As filed with the Securities and Exchange Commission on April 30, 1998.
File No. 811-620
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10
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INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 573-9354
JAMES H. BLUCK, ESQ.
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
(Name and Address of Agent for Service)
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PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. COVER PAGE
Not applicable.
ITEM 2. SYNOPSIS
Not applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION
Not applicable.
ITEM 4. GENERAL DESCRIPTION OF THE REGISTRANT
(a) ORGANIZATION AND OPERATION. Institutional Investors Capital
Appreciation Fund, Inc. (the "Fund") was incorporated in New York as a
diversified, open-end management investment company on October 29, 1952. The
Fund provides Eligible Institutions, as defined below, with a vehicle for
pooling their investments in certain equity securities which are believed to
have potential for capital appreciation. Shares of the Fund may be purchased and
owned only by, and may be transferred only to, Eligible Institutions that are
resident in the State of New York. An Eligible Institution will be deemed to be
a resident of the State of New York only if it has its principal office within
the State of New York. An "Eligible Institution" means: (i) a savings bank or
savings and loan association which is organized under the laws of the State of
New York, (ii) a federal savings association organized under the laws of the
United States, (iii) a holding company owning a majority of the outstanding
shares of such a savings bank, savings and loan association or savings
association, (iv) a life insurance department of any such savings bank, savings
and loan association or savings association, (v) a wholly- or majority-owned
subsidiary of any such savings bank, savings and loan association or savings
association, including without limitation a life insurance subsidiary, or (vi) a
pension trust, fund, plan or agreement participated in by one or more such
savings banks, savings and loan associations, savings associations or holding
companies to provide retirement benefits, death benefits or disability benefits
for any or all of its or their active officers and employees.
Federal law may further restrict the ability of certain Eligible
Institutions to invest in the Fund. Each Eligible Institution should consult its
own advisers with respect to limitations, if any, imposed on its investments in
the Fund by applicable banking laws or regulations.
INVESTMENT OBJECTIVES. The primary investment objective of the Fund is
to achieve capital appreciation for its shareholders. The objective of income is
secondary. The Fund seeks to achieve these objectives by investing primarily in
equity securities of companies whose growth, earnings and dividend prospects are
promising and whose securities are reasonably priced, in the opinion of the
Fund's Investment Adviser. There is no assurance that the Fund will achieve
these objectives.
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Changes in these investment objectives may be made by the Board of
Directors of the Fund without shareholder approval whenever in its judgment
economic or market conditions warrant.
FUNDAMENTAL POLICIES. The following restrictions are fundamental
policies and cannot be changed without approval of a majority of the Fund's
outstanding voting securities.
The Fund may not:
(i) purchase securities of an issuer if such purchase would cause more
than 25% of the value of the Fund's total assets (taken at current value) to be
invested in the securities of any one issuer or group of issuers in the same
industry;
(ii) purchase securities of an issuer if such purchase would cause more
than 5% of any class of securities of such issuer to be held by the Fund;
(iii) purchase securities of an issuer (other than obligations of the
United States and its instrumentalities) if such purchase would cause more than
5% of the Fund's total assets, taken at market value, to be invested in the
securities of such issuer;
(iv) invest in any issuer for the purpose of exercising control of
management;
(v) underwrite securities of other issuers;
(vi) purchase or sell real estate or real estate mortgage loans;
(vii) deal in commodities or commodities contracts;
(viii) loan money, except that, subject to the restrictions, if any,
imposed by the New York Banking Law, the Fund may (A) purchase debt obligations
and (B) make sales of federal funds (loans maturing in fewer than seven days to
depository institutions and generally made through the Federal Reserve System);
(ix) purchase on margin or sell short any security, except that the
Fund may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
(x) borrow money or mortgage or pledge any of its assets, except that
the Fund may borrow money from banks for temporary or emergency (but not
leveraging) purposes in an amount up to 5% of the Fund's total assets when the
borrowing is made, and may pledge up to 15% of its assets to secure such
borrowings;
(xi) purchase or retain securities of an issuer if any officer,
director or employee of, or counsel for, the Fund is an officer, director or
employee of such issuer; or
(xii) write, purchase or sell puts, calls or combinations thereof,
except that the Fund may (A) write covered call options with respect to any or
all of its portfolio securities and (B) enter into closing purchase transactions
with respect to such options.
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In addition to the foregoing, the Fund will not make any investment or
engage in any transaction which would cause the Fund's shares not to be eligible
for investment by savings banks under the laws of the State of New York. That
law effectively limits the types of investments which the Fund may make by
generally limiting savings banks to investing in investment companies which
invest in securities in which a savings bank may itself invest. As currently in
effect, the New York Banking Law and the Banking Department's regulations
thereunder and interpretations thereof operate to limit investment by the Fund
to "qualified equity securities" and "qualified debt securities" in which a
prudent person of discretion and intelligence in such matters who is seeking a
reasonable income and preservation of capital would invest. A "qualified equity
security" means an equity security which is, at the time of acquisition, listed
on the New York Stock Exchange or the American Stock Exchange or for which
representative high and low bid prices are regularly quoted on the National
Association of Securities Dealers Automated Quotation System. A "qualified debt
security" means a debt security which is not in default as to either principal
or interest when acquired. The Fund's investments under the "prudent man"
regulations of the Banking Department are subject to the further restriction
that the Fund may not invest in or otherwise acquire any equity security (or
security convertible into an equity security) issued by any bank, trust company,
savings bank, savings and loan association, bank holding company, banking
organization, life insurance company, or corporation engaged principally in the
issue, flotation, underwriting, public sale or distribution of securities except
to the extent otherwise permitted by the Banking Department.
Restrictions and policies of the Fund which are based on the laws of
the State of New York applicable to savings banks and savings and loan
associations may be changed by any amendments to or changes in such laws or the
regulations promulgated thereunder or official interpretations of such laws and
regulations, without action by the Fund's shareholders.
INVESTMENT POLICIES. In seeking to achieve its investment objectives,
it is expected that the Fund will invest at least 80% of its assets in common
stock, but it shall not be deemed inconsistent with this policy to invest part
of said assets in preferred stock and corporate debt securities convertible into
common stock. At most times, the Fund holds no more liquid reserves than it
believes necessary to provide for redemptions and does not invest in fixed
income securities to any substantial extent. However, the Fund may, subject to
restrictions, if any, imposed by the New York Banking Law, (i) hold reserves of
cash, (ii) invest temporarily in securities issued or guaranteed by the United
States government or its instrumentalities or agencies and commercial paper and
other obligations of U.S. domestic corporations maturing within 270 days,
(iii) write (sell) covered call options listed on organized securities
exchanges, and (iv) make sales of federal funds.
See Item 13(a) for additional information relating to writing of
covered call options. See Item 13(d) for the discussion relating to portfolio
turnover.
OTHER INVESTMENT RESTRICTIONS. In addition to the restrictions
identified above as "Fundamental Policies", the Fund may not:
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(i) invest in securities of any other investment company, except as may
be acquired as part of a merger, consolidation or other acquisition of assets,
and as may be consistent with applicable banking laws of the State of New York;
(ii) purchase any security if, as a result of such transaction, more
than 10% in the aggregate of the Fund's total assets (at current value) would be
invested in (A) securities restricted as to disposition under federal securities
laws and (B) securities for which there are no readily available market
quotations; or
(iii) participate on a joint or joint and several basis in any trading
account in securities.
(b) Not applicable.
(c) RISK FACTORS. Investors should note that the value of the shares of
the Fund fluctuates in accordance with the value of the portfolio securities
held by the Fund. Accordingly, the value of an investment in the Fund will
fluctuate with changing market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Thus, one should
not invest in the Fund primarily for current income or short-term gain. Although
the Fund invests primarily in common stock, the Fund is not restricted in the
proportion of its assets which may be invested in non-equity securities, such as
investment grade corporate bonds, commercial paper and government securities.
When deemed beneficial in the opinion of the Fund's investment adviser for
defensive purposes the Fund may invest up to 100% of its asset value in
short-term investments.
ITEM 5. MANAGEMENT OF THE FUND
(a) The directors of the Fund, in addition to reviewing the actions of
the Fund's Investment Adviser and administrator, decide upon matters of general
policy at their regular meetings. The Fund's officers supervise the business
operations of the Fund.
(b) Investment decisions for the Fund are made by Shay Assets
Management, Inc. (the "Investment Adviser"), which, together with its
predecessor, Shay Assets Management Co., has served as the Fund's investment
adviser since May 19, 1995. Subject to the general supervision of the Board of
Directors of the Fund and in conformity with the stated policies of the Fund,
the Investment Adviser manages the Fund's investment portfolio and is
responsible for placing purchase and sale orders for portfolio securities and
other investments. Under the investment advisory agreement between the Fund and
the Investment Adviser (the "Investment Advisory Agreement"), the Investment
Adviser receives a fee from the Fund computed at the annual rate of 0.75% of the
first $100,000,000 of the Fund's average daily net assets and 0.50% of the
Fund's average daily net assets in excess of $100,000,000. The fee payable to
the Investment Adviser is reduced (but not below zero) to the extent the
expenses of the Fund (exclusive of professional fees, e.g., legal and audit
fees, directors' fees and expenses and distribution expenses, if any, payable
under Rule 12b-1) exceed 1.10% of the Fund's average daily net assets during any
fiscal year during the term of the Investment Advisory Agreement. This
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limitation did not result in any reduction of the Investment Adviser's fee
during 1997, and the total amount paid by the Fund in 1997 in respect of
investment advisory services was 0.75% of the Fund's average daily net assets.
