no further legal or other
expenses in such situation for which indemnification has been sought
under this paragraph, except the expenses of any additional counsel
retained by the Indemnified Party. In no case shall any party
claiming the right to indemnification confess any claim or make any
compromise in any case in which the other party has been asked to
indemnify such party (unless such confession or compromise is made
with such other party's prior written consent).
The obligations of the parties hereto under this paragraph shall
survive the termination of this Agreement.
2. Without limiting the generality of the foregoing, the Custodian,
acting in the capacity of Custodian hereunder, shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased by or for
the account of the Fund, the legality of the purchase thereof, or
the propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or for the account
of the Fund, or the propriety of the amount for which the same
are sold;
(c) The legality of the issue or sale of any shares of the Fund, or
the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of the Fund, or the
propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any dividend by
the Trust in respect of shares of the Fund;
(f) The legality of any borrowing by the Trust, on behalf of the
Fund, using Securities as collateral;
(g) The sufficiency of any deposit made pursuant to a Certificate
described in clause (ii) of paragraph 2(e) of Article IV hereof,
3. The Custodian shall not be liable for any money or collected fund in
U.S. dollars deposited in a Federal Reserve Bank in accordance with a
Certificate described in clause (ii) of paragraph 2(e) of Article IV
hereof, nor be liable for or considered to be the Custodian of any
money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the
Fund until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing the
Fund's interest at the Book-Entry System or Depository.
4. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the
Dividend and Transfer Agent of the Fund nor to take any action to
effect payment or distribution by the Dividend and Transfer Agent of
the Fund of any amount paid by the Custodian to the Dividend and
Transfer Agent of the Fund in accordance with this Agreement.
5. Income due or payable to the Fund with respect to Fund Assets will be
credited to the account of the Fund as follows:
(a) Dividends will be credited on the first business day following
payable date irrespective of collection.
(b) Interest on fixed rate municipal bonds and debt securities
issued or guaranteed as to principal and/or interest by the
government of the United States or agencies or instrumentalities
thereof (excluding securities issued by the Government National
Mortgage Association) will be credited on payable date
irrespective of collection.
(c) Interest on fixed rate corporate debt securities will be
credited on the first business day following payable date
irrespective of collection.
(d) Interest on variable and floating rate debt securities and debt
securities issued by the Government National Mortgage Association
will be credited upon the Custodian's receipt of funds.
(e) Proceeds from options will be credited upon the Custodian's
receipt of funds.
6. Notwithstanding paragraph 5 of this Article IX, the Custodian shall
not be under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such
action by a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection
with any such action or, at the Custodian's option, prepayment
7. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking institutions
located in foreign countries, of Securities and monies at any time
owned by the Fund, upon terms and conditions approved in a
Certificate. Current Depository (s) and Sub-Custodian(s) are noted in
Appendix B. The Custodian shall not be relieved of any obligation or
liability under this Agreement in connection with the appointment or
activities of such Depositories or Sub-Custodians.
8. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the
account of the Fund are such as properly may be held by the Fund
under the provisions of the Declarations of Trust and the Trust's
By-Laws.
9. The Custodian shall treat all records and other information relating
to the Trust, the Fund and the Fund's Assets as confidential and
shall not disclose any such records or information to any other
person unless: (a) the Trust shall have consented thereto in writing
or (b) such disclosure is compelled by law.
10. The Custodian shall be entitled to receive and the Trust agrees to
pay to the Custodian, for the Fund's account from Fund Assets only,
such compensation as shall be determined pursuant to Appendix C,
attached hereto, or as shall be determined pursuant to amendments to
such Appendix approved by the Custodian and the Trust, on behalf of
the Fund. The Custodian shall be entitled, upon 10 days written
notice to the Trust, to charge against any money held by it for the
accounts of the Fund the amount of any loss, damage, liability or
expense, including reasonable counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement as
determined by agreement of the Custodian and the Trust or by the
final order of any court or arbitrator having jurisdiction and as to
which all rights of appeal shall have expired. The expenses which the
Custodian may charge against the accounts of the Fund include, but
are not limited to, the reasonable expenses of Sub-Custodians
incurred in settling transactions involving the purchase and sale of
Securities of the Fund.
11. The Custodian shall be entitled to rely upon any Certificate if such
reliance is made in good faith. The Custodian shall be entitled to
rely upon any Oral Instructions and any Written Instructions actually
received by the Custodian pursuant to Article IV or V hereof. The
Trust agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner so
that such Written Instructions are received by the Custodian, whether
by hand delivery, telex or otherwise, on the first business day
following the day on which such Oral Instructions are given to the
Custodian. The Trust agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect
the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that
the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such
transactions, except as otherwise set forth herein.
12. The Custodian will (a) set up and maintain proper books of account
and complete records of all transactions in the accounts maintained
by the Custodian hereunder in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940,
with particular attention to Section 31 thereof and Rules 31 a-1 and
31 a-2 thereunder, and (b) preserve for the periods prescribed by
applicable Federal statute or regulation all records required to be
so preserved. The books and records of the Custodian shall be open to
inspection and audit at reasonable times and with prior notice by
Officers and auditors employed by the Trust.
13. The Custodian and its Sub-Custodians shall promptly send to the
Trust, for the account of the Fund, any report received on the
systems of internal accounting control of the Book-Entry System or
the Depository and with such reports on their own systems of internal
accounting control as the Trust may reasonably request from time to
time.
14. The Custodian performs only the services of a custodian and shall
have no responsibility for the management, investment or reinvestment
of the Securities from time to time owned by the Fund, except as
otherwise set forth herein. The Custodian is not a selling agent for
shares of the Fund and performance of its duties as a custodial agent
shall not be deemed to be a recommendation to the Custodian's
depositors or others of shares of the Fund as an investment.
ARTICLE X
TERMINATION
1. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying
the date of such termination, which shall be not less than ninety
(90) days after the date of giving of such notice. If such notice is
given by the Trust, on behalf of the Fund, it shall be accompanied by
a copy of a resolution of the Board of Trustees of the Trust,
certified by the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust company having not
less than $2,000,000 aggregate capital, surplus and undivided
profits. In the event such notice is given by the Custodian, the
Trust shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of its Board of Trustees, certified
by the Secretary, designating a successor custodian or custodians to
act on behalf of the Fund. In the absence of such designation by the
Trust, the Custodian may designate a successor custodian which shall
be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus, and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian,
provided that it has received a notice of acceptance by the successor
custodian, shall deliver, on that date, directly to the successor
custodian all Securities and monies then owned by the Fund and held
by it as Custodian. Upon termination of this agreement, the Trust
shall pay to the Custodian on behalf of the Fund such compensation as
may be due as of the date of such termination. The Trust agrees on
behalf of the Fund that the Custodian shall be reimbursed for its
reasonable costs in connection with the termination of this
Agreement.
2. If a successor custodian is not designated by the Trust, on behalf of
the Fund, or by the Custodian in accordance with the preceding
paragraph, or the designated successor cannot or will not serve, the
Trust shall upon the delivery by the Custodian to the Trust of all
Securities (other than Securities held in the Book-Entry System which
cannot be delivered to the Trust) and monies then owned by the Fund,
other than monies deposited and the delivery of any such documents or
the taking of any other actions necessary to transfer custody by the
Custodian to the Trust of all securities held in the books - entry
system and all monies owned by the Fund on deposit (with a Federal
Reserve Bank pursuant to a Certificate described in clause (ii) of
paragraph 2(e) of Article IV), be deemed to be the custodian for the
Fund, and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
under paragraph 1 of article IX herein.
ARTICLE XI
MISCELLANEOUS
1. Appendix A sets forth the names and the signatures of all Authorized
Persons. The Trust agrees to furnish to the Custodian, on behalf of
the Fund, a new Appendix A in form similar to the attached Appendix
A, if any present Authorized Person ceases to be an Authorized Person
or if any other or additional Authorized Persons are elected or
appointed. Until such new Appendix A shall be received, the Custodian
shall be fully protected in acting under the provisions of this
Agreement upon Oral Instructions or signatures of the present
Authorized Persons as set forth in the last delivered Appendix A.
2. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder,
Officer, Trustee, past, present or future as such, of the Trust or of
any such predecessor or successor, whether by virtue of any
constitution, statute or rule of law or equity, or by the enforcement
of any assessment or penalty or otherwise; it being expressly agreed
and understood that this Agreement and the obligations thereunder are
enforceable solely against Fund Assets, and that no such personal
liability whatever shall attach to, or is or shall be incurred by,
the organizers, shareholders, Officers, Trustees of the Trust or of
any predecessor or successor, or any of them as such, because of the
obligations contained in this Agreement or implied therefrom and that
any and all such liability is hereby expressly waived and released by
the Custodian as a condition of, and as a consideration for, the
execution of this Agreement.
3. The obligations set forth in this Agreement as having been made by
the Trust have been made by the Trustees of the Trust, acting as such
Trustees for and on behalf of the Fund, pursuant to the authority
vested in them under the laws of the State of ______________, the
Declaration of Trust and the By-Laws of the Trust. This Agreement has
been executed by Officers of the Trust as Officers, and not
individually, and the obligations contained herein are not binding
upon any of the Trustees, Officers, Agents or holders of shares,
personally, but bind only the Trust and then only to the extent of
Fund Assets.