The Investment Adviser is a Florida corporation that is controlled by
Rodger D. Shay, who is a Vice President of the Fund. The Investment Adviser,
with its principal office located at 111 East Wacker Drive, Chicago, Illinois
60601, is a registered investment adviser under the Investment Advisers Act of
1940 and serves as investment adviser to Asset Management Fund, Inc., a
registered investment company comprising five fixed-income portfolios with
aggregate net assets of approximately $1.2 billion at March 31, 1998. In
addition, the Investment Adviser has served since May 19, 1995 as investment
adviser to M.S.B. Fund, Inc., which had net assets of approximately $55 million
at March 31, 1998.
(c) PORTFOLIO MANAGERS. The individuals with primary responsibility for
the day-to-day management of the Fund's portfolio are John J. McCabe and Mark F.
Trautman. Messrs. McCabe and Trautman have been primarily responsible for the
Fund's investments since August 1991, in the case of Mr. McCabe, and March 1993,
in the case of Mr. Trautman, initially as employees of the Fund/s former
investment adviser, Nationar, and currently as Portfolio Managers of Shay Assets
Management, Inc.
Mr. McCabe is Senior Vice President of the Investment Adviser.
Mr. McCabe previously served as Senior Vice President and Chief Investment
Officer of Nationar, the former investment adviser of the Fund, from August 1991
through May 1995, and in that capacity had responsibility for the Fund's
investments. Prior to joining Nationar he served as Managing Director and
Portfolio Manager at Sterling Manhattan Corporation, an investment banking firm,
for approximately three years. Prior to that Mr. McCabe served in various
positions at Bankers Trust Company, including Director of Investment Research
and Managing Director of the Investment Management Group. Mr. McCabe is a
director and past President of the New York Society of Security Analysts, a past
director of the Financial Analysts Federation and a member and founding Governor
of The Association for Investment Management and Research.
Mr. Trautman is Vice President of Shay Assets Management, Inc. Prior to
May 20, 1995, Mr. Trautman served as Director of Mutual Funds Investment of
Nationar, the Fund's former investment adviser, and in that capacity had
responsibility for the Fund's investments. He also has served as Portfolio
Manager of M.S.B. Fund, Inc. since March 1993. From January 1992 through March
1993 he served as Senior Equity Analyst for the two funds. From December 1988
through December 1991 Mr. Trautman was a Senior Associate with Sterling
Manhattan Corporation. From June 1987 through November 1988, Mr. Trautman held
the position of Treasury Analyst at Thomson McKinnon Securities, Inc., a
securities brokerage firm.
(d) PFPC Inc. ("PFPC"), 103 Bellevue Parkway, Wilmington, Delaware
19809, serves as the Fund's administrative agent. Pursuant to the terms of the
Administration and Accounting Services Agreement between the Fund and PFPC,
which became effective May 19, 1995, PFPC performs various administrative
services for the Fund, including (i) maintenance of books and records,
(ii) preparation of various filings, reports, statements and returns filed with
governmental authorities or distributed to shareholders of the Fund and
(iii) computation of the Fund's net asset value for purposes of sales and
redemptions of shares.
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PFPC also serves as the transfer agent, registrar and dividend paying
agent for the Fund and receives additional compensation in such capacities. PNC
Bank, N.A. ("PNC Bank"), Philadelphia, Pennsylvania, serves as custodian of the
Fund's investments. PFPC and PNC Bank are affiliates of PNC Bank Corp.
The Fund pays PFPC for its services as Administrator a fee computed at
the annual rate of 0.10% of the first $200 million of the Fund's average net
assets, 0.075% of the next $200 million of average net assets, with further
reductions in the applicable rate for net assets in excess of $400 million,
subject to a minimum annual charge of $80,400. The amounts paid to PFPC for the
period May 19, 1995 to December 31, 1995 and for the years ended December 31,
1996 and 1997, respectively, for its services as administrative agent were
$37,338, $80,400 and $84,732, respectively, after the fee waiver described
below. PFPC and PNC Bank agreed to waive 25% of the annual minimum charges
applicable under the Fund's administration, transfer agency and custody
agreements during the first year (which ended May 19, 1996) of their respective
agreements with the Fund.
(e) PFPC also serves as the transfer agent, registrar and dividend
paying agent for the Fund and receives compensation in that capacity in addition
to the compensation it receives as administrator. (See Item 5(d).)
(f) The Fund's operating expenses for the fiscal year ended
December 31, 1997, which include advisory fees but not brokerage commissions,
were 1.16% of the Fund's average daily net assets.
(g) Not applicable.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Not applicable.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) The capital stock of the Fund consists of a single class of common
shares with a par value of $1.00 per share. Each common share entitles the
holder to one vote for the election of directors and on all other matters. These
shares have non-cumulative voting rights which means that the holders of more
than 50% of the shares voting for the election of directors can elect 100% of
the directors if they choose to do so and, in such event, the holders of the
remaining shares voting for the election of directors will not be able to elect
any person or persons to the Board of Directors. All shares have equal rights to
participate in any dividends declared and, in the event of liquidation, in the
assets of the Fund. Upon issuance and payment in accordance with the terms
herein described, the shares will be fully paid and nonassessable. There are no
conversion rights, preemptive rights or sinking fund provisions with respect to
the Fund's shares.
Shares of stock of the Fund may not be sold or transferred to or be
owned by, any person other than an Eligible Institution.
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(b) As of March 31, 1998, Staten Island Savings Bank owned
approximately 33% of the outstanding shares of the Fund. This holding, if it
were maintained on the record date of any meeting of shareholders of the Fund,
would enable Staten Island Savings Bank to exercise a substantial influence over
the outcome of each matter submitted to a vote of the shareholders of the Fund,
including election of directors, and depending on the number of shares present
in person or represented by proxy at a meeting of shareholders, may enable
Staten Island Savings Bank to determine the outcome of each such vote.
(c) Not applicable.
(d) Not applicable.
(e) Shareholder inquiries should be directed to the Fund c/o Shay
Financial Services, Inc., 111 East Wacker Drive, Suite 2600, Chicago, IL 60601
or by telephone at 800-527-3713.
(f) It is the Fund's policy to distribute substantially all of its net
investment income (income from dividends and interest, less expenses) and net
short-term capital gain, if any, as dividends and to distribute substantially
all net long-term gain on sales of portfolio securities as capital gain
distributions. Dividends are paid quarterly. Distributions of net long-term
capital gains, if any, realized during the fiscal year, usually are distributed
in December of such fiscal year.
(g) Federal Income Tax Status. The Fund has elected to qualify and
intends to remain qualified as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the
Fund should not be subject to federal income taxes on its net investment income
and capital gains, if any, that it distributes to its shareholders.
All dividends out of net investment income, together with distributions
of short-term capital gain, will be taxable as ordinary income to shareholders
whether or not reinvested. Any net long-term capital gain distributed to
shareholders will be taxable as long-term capital gains to shareholders, whether
or not reinvested and regardless of the length of time a shareholder has owned
its shares. A portion of dividends paid from net investment income may qualify
for the dividends-received deduction for corporate shareholders. Shareholders
that are tax exempt entities will not be taxed on amounts distributed to them by
the Fund.
The Fund expects to pay dividends quarterly and capital gain
distributions annually, but there can be no assurance that there will be such
dividends or distributions. Dividends or capital gains distributions declared in
October, November or December with a record date in such a month and paid during
the following January will be taxable as if received by shareholders on December
31 of the calendar year in which such dividends or distributions are declared.
The Fund will notify shareholders after the close of its fiscal year of the
dollar amount and the taxable status of that year's dividends and distributions.
Any gain or loss realized upon a sale or redemption of Fund shares held
as capital assets by a shareholder will generally be treated as long-term
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capital gain or loss if the shares have been held for more than one year, and
otherwise will be treated as short-term capital gain or loss. However, any loss
realized on the sale or redemption of Fund shares that have been held for six
months or less will be treated as long-term capital loss to the extent of the
amount of any capital gains dividend received by the shareholder with respect to
such shares.
Under U.S. Treasury Regulations, the Fund is required to withhold and
remit to the U.S. Treasury 31% of dividends, capital gain distributions and
redemption proceeds paid to shareholders that have not provided certain
certified information to the Fund. In order to avoid this withholding
requirement, a shareholder must certify that the taxpayer identification number
provided is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.
Shareholders are urged to consult their own tax advisers with specific
questions about the federal, state or local income tax implications of an
investment in the Fund.
(h) Not applicable.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
(a) Shay Financial Services, Inc. (the "Distributor") acts as the
distributor of the Fund. The Distributor is a Florida corporation that is
controlled by Rodger D. Shay, who is a Vice President of the Fund.
The Distributor is authorized to undertake certain activities in
connection with the sale of shares of the Fund, including informing potential
investors about the Fund through written materials, seminars and personal
contacts. The Distributor does not receive any compensation from the Fund in
connection with such services.
Orders to purchase shares of the Fund and a request for an application
to open an account should be directed to the Fund by telephoning the Distributor
at 800-527-3713. Payment must be in the form of federal funds and should be
received by PNC Bank prior to 4:00 P.M. on the next Business Day, or the order
will be canceled. Wire transfer instructions for federal funds should be as
follows: PNC Bank, Philadelphia, PA, ABA 0310-0005-3; BNF Mutual Fund Services /
8529992181; From: (Name of Investor); Account Number: (Investor's account number
with the Fund); For purchase of Institutional Investors Capital Appreciation;
Amount: $ (Amount to be invested). The Fund reserves the right to reject any
purchase order.
Shareholders may elect to have dividends and capital gains
distributions of the Fund, when paid, reinvested in shares of the Fund at the
net asset value per share determined at the close of business on the ex-dividend
date. Dividends and capital gains distributions will be so reinvested unless a
contrary intention is stated by notice in writing to the Fund. An election may
be changed by the shareholder at any time prior to a record date for a dividend
or distribution by notice in writing to the Fund.
(b) Shares of the Fund will be sold at the net asset value per share
next determined after receipt of purchase orders by the Fund and are offered by
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the Fund to Eligible Institutions on a continuous basis without sales charge.
The net asset value of the Fund fluctuates daily.
Net asset value per share of the Fund is determined as of 4:00 P.M.,
New York time, on each Business Day, except that net asset value need not be
determined on any day on which no purchase or redemption orders are received by
the Fund. (A "Business Day" is a day on which the New York Stock Exchange is
open for trading. The New York Stock Exchange is open Monday through Friday
except for the following holidays: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.) Purchase orders received prior to
4:00 P.M., New York time, on a Business Day are executed at the net asset value
per share computed as of 4:00 P.M., New York time, on such day if payment by
federal funds is received by PNC Bank by 4:00 P.M. on the next Business Day.
Orders received after 4:00 P.M., New York time, on a Business Day or on a day
which is not a Business Day are executed at the net asset value per share
computed as of 4:00 P.M., New York time, of the next Business Day.
The net asset value of the Fund fluctuates daily. The net asset value
per share of the Fund is computed by dividing the total value of all securities
and other assets of the Fund, less liabilities, by the total number of shares of
the Fund outstanding. For purposes of such computation a security listed on a
national securities exchange or traded on the NASDAQ National Market System is
valued at the last reported sale price thereof on the exchange or system where
the security is principally traded. If no trade occurs on such exchange or
system on the date of computation, such security is valued at the mean of the
last bid and asked prices on such day on such exchange or system. Securities not
listed on a national securities exchange or traded on the NASDAQ National Market
System but traded in an over-the-counter market are valued at the mean of the
last bid and asked prices prior to the computation. Short-term interest-bearing
investments for which market quotations are not available are valued at cost
plus discount earned. Short-term investments (purchased without a discount or
premium) are valued at cost, which approximates market value. Other securities
are valued at their fair value as determined in good faith by the Board of
Directors of the Fund.
Securities underlying outstanding call options written by the Fund are
valued at their market price as determined above. Premiums received on the sale
of call options are included in the net asset value; however, the current market
value of outstanding options written by the Fund are deducted in computing net
asset value. The current market value of an option listed on an organized
securities exchange is based on the last sales price on such exchange prior to
4:00 P.M., New York time, or, if none, the mean of the last bid and asked prices
as of 4:00 P.M., New York time.
(c) Not applicable.
(d) The minimum initial investment in the shares of the Fund by an
investor is $20,000. There are no restrictions on the amount of subsequent
purchases of shares or on the dollar value of shares which must be owned by an
investor after its initial purchase. Each Eligible Institution, however, should
consult its own advisers with respect to limitations, if any, imposed on its
investments in the Fund by applicable banking laws or regulations. (See Item 8.)
<PAGE>
(e) Not applicable.
(f) Not applicable.
ITEM 8. REDEMPTION OR REPURCHASE
(a) A shareholder is entitled, subject to the exceptions described in
this Item 8(a) and in Item 8(d), to redeem at any time all or any portion of the
shares credited to its account by submitting a request for redemption in proper
form on a Business Day and can be made by telephone or in writing. Redemption
requests should be directed to the Fund by telephoning the Distributor at
800-527-3713 or by sending a request to the Fund, c/o Shay Financial Services,
Inc., 111 East Wacker Drive, Suite 2600, Chicago, IL 60601. The Fund redeems
shares at their net asset value next determined after the Distributor receives
the redemption request.
Upon the receipt of such request in proper form as described below, the
shareholder will receive from the Fund the amount of the net asset value of the
redeemed shares which will be determined in accordance with the procedures
described in paragraph 1 below. The option to require the Fund to purchase all
or any part of the shares held by a shareholder may be exercised only in
accordance with the following:
1. The net asset value applicable to any such redemption will be
computed as of 4:00 P.M., New York time, on the day on which notice of
redemption is received, if received on a Business Day before 4:00 P.M.,
New York time; if the notice of redemption is not received on a
Business Day, or if such notice is received after 4:00 P.M., New York
time, on a Business Day, then the net asset value will be computed as
of 4:00 P.M., New York time, on the next succeeding Business Day.
Proceeds will normally be wired in federal funds to the shareholder's
bank or other account shown on the Fund's records, the next Business
Day, but in no event more than seven days following a request in proper
form. Such computations will apply only to the extent of 2500 shares or
10% of the total number of shares owned on the date of giving such
notice by the holder presenting shares for redemption, whichever is
greater. The computation of net asset value of any excess number of
shares as to which notice is received from a shareholder will be made
at 4:00 P.M., New York time, on the Business Day next succeeding the
date of the first computation, subject to the maximum limitation of the
greater of 2500 shares or 10% of the total number of shares owned on
the date of giving such notice, with continuing like computations on
each succeeding Business Day, until the net asset value for all shares
for which notice has been received has been so determined. The
procedures for computation of redemption prices for large redemptions
contained in the second and third sentences of this paragraph 1 may be
waived by the Board of Directors in the event that it determines that
such restrictions are not in the best interests of the Fund and its
shareholders.
<PAGE>
2. The redemption price will be paid by the Fund within seven
Business Days after receipt of the notice of redemption in good order
by the Distributor, provided that the certificates for the shares to be
redeemed, if any, have been surrendered duly endorsed for transfer,
guaranteed and delivered to PFPC. In the event that the net asset value
of any shares is computed on a day other than the day of delivery of
notice of redemption, then the redemption price of such shares will be
paid by the Fund within seven Business Days after such day of
computation. (See Item 8(d).)
Any such payment may be made in whole or in part in kind, in
securities or other assets of the Fund, if the Board of Directors
determines that, by reason of the closing of the New York Stock
Exchange or otherwise, the orderly liquidation of securities owned by
the Fund is impracticable, or payment in cash would be prejudicial to
the best interests of the remaining shareholders of the Fund, provided
that in making any such payment in kind, the Fund will, as nearly as
may be practicable, deliver securities or other assets of a market
value representing the same proportionate interest in the assets of the
Fund as is represented by the shares so to be paid for; whenever
delivery of securities or other assets is so to be made, such delivery
will be made as promptly as practicable after receipt by the
Distributor of a request for redemption in proper form accompanied by
such other documents as may be required by the Fund.
(b) Not applicable.
(c) Not applicable.
(d) Redemptions may be suspended in the event that trading on the New
York Stock Exchange is suspended or restricted, in the event that an emergency
makes determination of net asset value or disposition of Fund portfolio
securities not reasonably practicable, both as determined under the rules of the
Securities and Exchange Commission, or in the event that the Securities and
Exchange Commission by order permits suspension for the protection of
shareholders.
The right of redemption may also be suspended or payment in
satisfaction of redemptions postponed for such other periods as may be
established by the Board of Directors if the Board of Directors determines that
it is contrary to the best interests of the Fund and its other shareholders to
commit the Fund to an earlier repurchase of any or all shares offered for
redemption, but such determination will be made only when a prior request for
redemption remains unaccepted or when the Board of Directors expressly concludes
that by reason of the number of shares offered or the condition of the
securities markets, there is doubt as to the ability of the Fund to liquidate
sufficient assets to raise the necessary funds within an earlier time without
undue sacrifice and that the existence of extraordinary conditions requires
adoption of an emergency measure. Requests for redemption received during a
period when the right to redeem is suspended may be withdrawn at any time until
redemptions are recommended.
<PAGE>
Redemptions may also be limited, and the date of payment postponed, as
set forth in numbered paragraphs 1 and 2 of Item 8(a).
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
Not applicable.
ITEM 11. TABLE OF CONTENTS
Not applicable.
ITEM 12. GENERAL INFORMATION AND HISTORY
See Item 4(a).
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
(a) The primary investment objective of the Fund is to achieve capital
appreciation for its shareholders. The objective of income is secondary. The
Fund seeks to achieve these objectives by investing primarily in common stocks
of companies whose growth, earnings and dividend prospects are promising and
whose securities are reasonably priced, in the opinion of its investment
adviser. Although the Fund invests primarily in common stocks, the Fund is not
restricted in the proportion of its assets that may be invested in non-equity
securities, such as investment grade corporate bonds, commercial paper and
government securities; and, when deemed beneficial in the opinion of the Fund's
Investment Adviser for defensive purposes, a substantial proportion of the
assets of the Fund may be invested temporarily in such securities. The Fund does
not have any present intention of investing in nonconvertible debt securities of
the lowest investment grade, which securities have some speculative
characteristics. The Fund does not invest in the securities of issuers which,
together with any predecessors, have a record of less than three years of
continuous operation.