4. Such provisions of the Prospectuses of the Fund and any other
documents (including advertising material) specifically mentioning
the Custodian (other than merely by name and address) shall be
reviewed with the Custodian by the Trust.
5. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at Star Bank Center, 425 Walnut Street, M.L. 6118,
Cincinnati, Ohio 45202, attention: Mutual Fund Custody Department, or
at such other place as the Custodian may from time to time designate
in writing.
6. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Trust shall be sufficiently given
when delivered to the Trust or on the second business day following
the time such notice is deposited in the U.S. mail postage prepaid
and addressed to the Trust at its office at _____________________ or
at such other place as the Trust may from time to time designate in
writing.
7. This Agreement with the exception of Appendices A & B may not be
amended or modified in any manner except by a written agreement
executed by both parties with the same formality as this Agreement,
and authorized and approved by a resolution of the Board of Trustees
of the Trust.
8. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust or
by the Custodian, and no attempted assignment by the Trust or the
Custodian shall be effective without the written consent of the other
party hereto.
9. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument. IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their
respective Officers, thereunto duly authorized as of the day and year
first above written.
ATTEST: _____________________
BY: _____________________ BY: _______________________
TITLE: _____________________ TITLE: ____________________
ATTEST: Star Bank, N.A.
BY: _____________________ BY: _______________________
TITLE: _____________________ TITLE: ____________________
<PAGE>
APPENDIX A
Authorized Persons Specimen Signatures
President: ___________________ ____________________
Vice President: ___________________ ____________________
Secretary: ___________________ ____________________
Treasurer: ___________________ ____________________
Adviser Employees: ___________________ ____________________
<PAGE>
APPENDIX B
The following Depository(s) and Sub-Custodian(s) are employed currently by Star
Bank, N.A. for securities processing and control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
EXHIBIT 9(A)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of the _______ day of
________________________ , 1996 by and between the MATTERHORN GROWTH FUND, INC.
(the "Fund"), a Maryland Corporation, and INVESTMENT COMPANY ADMINISTRATION
CORPORATION, a Delaware Corporation (the "Administrator");
WITNESSETH
WHEREAS, the Fund is a non-diversified series of an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain the Administrator to provide
certain administrative services in connection with the management of the Fund's
operations and the Administrator is willing to furnish such services:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Administrator to provide
certain administrative services, hereinafter enumerated, in connection with the
management of the Fund's operations for the period and on the terms set forth in
this Agreement. The Administrator accepts such appointment and agrees to comply
with all relevant provisions of the 1940 Act, applicable rules and regulations
thereunder, and other applicable law.
2. Services on a Continuing Basis. Subject to the overall supervision
of the Board of Directors of the Fund and MDB Asset Management Corporation (the
"Manager"), the Administrator will perform the following services on a regular
basis which would be daily, weekly or as otherwise appropriate:
A) perform the services in Schedule 1 attached; and
B) such additional services as may be agreed upon by the Fund and the
Administrator.
3. Responsibility of the Administrator. The Administrator shall be
under no duty to take any action on behalf of the Fund except as set forth
herein or as may be agreed to by the Administrator in writing. In the
performance of its duties hereunder, the Administrator shall be obligated to
exercise reasonable care and diligence and to act in good faith and to use its
best efforts. Without limiting the generality of the foregoing or any other
provision of this Agreement, the Administrator shall not be liable for delays or
errors or loss of data occurring by reason of circumstances beyond the
Administrator's control.
4. Reliance Upon Instructions. The Fund agrees that the Administrator
shall be entitled to rely upon any instructions, oral or written, actually
received by the Administrator from the Board of Directors of the Fund and shall
incur no liability to the Fund or the Fund's Manager in acting upon such oral or
written instructions, provided such instructions reasonably appear to have been
received from a person duly authorized by the Board of Directors of the Fund to
give oral or written instructions on behalf of the Fund.
5. Confidentiality. The Administrator agrees on behalf of itself and
its employees to treat confidentially all records and other information relative
to the Fund and all prior, present or potential shareholders of the Fund, except
after prior notification to, and approval of release of information in writing
by, the Fund, which approval shall not be unreasonably withheld where the
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
6. Equipment Failures. In the event of equipment failures or the
occurrence of events beyond the Administrator's control which render the
performance of the Administrator's functions under this Agreement impossible,
the Administrator shall take reasonable steps to minimize service interruptions
and is authorized to engage the services of third parties (at the
Administrator's expense) to prevent or remedy such service interruptions.
7. Compensation. As compensation for services rendered by the
Administrator during the term of this agreement, the Fund will pay to the
Administrator at an annualized rate of .10% of the Fund's average daily net
assets or $40,000 ($45,000 for the first year), whichever is greater. The fee is
computed daily and payable monthly by the fifth day of the next month.