Covered Call Options. The Fund may engage in writing (i.e., selling)
call options listed on organized securities exchanges with respect to securities
owned by the Fund (called "covered" options). Except in the circumstances
described below, the Fund will not sell any security subject to a call option
written by the Fund so long as that option is outstanding. Call options are
currently listed on the Chicago Board Options Exchange and the New York,
American, Midwest and Pacific Stock Exchanges. A call option gives the purchaser
the right to buy a security from the Fund at a fixed price (the "exercise
price") at any time prior to the expiration of the option contract regardless of
the market price of the security at that time. In return for such right, the
purchaser pays the Fund a premium which the Fund retains whether or not the
option is exercised. The premium represents consideration to the Fund for
undertaking the option obligation and thereby foregoing (during the period of
the option) the opportunity to profit from an increase in the market price of
the underlying security above the exercise price. For example, assume the Fund
owns 100 shares of XYZ and that, at a time when the market price of XYZ was $50
per share, the Fund wrote a six month call option on those shares at an exercise
price of $50 for a premium of $500 (less transaction costs). If the price of XYZ
declined to $40 per share the call would not likely be exercised. The 100 XYZ
shares would have declined $1,000 in value and the Fund would have received
<PAGE>
income in the amount of $500. On the other hand, should the price of XYZ rise to
$60 per share the call would likely be exercised with the result that, in
exchange for the $500 premium, the Fund would have foregone the $1,000
appreciation on the underlying shares.
When an option is written the securities subject to the option will be
segregated or otherwise held for delivery in accordance with the requirements of
any applicable securities exchange. The Fund may purchase call options only for
the purpose of closing out a previous option commitment (called a "closing
purchase transaction"). A closing purchase transaction is made by buying an
option with identical terms as an option previously written, resulting in the
cancellation of the Fund's previous option obligation. If the Fund wishes to
sell securities on which it has options outstanding it would execute a closing
purchase transaction prior to selling the securities. A profit or loss may be
realized on a closing purchase transaction if the amount paid to purchase a call
option previously written is less or more than the amount received from its
sale.
The writing of covered call options involves certain risks. An option
position may be closed out only on an exchange which provides a market for an
option of the same series. Although the Fund will generally write only those
call options for which there appears to be an active market, there is no
assurance that an active market on an exchange will exist for any particular
option at any particular time. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it would,
as a result, be subject to any price decline in the underlying security. If such
a situation were to arise, the Fund's Investment Adviser would determine whether
to hold the underlying securities and risk depreciation in their market value or
to sell the securities and substitute cash or other securities as collateral for
the option obligation.
In general, premiums received on options which are not exercised and
gains or losses realized on closing purchase transactions are treated as
short-term capital gains or losses. When an option is exercised the premium is
added to the exercise price and the resulting gain or loss is characterized as a
short or long-term capital gain or loss depending on the holding period of the
underlying securities. In general, brokerage commissions associated with buying
and selling call options are higher than those associated with other securities
transactions.
As described in Item 6(g), it is the Fund's intention to qualify in
each year for treatment as a regulated investment company under Subchapter M of
the Code for federal income tax purposes. One of the requirements for such
qualifications is that income derived from gains from the sale or other
dispositions of securities, including options, held for less than three months
must be less than 30% of the Fund's gross income. This requirement may limit the
extent to which the Fund may sell call options. Accordingly, the Fund may limit
its writing of options on securities which have been held for less than three
months, its writing of options which expire in less than three months, and its
effecting of closing purchase transactions or closing sale transactions with
respect to options written within three months of such transactions. The Fund
may effect sales of securities that have been held for at least three months in
order to realize gains to maintain its tax qualification.
<PAGE>
The Board of Directors has directed the Fund's Investment Adviser to
write options only in situations where the exercise price plus the premium (less
transaction costs) would, at the time the option is written, equal a price at
which the Investment Adviser would recommend selling the underlying securities
because of fundamental investment considerations. Consequently, the Fund does
not believe that option writing has a material effect on the Fund's portfolio
turn-over rate and it is believed that option writing may contribute both to the
capital appreciation and income objectives of the Fund. In addition, the Board
of Directors has directed the Investment Adviser to restrict option writing so
that no more than 15% of the Fund's total assets may be subject to outstanding
options at any time. These restrictions may be changed by the Board of Directors
whenever such changes appear to be in the best interest of the Fund.
(b) Not applicable.
(c) Not applicable.
(d) Portfolio Turnover. Although the Fund does not intend to engage in
substantial short-term trading, it may, in order to take advantage of new
investment opportunities or to preserve gains or limit losses, sell portfolio
securities without regard to the length of time that they have been held. The
Fund's annual portfolio turnover rate was 85%, 48% and 27% in 1995, 1996 and
1997, respectively. The portfolio turnover rate is determined by dividing the
amount of the lesser of the purchases or sales during the year by the average
value of the Fund's portfolio securities during such year. The portfolio
turnover rate of the Fund is not normally expected to exceed 75% but may do so
if the Fund's investment objectives and policies in the light of market
conditions require more frequent trades. The Fund's portfolio turnover rate was
lower in 1997 than in 1996 as fewer securities were required to be sold to meet
redemption or other cash requirements.
ITEM 14. MANAGEMENT OF THE FUND
(a) The Fund has fifteen directors who are elected for staggered terms
of three years each. The directors and officers of the Fund, together with their
addresses and ages, the years of expiration of their terms as directors and
their principal occupations for the last five years (together with other
relevant experience), are set forth in the following table.
Position(s) Held with
Registrant and Expiration
Name, Age, Address and Principal Occupation of Term as a Director
- ------------------------------------------- -------------------------
HARRY P. DOHERTY (Age 55)*+ President, Director (2000)
15 Beach Street
Staten Island, NY 10304
Chairman of the Board and Chief Executive Officer, Staten Island
Bancorp, Inc., and Chairman and Chief Executive Officer of its principal
subsidiary, Staten Island Savings Bank.
<PAGE>
TIMOTHY A. DEMPSEY (Age 64) Director (2001)
18 Oakland Avenue
P.O. Box 591
Warwick, NY 10990-0591
President and Chief Executive Officer, Warwick Community Bancorp, Inc.
Savings Bank and President and Chief Executive Officer of its principal
subsidiary, The Warwick Savings Bank.
MICHAEL R. KALLET (Age 47)* Vice President, Director
182 Main Street (1999)
Oneida, NY 13421
President and Chief Executive Officer, Oneida Savings Bank.
RALPH F. BROUTY (Age 68) Director (2000)
111 Clinton Street
Watertown, NY 13601
President and Chief Executive Officer, Watertown Savings Bank.
ROBERT P. CAPONE (Age 43) Director (1999)
10 Bank Street
White Plains, NY 10606
Chairman of the Board, President and Chief Executive Officer, Community
Mutual Savings Bank.
CHRIS C. GAGAS (Age 67) Director (1999)
214 West First Street
Oswego, NY 13126
Chairman of the Board, President and Chief Executive Officer, Oswego
City Savings Bank.
EDWARD P. HENSON (Age 59) Director (1999)
303 Merrick Road
Lynbrook, NY 11563
President, Jamaica Savings Bank FSB.
STEPHEN J. KELLY (Age 44) Director (2000)
23 Montgomery Street
Rhinebeck, NY 12572
President and Chief Executive Officer, Rhinebeck Savings Bank.
<PAGE>
CLIFFORD E. KELSEY, JR. (Age 65) Director (2001)
1 South Church Street
Goshen, NY 10924
President and Chief Executive Officer, Goshen Savings Bank.
ROBERT E. KERNAN, JR. (Age 55) Director (1999)
19 Cayuga Street
Seneca Falls, NY 13148
President and Chief Executive Officer, The Seneca Falls Savings Bank.
JOSEPH L. MANCINO (Age 60)* Executive Vice President,
1400 Old Northern Boulevard Director (2001)
Roslyn, NY 11576
Chairman, President and Chief Executive Officer, The Roslyn Savings
Bank.
WILLIAM A. MCKENNA, JR. (Age 61) Director (2000)
71-02 Forest Avenue
Ridgewood, NY 11385
Chairman of the Board, President and Chief Executive Officer, Ridgewood
Savings Bank.
VINCENT F. PALAGIANO (Age 57) Director (2000)
209 Havemeyer Street
Brooklyn, NY 11211
Chairman and Chief Executive Officer, The Dime Savings Bank of
Williamsburgh.
CHARLES M. SPROCK (Age 58) Director (2001)
100 On the Mall
Rome, NY 13340
Chairman of the Board, President and Chief Executive Officer, The Rome
Savings Bank.
JOHN M. TSIMBINOS (Age 60)+ Director (2001)
1122 Franklin Avenue
Garden City, NY 11530
Chairman of the Board and Chief Executive Officer, Roosevelt Savings
Bank and TR Financial Corp.
<PAGE>
RODGER D. SHAY (Age 61) Vice President and Assistant
1000 Brickell Avenue Secretary
Miami, FL 33131
Mr. Shay has been Chairman and the sole director of the Fund's
investment adviser, Shay Assets Management, Inc., since November 1997
and previously served as its President and as a director from 1990 to
1997. Mr. Shay also has served as Chairman and the sole director of the
Fund's distributor, Shay Financial Services, Inc., since November 1997
and previously served as its President and as a director from 1990 to
1997. Mr. Shay held similar positions with Shay Assets Management Co.
and Shay Financial Services Co., which served as the Fund's investment
adviser and distributor, respectively, from 1995 through December 1997.
He serves or has previously served in the following capacities:
Chairman and a Director, Asset Management Fund, Inc., a registered
investment company; Vice President and Assistant Secretary of M.S.B.
Fund, Inc., a registered investment company; Director, First Home
Savings Bank, S.L.A. since 1990. He previously was employed by certain
subsidiaries of Merrill Lynch & Co. from 1955 to 1981, where he served
in various executive positions including Chairman of the Board of
Merrill Lynch Government Securities, Inc., Chairman of the Board of
Merrill Lynch Money Market Securities, Inc. and Managing Director of
the Debt Trading Division of Merrill Lynch, Pierce, Fenner & Smith Inc.
EDWARD E. SAMMONS, JR. (Age 58) Vice President and Secretary
111 East Wacker Drive
Chicago, IL 60601
Mr. Sammons has been President of the Fund's investment adviser, Shay
Assets Management, Inc., since November 1997 and previously served as
its Executive Vice President from 1990 to 1997. Mr. Sammons also has
served as Executive Vice President of the Fund's distributor, Shay
Financial Services, Inc., since 1990. He also held the position of
Executive Vice President with Shay Assets Management Co. and Shay
Financial Services Co., which served as the Fund's investment adviser
and distributor, respectively, from 1995 through December 1997. He
serves or has previously served in the following capacities: President
and Treasurer of Asset Management Fund, Inc., a registered investment
company; Vice President and Secretary of M.S.B. Fund, Inc.; Vice
President, from 1987 to 1990, Advance America Funds, Inc.; and Senior
Vice President and Manager of Fixed Income Securities, Republic
National Bank in Dallas from 1962 to 1983.
JOHN J. McCABE (Age 54) Vice President
200 Park Avenue, 45th Floor
New York, New York 10166
Mr. McCabe has been a Senior Vice President of Shay Assets Management,
Inc. since June 1995 and held the comparable position with Shay Assets
Management Co. through December 1997. From August 1991 through May
1995, he was Senior Vice President and Chief Investment Officer of
Nationar. He also serves as a Vice President of M.S.B. Fund, Inc. He
previously served as Managing Director and Portfolio Manager at
Sterling Manhattan Corporation, an investment banking firm, for
approximately three years and in various positions at Bankers Trust
Company, including Director of Investment Research and Managing
<PAGE>
Director of the Investment Management Group. Mr. McCabe is a director
and past President of the New York Society of Security Analysts, a past
director of the Financial Analysts Federation and a member and founding
Governor of The Association for Investment Management and Research.
MARK F. TRAUTMAN (Age 32) Vice President
200 Park Avenue, 45th Floor
New York, New York 10166
Mr. Trautman has been a Vice President of Shay Assets Management, Inc.
since June 1995 and held the comparable position with Shay Assets
Management Co. through December 1997. He has been Portfolio Manager of
the Fund since March 1993. From March 1993 through May 1995, he served
as Director of Mutual Funds Investment of Nationar. He also serves as a
Vice President and Portfolio Manager for M.S.B. Fund, Inc. From January
1992 through March 1993 he served as Senior Equity Analyst for the two
funds. From December 1988 through December 1991, Mr. Trautman was a
Senior Associate with Sterling Manhattan Corporation. From June 1987
through November 1988, Mr. Trautman held the position of Treasury
Analyst at Thomson McKinnon Securities, Inc., a securities brokerage
firm. He is also a member of The New York Society of Security Analysts
and The Association for Investment Management and Research.
JAY F. NUSBLATT (Age 37) Treasurer
103 Bellevue Parkway
Wilmington, Delaware 19809
Mr. Nusblatt has been Vice President and Director of Fund Accounting
and Administration of PFPC Inc., the Fund's administrator, since
March 1993. He was previously employed as an Assistant Vice President
of Fund/Plan Services, Inc., with responsibility for financial
reporting and fund administration, 1989 to 1993. Mr. Nusblatt also
serves as Treasurer of M.S.B. Fund, Inc.
- ---------------------------------
* These directors are regarded as interested persons under the Investment
Company Act of 1940 by virtue of their positions as officers of the
Fund.
+ This director may be regarded as an "interested person" under the
Investment Company Act of 1940 because he is a director of America's
Community Bankers. See Item 14(b).
See Item 14(b) for additional information concerning organizations with
which Messrs. Doherty and Mr. Tsimbinos are or have been affiliated. See Items 5
and 16 for additional information concerning the organizations with which
Messrs. Shay, Sammons, McCabe, Trautman and Nusblatt are affiliated.
Harry P. Doherty, Timothy A. Dempsey and William A. McKenna are
directors of M.S.B. Fund, Inc., a registered investment company affiliated with
the Fund by virtue of having a common investment adviser. Messrs. Shay, Sammons,
McCabe, Trautman and Nusblatt also are officers of M.S.B. Fund, Inc.
<PAGE>
The Fund has an Executive Committee, composed of Messrs. Doherty,
Dempsey, Kallet and McKenna, which meets from time to time, as necessary,
between meetings of the Board to consider matters concerning the Fund. Subject
to limitations provided by law and the Fund's by-laws, the Executive Committee
is authorized to exercise the power and authority of the Board of Directors as
may be necessary during the intervals between meetings of the Board of
Directors.
Each of the directors of the Fund is an officer or director of an
Eligible Institution or of a holding company which controls one or more Eligible
Institutions. (See Item 15(b).) Any of such Eligible Institutions may from time
to time purchase at its discretion sufficient shares of the Fund so that its
holding may exceed 5% of the then outstanding shares of the Fund. Eligible
Institutions are not restricted by the Fund as to the number of shares of the
Fund that they may purchase or hold. Each Eligible Institution, however, should
consult its own advisers with respect to limitations, if any, imposed on its
investments in the Fund by applicable banking laws or regulations.
(b) Certain officers and directors of the Fund are also officers,
employees, directors or shareholders of Shay Assets Management, Inc. ("SAMI")
and Shay Financial Services, Inc. ("SFSI"). Messrs. Rodger D. Shay, Edward E.
Sammons, Jr., John J. McCabe and Mark F. Trautman, who are officers of the Fund,
are officers and employees of SAMI. Mr. Shay is the sole director of SAMI, SFSI
and Shay Investment Services, Inc. ("SISI"), which is the sole stockholder of
SAMI and SFSI. Mr. Shay also is the majority stockholder of SISI. See Item
14(a).
Messrs. Harry P. Doherty and John M. Tsimbinos, who are directors of
the Fund, also hold or have recently held positions with affiliates of Shay
Assets Management Co., which, prior to December, 1997, served as the Fund's
investment adviser. Mr. Doherty is a director, and Mr. Tsimbinos previously
served as a director, of America's Community Bankers (the "Association"). Prior
to December 7, 1997, the Association owned through subsidiaries a 50% interest
in Shay Assets Management Co. and Shay Financial Services Co., which served as
the Fund's investment adviser and distributor, respectively, from May 1995 to
December 7, 1997. Mr. Doherty may be considered an "interested person" as the
result of his continued position with the Association and the interest of the
Association in certain royalty and other payments that will be made by SISI and
its affiliates to the Association and its affiliates. Because Mr. Tsimbinos no
longer holds any position with the Association and its affiliates, Mr. Tsimbinos
will not be deemed to be an "interested person," unless the Securities and
Exchange Commission by order determines that Mr. Tsimbinos is an "interested
person" by virtue of having a material relationship with the Fund's investment
adviser or distributor as a result of his prior positions with the Association
and its affiliates.
(c) Directors receive an annual retainer of $3,000, payable at the end
of each quarter, and an additional $500 for each meeting of the Board of
Directors attended. Directors serving on a committee of the Board of Directors
receive additional compensation of $250 for each committee meeting attended in
person if the meeting is held on a date on which a meeting of the Board of
Directors is not held. No additional fee is paid for telephonic meetings. The
Board of Directors meets quarterly. In recognition of the additional
<PAGE>
responsibilities and duties performed by the President of the Fund, the Board of
Directors has authorized an additional annual retainer of $2,000 for the
President of the Fund, payable at the end of each quarter, which is in addition
to compensation the President receives as a director. The other officers of the
Fund do not receive any compensation from the Fund other than the compensation
they may receive as directors. The total amount of such compensation paid to the
directors and officers for 1997 was $83,500. The Fund also reimburses directors
and officers for their reasonable expenses incurred in attending meetings or
otherwise in connection with their attention to the affairs of the Fund. In 1997
the total amount of such reimbursed expenses was $13,665. The Fund does not
provide officers and directors directly or indirectly with any pension or
retirement benefits for their services to the Fund.
The following table sets forth the aggregate compensation received by
each director of the Fund from the Fund and any other investment company having
the same investment adviser for services as a director or officer during 1997.
Such compensation does not include reimbursements to the directors for their
expenses incurred in connection with their activities as directors.
<TABLE>
<CAPTION>
Total Compensation from
Aggregate Compensation Fund and Fund Complex
Name of Director from Fund Paid to Directors
- ---------------- ---------------------- -----------------------
<S> <C> <C>
Ralph F. Brouty $5,500 $5,500
Robert P. Capone $5,000 $5,000
Timothy A. Dempsey $6,000 $10,250 (1)
Harry P. Doherty $7,000 $12,000 (1)
Chris C. Gagas $5,500 $5,500
Edward P. Henson $5,000 $5,000
Michael R. Kallet $5,500 $5,500
Stephen J. Kelly $5,500 $5,500
Clifford E. Kelsey, Jr. $6,000 $6,000
Robert E. Kernan, Jr. $5,500 $5,500
Joseph L. Mancino $5,000 $5,000
William A. McKenna, Jr. $5,500 $11,250 (1)
Vincent F. Palagiano $5,500 $5,500
Charles M. Sprock $5,500 $5,500
John M. Tsimbinos $5,500 $5,500
</TABLE>
(1) Includes compensation received as a director or officer of one other
investment company having the same investment adviser as the Fund.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) As of March 31, 1998, Staten Island Savings Bank, 15 Beach Street,
Staten Island, New York, owned approximately 33% of the outstanding shares of
the Fund. As a result of such ownership, Staten Island Savings Bank, which is
organized as a New York mutual savings bank, is deemed to be a controlling
person of the Fund. See Item 6(b) for a discussion of the effect of such
ownership on the rights of other shareholders.