8. Indemnification. The Fund agrees to indemnify and hold harmless
the Administrator from all taxes, filing fees, charges, expenses, assessments,
claims and liabilities (including without limitation, liabilities arising under
the Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act,
and any state and foreign securities laws, all as amended from time to time) and
expenses, including (without limitation) reasonable attorneys fees and
disbursements, arising directly or indirectly from any action or thing which the
Administrator takes or does or omits to take or do at the request of or in
reliance upon the advice of the Board of Directors of the Fund, provided, that
the Administrator will not be indemnified against any liability to the Fund or
to shareholders of the Fund (or any expenses incident to such liability) arising
out of the Administrator's own willful misfeasance, bad faith, gross negligence
or reckless disregard of its duties and obligations under this Agreement. The
Administrator agrees to indemnify and hold harmless the Fund, the Fund, and each
of its Directors from all claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the 1940 Act, and any state and foreign securities laws, all as
amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, arising directly or indirectly from
any action or thing which the Administrator takes or does or omits to take or do
which is in violation of this Agreement or not in accordance with instructions
properly given to the Administrator, or arising out of the Administrator's own
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement.
9. Duration and Termination. This Agreement shall continue until
termination by the Fund (through the Board of Directors of the Fund) or the
Administrator on 60 days' written notice to the other. All notices and other
communications hereunder shall be in writing. This Agreement cannot be assigned
without the prior written consent of the other party hereto.
10. Amendments. This Agreement or any part hereof may be changed or
waived only by instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
11. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in Delaware and governed by
Delaware law. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first written
above.
MATTERHORN GROWTH FUND, INC.
By:____________________________________
Title: ________________________________
INVESTMENT COMPANY ADMINISTRATION
CORPORATION
By:____________________________________
Title: ________________________________
TRANSFER AGENCY AND SERVICE AGREEMENT
between
MATTERHORN GROWTH FUND, INC.
and
AMERICAN DATA SERVICES, INC.
1
<PAGE>
INDEX
1. TERMS OF APPOINTMENT; DUTIES OF ADS.........................................
2. FEES AND EXPENSES...........................................................
3. REPRESENTATIONS AND WARRANTIES OF ADS.......................................
4. REPRESENTATIONS AND WARRANTIES OF THE FUND..................................
5. INDEMNIFICATION.............................................................
6. COVENANTS OF THE FUND AND ADS...............................................
7. TERMINATION OF AGREEMENT....................................................
8. ASSIGNMENT..................................................................
9. AMENDMENT...................................................................
10. NEW YORK LAWS TO APPLY.....................................................
11. MERGER OF AGREEMENT........................................................
12. NOTICES....................................................................
2
<PAGE>
FEE SCHEDULE....................................................................
(a) ACCOUNT MAINTENANCE CHARGE:.................................................
FEE WAIVER:..................................................................
(b) TRANSACTION FEES:...........................................................
(c) IRA PLAN FEES:..............................................................
FEE INCREASES................................................................
(d) EXPENSES:...................................................................
(e) SPECIAL REPORTS:............................................................
(f) SECURITY DEPOSIT:...........................................................
(g) CONVERSION CHARGE:..........................................................
SCHEDULE A......................................................................
3
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made the____day of _____, 1995, by and between MATTERHORN GROWTH FUND,
INC. A Maryland Corporation, having its principal office and place of business
at 26 Broadway, New York, NY 10004-1790 (the "Fund"), and American Data
Services, Inc., a New York corporation having its principal office and place of
business at 24 West Carver Street., Huntington, New York 11743 ("ADS").
WHEREAS, the Fund desires to appoint ADS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement,
the Fund hereby employs and appoints ADS to act as, and ADS agrees to act as its
transfer agent for the Fund's authorized and issued shares of its common stock,
$0.001 par value, ("Shares"), dividend disbursing agent and agent in connection
with any accumulation, open-account or similar plans provided to the
shareholders of the fund ("Shareholders") set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with the Fund's Registration Statement,
which describes how sales and redemptions of Shares shall be made, ADS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefore to the Custodian of the
Fund authorized by the Board of Directors of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of full and
fractional Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation therefore to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by the
Custodian with respect to any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon receipt of
appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions declared by
the Fund, and effect dividend and capital gains distribution reinvestments in
accordance with Shareholder instructions;
(vii) Serve as a record keeping transfer agent for the Fund, and maintain
records of account for and advise the Fund and its Shareholders as to the
foregoing; and
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(viii) Record the issuance of shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of shares of the Fund which are
authorized, based upon data provided to it by the Fund, and issued and
outstanding. ADS shall also provide the Fund each business day with the
following: (I) the total number and dollar amount of Shares issued and
outstanding as of the close of business on the preceding business day; (ii) the
total number and dollar amount of Shares sold on the preceding business day;
(iii) the total number and dollar amount of Shares redeemed on the preceding
business day; (iv) the total number and dollar amount of Shares sold on the
preceding business day pursuant to dividend and capital gains distribution
reinvestments; and (v) the total number and dollar amount of Shares which are
authorized and issued and outstanding as of the opening of business on such day.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), ADS shall:
(i) Perform all of the customary services of a transfer agent, dividend
disbursing agent, including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases redemptions of
Shares and other confirmable transactions in Shareholder accounts as prescribed
in the federal securities laws or as described in the Fund's Registration
Statement, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system and reports
which will enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to ADS in writing those
transactions and shares to be treated as exempt from blue sky reporting for each
State and (ii) monitor the daily activity for each State, as provided by ADS.