(b) As of March 31, 1998, the following persons owned of record and, to
the best of the Fund's knowledge, beneficially more than 5% of the Fund's
outstanding securities:
<PAGE>
<TABLE>
<CAPTION>
Name and Address Percentage Ownership
---------------- --------------------
<S> <C>
Staten Island Savings Bank 33%
15 Beach Street
Staten Island, New York 10304
Ridgewood Savings Bank 17.9%
71-02 Forest Avenue
Ridgewood, NY 11385
Watertown Savings Bank 9.1%
111 Clinton Street
Watertown, New York 13601
The Warwick Savings Bank 8.4%
18 Oakland Avenue
P.O. Box 591
Warwick, NY 10990-0591
</TABLE>
(c) Although no officer or director of the Fund owns any equity
securities of the Fund, each director of the Fund is an officer or director of
an Eligible Institution or of a holding company which controls one or more
Eligible Institutions, and it is expected that such Eligible Institutions may,
from time to time, purchase shares of the Fund. All such directors disclaim
beneficial ownership of any such shares.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) Investment decisions for the Fund are made by the Fund's Investment
Adviser, Shay Assets Management, Inc. The Investment Adviser is responsible for
placing purchase and sale orders for portfolio securities and other investments.
Under the Investment Advisory Agreement, the Investment Adviser receives for its
investment management services a fee from the Fund computed at the annual rate
of 0.75% of the first $100,000,000 of the Fund's average daily net assets and
0.50% of the Fund's average daily net assets in excess of $100,000,000. The fee
payable to the Investment Adviser is reduced (but not below zero) to the extent
the expenses of the Fund (exclusive of professional fees, e.g., legal and audit
fees, directors' fees and expenses and distribution expenses, if any, payable
under Rule 12b-1) exceed 1.10% of the Fund's average daily net assets during any
fiscal year during the term of the Fund's agreement with the Investment Adviser.
The Investment Advisory Agreement also provides for a reduction in the fee
payable to the Investment Adviser to the extent the expenses of the Fund would
exceed any applicable limit established pursuant to the statutes or regulations
of any jurisdictions in which the Fund's shares are qualified for offer and
sale. However, the Fund's shares are not offered or sold in any jurisdiction
that imposes such a limitation. These limitations did not result in any
reduction of the Investment Adviser's fee in 1997. The total amounts paid by the
Fund for the period May 19, 1995 to December 31, 1995, and for the years ended
December 31, 1996 and 1997, respectively, in respect of investment advisory
<PAGE>
services were $233,934, $492,702 and $621,810, respectively, representing 0.75%,
0.75% and 0.75% of the Fund's average daily net assets (after all fee reductions
and expense limitations). See Item 5(b).
The Investment Adviser is a registered investment adviser under the
Investment Advisers Act of 1940 and serves as investment adviser to Asset
Management Fund, Inc., a registered investment company comprising five
fixed-income portfolios with aggregate net assets of approximately $1.2 billion
at March 31, 1998, and as investment adviser to M.S.B. Fund, Inc., an investment
company with net assets of approximately $55 million as of March 31, 1998.
The Investment Adviser, Shay Assets Management, Inc., is a Florida
corporation that is controlled by Rodger D. Shay. The Investment Adviser is a
wholly-owned subsidiary of Shay Investment Services, Inc., which is the holding
company for the Fund's Investment Adviser and Distributor and certain other
related companies engaged primarily in securities-related businesses. Rodger D.
Shay is the majority stockholder of Shay Investment Services, Inc. The
Investment Adviser's principal office is located at 111 East Wacker Drive,
Chicago, Illinois 60601.
Certain directors and officers of the Fund are affiliated persons of
the Investment Adviser. See Item 14 for a list of the capacities in which such
persons are affiliated with the Fund and the Investment Adviser.
Under the Investment Advisory Agreement, the Investment Adviser is not
liable to the Fund for any error of judgment or mistake of law or for any loss
suffered by the Fund, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the agreement.
The Investment Advisory Agreement will continue in effect from year to
year, subject to termination by the Fund or the Investment Adviser as described
below, if such continuance is approved at least annually by the vote of the
Fund's Board of Directors and a majority of the directors of the Fund who are
not "interested persons" of the Fund or of the Investment Adviser.
The Investment Adviser may terminate the Investment Advisory Agreement
only after the third anniversary of the date of the Agreement (i.e. after May
19, 1998) upon 90 days' written notice to the Fund. The Investment Advisory
Agreement can be terminated at any time without penalty by the Fund upon 30
days' written notice to the Investment Adviser. The Investment Advisory
Agreement will terminate automatically in the event of its assignment.
(b) Subject to the general supervision of the Board of Directors, the
Investment Adviser manages the investment operations of the Fund and the
composition of the Fund's portfolio of securities and investments (including
cash) belonging to the Fund. The Investment Adviser also provides such office
and other facilities as may be required by the Fund and is responsible for the
costs of preparing and keeping minutes of meetings of the Board of Directors.
See Item 16(a).
<PAGE>
(c) The Fund is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees payable to the Fund's Investment
Adviser, administrator, transfer agent, shareholder servicing agent, dividend
paying agent and custodian, brokerage fees and expenses, filing fees for the
registration or qualification of the Fund's shares under federal or state
securities laws, taxes, interest, the cost of liability insurance, fidelity
bonds, indemnification expenses, legal and auditing fees and expenses, any
costs, expenses or losses arising out of any liability of, or claim for damages
or other relief asserted against, the Fund for violation of any law, expenses of
preparing and printing prospectuses, proxy materials, reports and notices and of
mailing the same to shareholders and regulatory authorities, the compensation
and expenses of the Fund's directors and officers who are not affiliated with
the Fund's Investment Adviser or administrator and any extraordinary expenses
incurred by the Fund. See also Item 16(a).
A statement of operational expenses is included in each annual and
semi-annual report to shareholders.
Any expenses incurred in promoting the sale of shares of the Fund are
borne by the Fund's distributor, Shay Financial Services, Inc. ("Distributor"),
an affiliate of the Investment Adviser. The Distributor does not receive any
compensation from the Fund.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) PNC Bank, 17th and Chestnut Streets, Philadelphia, Pennsylvania, is
the custodian of the Fund and in that capacity maintains custody of the
investments (including cash) of the Fund. PNC Bank and PFPC are affiliates of
PNC Bank Corp. See Item 5(d).
Arthur Andersen LLP, 1601 Market Street, Philadelphia, Pennsylvania has
been appointed to serve as the Fund's independent auditors for fiscal year 1998
and in that capacity audits the Fund's annual financial statements.
(i) Not applicable.
ITEM 17. BROKERAGE ALLOCATION
(a) Transactions in portfolio securities were effected during the
calendar year 1997 through a total of 4 brokers, drawn from a list of brokers
selected by the Investment Adviser on the basis of their ability to provide
efficient execution of portfolio transactions and investment research and
statistical information. A majority of the Fund's portfolio transactions are
executed on national securities exchanges through member firms. However, when
<PAGE>
the Investment Adviser believes that a better price can be obtained for the
Fund, portfolio transactions may be executed in the third market. Portfolio
transactions in unlisted securities are executed in the over-the-counter market
through principal market makers. The brokerage list is reviewed continually in
an effort to obtain maximum advantage from investment research and statistical
information made available by brokers, and allocation among the brokers is made
on the basis of best price and execution consistent with obtaining research and
statistical information at reasonable cost. The Investment Adviser is thus
authorized to pay a brokerage commission in excess of that which another broker
might have charged for effecting the same transaction in recognition of the
value of efficient execution and research and statistical information provided
by the selected broker. In 1997, 76.1% of the Fund's brokerage (attributable to
purchases of $14,437,955 and proceeds from sales of $16,490,651) was placed with
brokers who provided investment research and statistical information to the
Fund's investment adviser. The total amount of brokerage commissions paid in
1995, 1996 and 1997 was approximately $101,024, $70,147 and $52,668,
respectively. Brokerage commissions were lower in 1997 than in 1996 as fewer
securities were required to be sold (which sales would have generated brokerage
commissions) to meet redemption or other cash requirements.
(b) Not applicable.
(c) The primary aim of the Fund in allocation of portfolio transactions
to various brokers is the attainment of the best price and execution. Consistent
with this primary aim, the Fund's Investment Adviser will give principal
consideration to attainment of the best price and to the execution efficiency,
settlement capability, and financial condition of the broker. The Investment
Adviser may also consider various additional criteria, including the size and
type of transaction, the nature and character of the markets for the security to
be purchased or sold, the broker's ability to provide quality research and
statistical services, and the reasonableness of any spread or commissions under
the circumstances and in light of the brokerage and research services provided.
The research and statistical information provided to the Investment
Adviser consists primarily of written and electronic reports and presentations
analyzing specific companies, industry sectors, the stock market and the
economy. To the extent that such research and information are used by the
Investment Adviser in rendering investment advice to the Fund, they tend to
reduce the Investment Adviser's expenses.