The responsibility of ADS pursuant to this Agreement for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Fund
agrees to pay ADS an annual maintenance fee for each Shareholder account and
transaction fees for each portfolio or class of shares serviced under this
Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such
fees and out-of pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by ADS at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports
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<PAGE>
and other mailings to all shareholder accounts shall be advanced to ADS by the
Fund at least seven (7) days prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of The State of New York.
3.02 It is duly qualified to carry on its business in The State of
New York.
3.03 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 ADS is duly registered as a transfer agent under the Securities
Exchange Act of 1934 and shall continue to be registered throughout the
remainder of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that;
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Fund shall indemnify
and hold ADS harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
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<PAGE>
(a) All actions of ADS or its agents or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence, willful misconduct, or in reckless disregard of its
duties under this Agreement..
(b) The Fund's refusal or failure to comply with the terms of this Agreement,
or which arise out of the Fund's lack good faith, gross negligence or willful
misconduct or which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors of
information, records and documents which (i) are received by ADS or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by ADS or its agents or subcontractors
of any written instruction signed by an officer of the Fund, or any legal
opinion of counsel to the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 ADS shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by ADS as a result of ADS's lack of good faith, gross negligence
or willful misconduct or the breach of any warranty or representation of ADS
hereunder.
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with the Fund's legal counsel with respect to any
matter arising in connection with the services to be performed by ADS under this
Agreement, and ADS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ADS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided ADS or its agents
or subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. ADS, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party of
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<PAGE>
seeking indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall have the
option to participate with the party seeking indemnification the defense of such
claim. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
6. COVENANTS OF THE FUND AND ADS
6.01 The Fund Shall promptly furnish to ADS a certified copy of the
resolution of the Board of Directors of the Fund authorizing the appointment of
ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, ADS agrees that all such records prepared or maintained by
ADS relating to the services to be performed by ADS hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. ADS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Fund of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Fund.
7. TERMINATION OF AGREEMENT
7.01 This Agreement shall become effective as of the date hereof and
shall remain in force through and shall automatically terminate on June 30,
1998, provided however, that both parties to this Agreement have the option to
terminate the Agreement, without penalty, upon ninety (90) days prior written
notice.
7.02 Should the Fund exercise its right to terminate, all expenses
incurred by ADS associated with the movement of records and material will be
borne by the Fund. Such expenses will include all out-of-pocket expenses and all
time incurred to train or consult with the successor transfer agent with regard
to the transfer of shareholder accounting and stock transfer responsibilities.
The charge for all time incurred by ADS will be calculated in accordance with
the rates specified in the Fee Schedule paragraph (e).
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<PAGE>
8. ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns.
9. AMENDMENT
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.
10. NEW YORK LAWS TO APPLY
10.01 The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
11. MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
12. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
Mr. Mark D. Beckerman Michael Miola
President President
The 44 Wall Street Equity Fund, Inc. American Data Services, Inc.
26 Broadway 24 West Carver Street
New York, NY 10004-1790 Huntington, New York 11743
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
MATTERHORN GROWTH FUND, INC. AMERICAN DATA SERVICES, INC.
By:____________________________ By:__________________________
Mark D. Beckerman, President Michael Miola, President
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<PAGE>
FEE SCHEDULE
For the services rendered by ADS in its capacity as transfer agent,
the Fund shall pay ADS, within ten (10) days after receipt of an invoice from
ADS at the beginning of each month, a fee, calculated as a combination of
account maintenance charges and transaction charges as follows:
(a) ACCOUNT MAINTENANCE CHARGE:
The Greater of:
(1) Minimum maintenance charge per fund - $555.55/month (No prorating partial
months);
OR,
(2) Based upon the total of all open/closed accounts in the Fund upon the
following annual rates (billed monthly):
Equity Fund ....................... $ 8.00 per account
Fixed Income Fund............. $12.00 per account
Money Market Fund .......... $16.00 per account
Closed accounts ................. $ 2.00 per account***
** All accounts closed during a calendar year will be considered as open
accounts for billing purposes until all 1099's and 5498's have been sent to
shareholders and reported (via mag media) to the IRS.
PLUS,
(b) TRANSACTION FEES:
Trade Entry (purchase/liquidation) ................................ $ 1.35 each
New account set-up ................................................ $ 2.50 each
Customer service calls ............................................ $ 1.00 each
Correspondence/ information requests .............................. $ 1.25 each
Liquidations paid by wire transfer ................................ $ 3.00 each
Omnibus accounts .................................................. $ 1.25 per
transaction*
ACH charge ........................................................ $ .30 each
SWP ............................................................... $ 1.25 each*
* Not included as a Trade Entry.
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<PAGE>
FEE REDUCTION:
As consideration for entering into a three year contract, ADS will reduce the
above fees as follows:
o While the net assets of the Fund to be serviced under this Agreement (see
Schedule A) are below $15 million, account maintenance fees will be
reduced by 40% and transaction fees will be reduced by 50%.
o While the net assets of the Fund are between $15 million and $18 million,
account maintenance fees will be reduced by 20% and transaction fees will
be reduced by 30%.
o Once the net assets of the Fund exceed $18 million, the fee schedule above
will be in force without any fee reduction.
o Out of pocket expenses are not subject to the fee reduction and will be
charged to the Fund as incurred.
(c) IRA PLAN FEES:
The following fees will be charged directly to the shareholder account:
Annual maintenance fee ....................................... $12.00 /account*
Incoming transfer from prior custodian ........................ $12.00
Distribution to a participant ................................. $15.00
Refund of excess contribution ................................. $15.00
Transfer to successor custodian ............................... $12.00
Automatic periodic distributions .............................. $15.00/year
per account
* Includes Star Bank N.A. $8.00 Custody Fee.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
(except for the IRA Plan fees) will be increased by the lesser of, the change in
the Consumer Price Index for the Northeast region (CPI), or the overall
inflation rate for the twelve month period ending with the month preceding such
annual anniversary date.
(d) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of
salaries, advanced by ADS in connection with but not limited to the printing of
confirmation forms and statements, proxy expenses, quotation services, travel
requested by the Fund, telephone, facsimile transmissions, stationery and
supplies (related to Fund records), record storage, postage (plus a $0.07
service charge for all mailings), telex and courier charges authorized by the
Fund, incurred in connection with the
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<PAGE>
performance of its duties hereunder. ADS shall provide the Fund with a monthly
invoice of such expenses and the Fund shall reimburse ADS within fifteen (15)
days after receipt thereof.
(e) SPECIAL REPORTS:
All reports and /or analyses requested by the Fund, its auditors, legal counsel,
portfolio manager, or any regulatory agency having jurisdiction over the Fund,
that are not in the normal course of fund stock transfer activities as specified
in Paragraph 1 of this Agreement and are not required to clarify standard
reports generated by ADS, shall be subject to an additional charge, agreed upon
in advance and in writing, based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time - $45.00/hr.
(f) SECURITY DEPOSIT:
The Fund will remit to ADS upon execution of this Agreement a
security deposit of equal to one (1) month's shareholder service fee. The
security deposit computation will be based either on the total number of
shareholder accounts (open and closed) of the Fund or the minimum fee, whichever
is greater on the date above written. The Fund will have the option to have the
security deposit applied to the last month's service fee, or applied to any new
contract between the Fund and ADS.
(g) CONVERSION CHARGE:
NOTE: FOR EXISTING FUNDS ONLY (new funds please ignore):
There will be a charge to convert the Fund's shareholder accounting
records on to the ADS stock transfer system (ADSHARE). In addition, ADS will be
reimbursed for all out-of-pocket expenses, enumerated in paragraph (b) above and
data media conversion costs, incurred during the conversion process.
The aforementioned conversion charge will not exceed $2,000.00.
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<PAGE>
SCHEDULE A
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
Matterhorn Growth Fund, Inc.
14
FUND ACCOUNTING SERVICE AGREEMENT
between
MATTERHORN GROWTH FUND, INC.
and
AMERICAN DATA SERVICES, INC.
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<PAGE>
INDEX
1. DUTIES OF ADS.
2. COMPENSATION OF ADS.
3. LIMITATION OF LIABILITY OF ADS.
4. REPORTS.
5. ACTIVITIES OF ADS.
6. ACCOUNTS AND RECORDS.
7. CONFIDENTIALITY.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
9. ASSIGNMENT.
10. NEW YORK LAWS TO APPLY
11. AMENDMENTS TO THIS AGREEMENT.
12. MERGER OF AGREEMENT
13. NOTICES.
SCHEDULE A
(a) FUND ACCOUNTING SERVICE FEE:
FEE WAIVER
FEE INCREASES
(b) EXPENSES.
(c) SPECIAL REPORTS.
(d) SECURITY DEPOSIT.