The Investment Adviser monitors the reasonableness of the commissions
paid by the Fund based on its experience in the market, and information as to
brokerage commissions paid by the Fund is reviewed periodically by the Board of
Directors.
Research, statistical and other services furnished by brokers through
whom the Fund executes securities transactions may be used by the Investment
Adviser in servicing all of its accounts, and not all such services may be
useful in connection with the Fund.
Neither the Fund nor any of its officers or directors nor its
Investment Adviser is affiliated with any broker employed by the Fund in
connection with the purchase or sale of portfolio securities or other
investments.
(d) Not applicable.
(e) Not applicable.
<PAGE>
ITEM 18. STOCK AND OTHER SECURITIES
(a) See Item 6(a).
(b) Not applicable.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
(a) See Item 7.
(b) Shares of the Fund may be purchased or redeemed at the Fund's net
asset value per share next determined after receipt of an order for purchase or
redemption as described in Items 7 and 8, subject to the exceptions described in
Item 8. See Item 7(b) for a description of the methods used to value the Fund's
assets. The following computation demonstrates by way of example the manner in
which the net asset value of the Fund was determined as of 4:00 P.M., New York
time, on December 31, 1997.
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
December 31, 1997 Valuation Sheet
<TABLE>
<CAPTION>
<S> <C>
Investment in securities, at value........................ $97,052,641
Cash...................................................... 224
Receivable for fund shares sold........................... 1,000,000
Dividends and interest receivable......................... 159,064
Prepaid expenses.......................................... 29,360
-----------
Total assets..................................... $98,241,289
-----------
Less:
Payable for investments purchased......................... 733,244
Accrued expenses payable.................................. 21,175
-----------
Total Liabilities......................................... 754,419
-----------
Net assets....................................... $97,486,870
===========
Number of shares outstanding.............................. 591,971
Net asset value, offering and redemption price per
share.................................................... $164.68
===========
</TABLE>
(c) Not applicable.
ITEM 20. TAX STATUS
It is the Fund's policy to distribute to shareholders substantially all
of its net investment income (income from dividends and interest, less expenses)
and net short-term capital gain, if any, as dividends and to distribute
substantially all net long-term capital gain (net of short-term capital loss) on
sales of portfolio securities as capital gain distributions. In the event the
<PAGE>
Fund fails to distribute to shareholders in a calendar year an amount equal to
the sum of (i) 98% of its ordinary income (excluding capital gain), (ii) 98% of
its capital gain net income (determined for the applicable twelve-month test
period), and (iii) the amount, if any, of ordinary income and capital gain not
distributed in the preceding calendar year, it would be subject to a
nondeductible 4% excise tax on the amounts not distributed. Because the Fund
expects to distribute all of its net investment income and net capital gain, it
does not expect to incur a liability for this tax.
In general, the portion of the dividends paid by the Fund out of
qualifying dividends received by the Fund from domestic corporations with
respect to shares which are held by the Fund for at least 46 days (excluding
certain periods during which the Fund's risk of loss is diminished), other than
with respect to certain cumulative dividends on preferred stock and designated
as such by the Fund will be eligible, whether paid in cash or in additional
shares, for the federal income tax 70% dividends-received deduction that is
available to certain corporate taxpayers. Because a portion of the dividends
paid by the Fund will be paid out of, in addition to such qualifying dividends,
other income such as interest income and net short-term capital gains realized
by the Fund, less than 100% of the dividends will be eligible for the 70%
dividends-received deduction. Dividends paid on shares of the Fund will not be
eligible for the dividends-received deduction if the corporate shareholder holds
such shares less than 46 days.
Other Code provisions may also limit the availability of the
dividends-received deduction to shareholders. For example, the 70%
dividends-received deduction cannot, in general, exceed 70% of a corporation's
taxable income (determined without regard to the 70% dividends-received
deduction). In addition, the Code reduces the 70% dividends-received deduction
with respect to portfolio stock where debt is attributable to the investment in
such stock. In addition, the 70% dividends-received deduction is not permitted
for purposes of calculating a shareholder's alternative minimum tax.
Shareholders should consult their own tax advisers concerning these and
other matters that may be applicable to their specific tax situation, including
the effects of any changes in the tax law.
ITEM 21. UNDERWRITERS
See Item 7(a).
ITEM 22. CALCULATION OF PERFORMANCE DATA
(a) Not applicable.
(b) From time to time, the Fund may advertise the total return and the
average annual total return of the Fund over specified periods. Such information
is based on historical results and is not intended to indicate or predict future
performance of the Fund. Total return shows the percentage change in the value
of an investment in the Fund over a specified period of time, assuming (i) a
hypothetical investment of $1,000 at the beginning of the period,
(ii) reinvestment of all dividends and distributions and (iii) deduction of all
applicable charges and expenses. The Fund's average annual total return
represents the annual compounded growth rate that would produce the total return
achieved over the applicable period. Comparisons of total returns on a
<PAGE>
year-to-year basis may facilitate an understanding of how the Fund is affected
by changing market conditions. The average annual total return permits an
investor to identify the overall rate of return achieved by the Fund during a
multi-year period without regard to year-to-year variations. The performance
information reported by the Fund does not take into account any federal or state
income taxes that may be payable by an investor. The Fund may also include
comparative performance information in advertising or marketing the Fund's
shares as described below.
The following table sets forth the total return on an investment in the
Fund for the one- , three-, five- and ten-year periods ended December 31, 1997,
and the average annual total return for such periods.
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
<TABLE>
<CAPTION>
Total Return Data
Periods ended December 31, 1997
-----------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Return........... 28.64% 94.15% 132.05% 283.30%
Average Annual Total
Return............... 28.64% 24.75% 18.34% 14.38%
</TABLE>
The foregoing information is a statement of the past record of the Fund
and should not be construed as a representation or prediction of future results.
The investment return and principal value of an investment in the Fund will
fluctuate with changing market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
From time to time the Fund's performance may be compared to the Dow
Jones Industrial Average and the Standard & Poor's 500 Composite Price Index,
which are groups of unmanaged securities, and other published indices and to the
Lipper All Equity Funds Average and the Lipper Growth and Income Funds Average.
The Fund's performance also may be compared to the returns payable on U.S.
Treasury securities, to the Federal Funds Rate and to the advance rates quoted
by a Federal Home Loan Bank. The Fund's performance also may be compared to that
of other mutual funds through ratings or rankings or appropriate averages based
on specified factors over specified periods of time reported or published by
such entities as AMG Data, Barron's, Business Week, CDA Investment Technologies,
Inc., Changing Times, Chicago Tribune, Consumer Reports, Crain's New York
Business, the Donoghue Organization, The Economist, Financial Times, Forbes,
Fortune, Futures, Income Opportunities, Investment Advisor, Investment Company
Data, Inc., Kiplinger's Personal Finance, Lipper Analytical Services, Inc.,
Media General Financial Services, Money, Morningstar, Inc., Mutual Fund Market
News, Newsweek, The New York Times, No-Load Fund Investor, Smart Money,
Standard & Poor's, Strategic Data, Success, Time, U.S. News and World Report,
USA Today, Value Line, The Wall Street Journal and Worth Magazine.
<PAGE>
ITEM 23. FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year ended
December 31, 1997, including the notes thereto and the report of Arthur Andersen
LLP, contained in the Fund's Annual Report to shareholders for the year ended
December 31, 1997 (the "Annual Report") are incorporated herein by reference to
the Annual Report. Such financial statements have been audited by Arthur
Andersen LLP and have been incorporated by reference herein in reliance on the
report of Arthur Andersen LLP and the authority of such firm as experts in
accounting and auditing. Except as set forth above, no other portion of the
Annual Report is incorporated herein.
The Fund will provide a copy of the Annual Report without charge to
each person to whom this Registration Statement is delivered. Requests should be
directed to the Fund in writing c/o Shay Financial Services, Inc., 111 East
Wacker Drive, Suite 2600, Chicago, IL 60601 or by telephone at 800-527-3713.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The following financial statements, including the notes thereto and the
report of Arthur Andersen LLP, contained in the Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1997 are incorporated by
reference into Part B of this Amendment to the Registration Statement:
(1) Schedule of Investments as of December 31, 1997
(2) Statement of Assets and Liabilities as of December 31, 1997
(3) Statement of Operations for the year ended December 31, 1997
(4) Statements of Changes in Net Assets for each of the years in
the two-year period ended December 31, 1997
(5) Financial Highlights, Selected Data for Each Share of Capital
Stock Outstanding Throughout Each Year for each of the years in
the five-year period ended December 31, 1997
(6) Notes to Financial Statements
(7) Report of Independent Auditors (Arthur Andersen LLP, dated
January 20, 1998)
(b) Exhibits:
(1) Restated Certificate of Incorporation of the registrant.
Previously filed with Amendment No. 9.
(2) By-Laws.
(3) Not applicable
(4) Instruments defining rights of security holders
(a) Form of Certificate for Common Stock. Previously filed
with Amendment No. 2.
(b) Articles Third, Fourth, Ninth, Tenth and Eleventh of
Certificate of Incorporation (See Exhibit 1.)
<PAGE>
(c) Articles II, VIII, IX and XVI of By-Laws (See Exhibit 2.)
(5) Investment Advisory Agreement dated as of December 9, 1997,
between the Registrant and Shay Assets Management, Inc.
(6) Not applicable
(7) Not applicable
(8) Custody Agreement
(a) Custodian Services Agreement dated as of May 19, 1995
between the Registrant and PNC Bank, National
Association. Previously filed with Amendment No. 8.