(e) CONVERSION CHARGE.
SCHEDULE B:
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<PAGE>
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made the 1st. day of July, 1995 by and between MATTERHORN GROWTH FUND,
INC., a Maryland corporation, (the "Fund") and AMERICAN DATA SERVICES, INC., a
New York corporation ("ADS").
BACKGROUND
WHEREAS, the Fund is a non-diversified open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services to
mutual funds and possesses facilities sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.
ADS will perform the following services for the Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net
asset value and communicate such value to the Fund and its transfer agent;
(b) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any successor rule
may be amended from time to time ("Rule 31a-1"), that are applicable to the
fulfillment of ADS's duties hereunder, as well as any other documents necessary
or advisable for compliance with applicable regulations as may be mutually
agreed to between the Fund and ADS. Without limiting the generality of the
foregoing, ADS will prepare and maintain the following records upon receipt of
information in proper form from the Fund or its authorized agents:
o Cash receipts journal
o Cash disbursements journal
o Dividend record
o Purchase and sales - portfolio securities journals
o Subscription and redemption journals
o Security ledgers
o Broker ledger
o General ledger
o Daily expense accruals
o Daily income accruals
o Securities and monies borrowed or loaned and collateral therefore
o Foreign currency journals
o Trial balances
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<PAGE>
(c) Provide the Fund and its investment adviser with daily
portfolio valuation, net asset value calculation and other
standard operational reports as requested from time to time.
(d) Provide all raw data available from our fund accounting system
(PAIRS) for management's or the administrators preparation of the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1a;
5. Annual proxy statement.
6. Financial data necessary to calculate all
dividends and capital gains distributions in
accordance with Subchapter M of the Internal
Revenue Code.
ADS shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein for each portfolio listed in Schedule B, ADS shall be entitled to receive
compensation and reimbursement for all reasonable out-of-pocket expenses. The
Fund agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
(a) ADS may rely upon the advice of the Fund, or of counsel for the
Fund and upon statements of the Fund's independent accountants, brokers and
other persons reasonably believed by it in good faith to be expert in the
matters upon which they are consulted and for any actions reasonably taken in
good faith reliance upon such statements and without gross negligence or
misconduct, ADS shall not be liable to anyone.
(b) ADS shall be liable to the Fund for any losses arising out of any
act or omission in the course of its duties, the gross negligence, misfeasance,
bad faith of ADS or breach of the agreement by ADS or disregard of ADS's
obligations and duties under this agreement or the willful violation of any
applicable law.
(c) Except as may otherwise be provided by applicable law, neither
ADS nor its shareholders, officers, directors, employees or agents shall be
subject to, and the Fund shall indemnify and hold such persons harmless from and
against, any liability for and any damages, expenses or losses incurred by
reason of the inaccuracy of information furnished to ADS by the Fund or its
authorized agents. ADS shall promptly notify the Fund of the assertion of a
claim for which the Fund may be required to indemnify ADS and shall keep the
Fund advised with respect to all developments regarding such claim. The Fund
shall have the option to participate in the defense of such claim. ADS in no
case shall confess any claim or make any compromise in any case in which the
Fund may be required to indemnify ADS except with the Fund's prior written
consent.
4. REPORTS.
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<PAGE>
(a) The Fund shall provide to ADS on a quarterly basis a report of a
duly authorized officer of the Fund representing that all information furnished
to ADS during the preceding quarter was true, complete and correct in all
material respects. ADS shall not be responsible for the accuracy of any
information furnished to it by the Fund or its authorized agents, and the Fund
shall hold ADS harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) Whenever, in the course of performing its duties under this
Agreement, ADS determines, on the basis of information supplied to ADS by the
Fund or its authorized agents, that a violation of applicable law has occurred
or that, to its knowledge, a possible violation of applicable law may have
occurred or, with the passage of time, would occur, ADS shall promptly notify
the Fund and its counsel of such violation.
5. ACTIVITIES OF ADS.
The services of ADS under this Agreement are not to be deemed
exclusive, and ADS shall be free to render similar services to others so long as
its services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of
the Fund, and shall be surrendered to the Fund promptly upon request by the Fund
in the form in which such accounts and records have been maintained or preserved
(including the electronic or computerized format in which such accounts and
records have been maintained). ADS agrees to maintain a back-up set of accounts
and records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. ADS shall assist the Fund's independent auditors, or, upon approval of
the Fund, any regulatory body, in any requested review of the Fund's accounts
and records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all information obtained pursuant to, and all transactions
contemplated by this Agreement, and all other information germane thereto, as
confidential and not to be disclosed to any person except as may be authorized
by the Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
Should the Fund exercise its right to terminate, all expenses
incurred by ADS associated with the movement of records and material will be
borne by the Fund. Such expenses will include all out-of-pocket expenses and all
time incurred to train or consult with the successor fund accounting agent with
regard to the transfer of fund accounting responsibilities. The charge for all
time incurred by ADS will be calculated in accordance with the rates specified
in Schedule A paragraph (c).
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
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<PAGE>
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the State of New York as at the time in effect
and the applicable provisions of the 1940 Act. To the extent that the applicable
law of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
6
<PAGE>
To the Fund: To the Administrator:
Mr. Mark D. Beckerman Michael Miola
President President
The 44 Wall Street Equity Fund, Inc. American Data Services, Inc.
26 Broadway 24 West Carver Street
New York, NY 10004-1790 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
MATTERHORN GROWTH FUND, INC. AMERICAN DATA SERVICES, INC.
By:_____________________________ By:____________________________
Mark D. Beckerman, President Michael Miola, President
SCHEDULE A
(a) FUND ACCOUNTING SERVICE FEE:
For the services rendered by ADS in its capacity as fund accounting
agent, as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS,
within ten (10) days after receipt of an invoice from ADS at the beginning of
each month, a fee equal to:
CALCULATED FEE WILL BE BASED UPON PRIOR MONTH AVERAGE NET ASSETS:
(No prorating partial months)
THE MINIMUM FEE:
$1,000 per month for Fund Group (1)
OR,
NET ASSET CHARGE: (1)
On first $12 million of average
monthly net assets..................................1/12th of 17.00 basis points
On all assets in excess of $12
million..............................................1/12th of 2.50 basis points
(1) The Fund Group consists of The 44 Wall Street Equity Fund and the
Progressive Portfolio Series. The Net asset charge is based upon the average
aggregate monthly net assets of the Fund Group.
FEE WAIVER
ADS shall waive all service fees due and payable under this Agreement during the
first two (2) months this Agreement is in effect. Out of pocket expenses are not
considered service fees and will be charged to the Fund during the fee waiver
period.
7
<PAGE>
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
will be increased by the lesser of, the change in the Consumer Price Index for
the Northeast region (CPI), or the overall inflation rate for the twelve month
period ending with the month preceding such annual anniversary date.
(b) EXPENSES.
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of
salaries, advanced by ADS in connection with but not limited to the printing of
confirmation forms and statements, proxy expenses, quotation services, travel
requested by the Fund, telephone, facsimile transmissions, stationery and
supplies (related to Fund records), record storage, postage (plus a $0.07
service charge for all mailings), telex and courier charges authorized by the
Fund, incurred in connection with the performance of its duties hereunder. ADS
shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
(c) SPECIAL REPORTS.
All reports and /or analyses requested by the Fund, its auditors, legal counsel,
portfolio manager, or any regulatory agency having jurisdiction over the Fund,
that are not in the normal course of Fund administrative activities as specified
in Paragraph 1 of this Agreement or are not required to clarify standard reports
generated by ADS, shall be subject to an additional charge, agreed upon in
advance and in writing, based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $50.00/hr.
Computer time - $45.00/hr.
(d) SECURITY DEPOSIT.
The Fund will remit to ADS upon execution of this Agreement a
security deposit equal to one (1) month's minimum fee under this Agreement,
computed in accordance with the number of portfolios listed in Schedule B of
this Agreement without giving effect to any fee waivers that may be in effect.
The Fund will have the option to have the security deposit applied to the last
month's service fee, or applied to any new contract between the Fund and ADS.
(e) CONVERSION CHARGE.
None.
8
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SCHEDULE B:
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
Matterhorn Growth Fund, Inc.
9
EXHIBIT 11
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
The 44 Wall Street Equity Fund, Inc.
We hereby consent to the use of our report dated August 10, 1995 on the
financial statements of The 44 Wall Street Equity Fund, Inc. (to be known as
"Matterhorn Growth Fund, Inc."), referred to therein in Post-Effective Amendment
No 17 to the Registration Statement on Form N-lA, File No. 2-67610, as filed
with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption, "Financial Highlights" and "Accountants".
MCGLADREY & PULLEN, LLP
New York, New York
January 12, 1996
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF
PERFORMANCE QUOTATIONS OF
THE 44 WALL STREET EQUITY FUND, INC.
TOTAL RETURN FORMULA
n
P(1+T) = ERV
Where P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the end of the 1-, 5- or 10 year periods (or
fractional portion thereof)
For the 1-year period ended December 31, 1995:
1
$1,000 (1+T) = $ 1,252.75 or an annual compounded rate of 25.28%
For the 5-year period ended December 31, 1995:
5
$1,000 (1+T) = $ 2,069.27 or an average annual compounded rate of
15.70%
For the period September 30, 1988 (inception) to December 31, 1995:
7.25
$1,000 (1+T) = $ 2,511.57 or an average annual compounded rate of
13.54%