(b) Custodian Services Fees Agreement dated as of May 19,
1995 between the Registrant and PNC Bank, National
Association. Previously filed with Amendment No. 8.
(c) Administration and Accounting, Transfer Agency and
Custodian Services Fee Waivers Agreement dated as of May
19, 1995 between the Registrant, PNC Bank, National
Association and PFPC Inc. Previously filed with Amendment
No. 8.
(9) Other Material Contracts
(a) Administration and Accounting Services Agreement dated as
of May 19, 1995 between the Registrant and PFPC Inc.
Previously filed with Amendment No. 8.
(b) Transfer Agency Services Agreement dated as of May 19,
1995 between the Registrant and PFPC Inc. Previously
filed with Amendment No. 8.
(c) Distribution Agreement dated as of December 9, 1997
between the Registrant and Shay Financial Services, Inc.
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Not applicable
<PAGE>
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) Financial Data Schedule
(18) Not applicable
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
SIVCO Corp., a New York corporation and a wholly-owned subsidiary of
Staten Island Savings Bank, is deemed to be under common control with the
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1998, there were 24 record holders of common stock of
the Fund.
ITEM 27. INDEMNIFICATION
Sections 721-726 of the New York Business Corporation Law provide that
a New York corporation shall have the power and, in certain cases, the
obligation to indemnify officers or directors against certain liabilities.
Article XVII of the by-laws of the Registrant provides that the Registrant shall
indemnify directors or officers to the full extent permitted by New York law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
In addition, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, indemnification by the Registrant of its
directors and officers against liabilities arising out of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their respective offices is against public policy and, therefore,
<PAGE>
unenforceable. In the event that any questions arise as to the lawfulness of
indemnification under the Investment Company Act of 1940 or the advancement of
legal fees or other expenses incurred by its officers and directors, the
Registrant will not advance such expenses or provide such indemnification unless
there has been a determination by a court, by a vote of a majority of a quorum
consisting of disinterested, non-party directors, or by independent legal
counsel in a written opinion or by other reasonable and fair means that such
indemnification or advancement would not violate Section 17 of the Investment
Company Act of 1940 and the rules and regulations thereunder.
In addition, the Registrant has entered into a Directors and Officers
Liability Insurance Policy covering the period August 1, 1997 to July 31, 1998.
Such policy insures against loss which any directors or officers of the
Registrant are obligated to pay by reason of claims based on actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or
other act done or wrongfully attempted or any matter claimed against them solely
by reason of their being directors or officers. The policy does not protect or
purport to protect any director or officer against any loss arising from fines
or penalties imposed by law or matters which may be deemed uninsurable under the
law.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Incorporated herein by reference from Items 5 and 16 are the following:
the description of the business of Shay Assets Management, Inc. (the "Investment
Adviser"), the information concerning the organization and controlling persons
of Shay Financial Services, Inc. (the "Distributor") and the biographical
information pertaining to Messrs. Shay, Sammons, McCabe and Trautman.
The Investment Adviser is located at 111 East Wacker Drive, Chicago,
Illinois, 60601 and at 1000 Brickell Avenue, Miami, Florida, 33131, and also has
offices in New York City and Summit, New Jersey. The Investment Adviser is a
wholly-owned subsidiary of Shay Investment Services, Inc. ("SISI"). SISI is
owned by Rodger D. Shay, Sr., Arthur M. Berardelli, Barbara M. Quesep and Rodger
D. Shay, Jr., with Rodger D. Shay, Sr. being the controlling shareholder of
SISI. Shay Financial Services, Inc. ("SFSI") and First Financial Trust Company
("FFTC") are also wholly-owned subsidiaries of SISI.
Rodger D. Shay, Sr. is the Chairman of the Investment Adviser, SISI,
and SFSI. Edward E. Sammons, Jr. is President of the Investment Adviser and
Executive Vice President of SFSI. Rodger D. Shay, Jr. is the President of SFSI
and Executive Vice President of the Investment Adviser. Roy R. Hingston and
Robert T. Podraza are also Vice Presidents of the Investment Adviser, SISI and
SFSI.
SFSI is a securities broker-dealer registered with the Securities and
Exchange Commission. FFTC is a Texas trust company which provides custodial
services, primarily for institutional customers of SFSI.
Effective December 8, 1997, the Investment Adviser began rendering
investment adviser services to the Fund and two other registered investment
<PAGE>
companies, Asset Management Fund, Inc. ("AMF") and M.S.B. Fund, Inc. In
addition, the Investment Adviser acts as investment adviser to several savings
banks located in New York State on a non-discretionary basis.
From its inception in August 1990 to December 7, 1997, the Investment
Adviser was a 50% general partner and the managing partner of Shay Assets
Management Co., the Fund's prior investment adviser. SAMC was the investment
adviser for the Fund and M.S.B. Fund, Inc. from May 19, 1995 to December 7,
1997, for AMF from September 1, 1990 to December 7, 1997, and for the
Institutional Investors Tax-Advantaged Income Fund, Inc. from May 19, 1995 to
March 15, 1996, and was the Sub-Adviser, providing portfolio management
services, for the U.S. Mortgage Securities Portfolio of Nationar Funds, Inc.
from June 1994 to February 1995. In addition, SAMC acted as investment adviser
to several savings banks located in New York State on a non-discretionary basis.
SAMC was dissolved on December 7, 1997, with its assets, liabilities, and
business (including investment advisory services to the Fund) being transferred
to the Investment Adviser.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and other documents required to be maintained pursuant to
Rule 31a-1(b) (4) and (b) (10) are in the physical possession of the Fund's
Secretary, 111 East Wacker Drive, Chicago, Illinois 60601; accounts, books and
other documents required by Rule 31a-1(b) (5) through (7) and (b) (11) and Rule
31a-1(f) are in the physical possession of Shay Assets Management, Inc.,
111 East Wacker Drive, Chicago, Illinois 60601; all other books, accounts and
other documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of PFPC Inc., 103 Bellevue Parkway, Wilmington, Delaware 19809.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York and
State of New York on the 30th day of April, 1998.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ JOHN McCABE
------------------------------------
John McCabe
Senior Vice President
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2 By-laws
5 Investment Advisory Agreement dated as of December 9,
1997, between the Registrant and Shay Assets
Management, Inc.
9(c) Distribution Agreement dated as of December 9, 1997,
between the Registrant and Shay Financial Services,
Inc.
17 Financial Data Schedule
</TABLE>
EXHIBIT 2
By-Laws
<PAGE>
BY-LAWS
OF
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
(As Amended to January 21, 1998)
<PAGE>
BY-LAWS
OF
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I. Offices................................................... 1
Section 1. Location........................................... 1
ARTICLE II. Meetings of Stockholders.................................. 1
Section 1. Place of Meeting................................... 1
Section 2. Annual Meeting..................................... 1
Section 3. Special Meetings................................... 1
Section 4. Notice of Meetings................................. 1
Section 5. Quorum............................................. 2
Section 6. Organization....................................... 2
Section 7. Voting............................................. 2
Section 8. Inspectors......................................... 3
Section 9. List of Stockholders at Meeting.................... 3
ARTICLE III. Board of Directors........................................ 3
Section 1. Number, Qualifications and Term of Office.......... 3
Section 2. Vacancies.......................................... 4
Section 3. Resignations....................................... 5
Section 4. Increase or Decrease in Size of Board.............. 5
Section 5. Place of Meeting................................... 5
Section 6. Annual Meeting..................................... 5
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Section 7. Regular Meetings................................... 5
Section 8. Special Meetings................................... 5
Section 9. Notice of Special Meetings......................... 6
Section 10. Organization....................................... 6
Section 11. Contracts.......................................... 6
Section 12. Supervision by New York State Banking Department... 6
Section 13. Compensation and Reimbursement of Expenses......... 6
Section 14. Presumption of Concurrence......................... 7
Section 15. Action of Directors or Committees without Meeting.. 7
Section 16. Telephonic Meetings of the Board or Committees..... 7
ARTICLE IV. Committees................................................ 7
ARTICLE V. Officers.................................................. 8
Section 1. Number and Description............................. 8
Section 2. Term of Office..................................... 8
Section 3. Resignation........................................ 9
Section 4. Vacancies.......................................... 9
Section 5. The President...................................... 9
Section 6. The Executive Vice President....................... 9
Section 7. The Vice President................................. 9
Section 8. The Secretary...................................... 10
Section 9. Assistant Secretaries.............................. 10
Section 10. Treasurer.......................................... 10
Section 11. Assistant Treasurers............................... 10
Section 12. Compensation....................................... 11
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE VI. Stock..................................................... 11
Section 1. Representation of Shares of Stock.................. 11
Section 2. Open Accounts...................................... 11
Section 3. Certificates of Stock.............................. 11
Section 4. Lost, Destroyed or Wrongfully Taken Certificates... 12
Section 5. Record Date........................................ 12
Section 6. Record of Stockholders............................. 12
Section 7. Transfer of Stock.................................. 12
ARTICLE VII. Determination of Net Asset Value.......................... 13
ARTICLE VIII. Repurchase of Stock....................................... 13
ARTICLE IX. Restrictions on Sale and Transfer of Shares............... 16
ARTICLE X. Investments............................................... 16
ARTICLE XI. Custodian................................................. 18
ARTICLE XII. Investment Adviser........................................ 18
Section 1. Appointment of Investment Adviser.................. 18
Section 2. Agreement with Investment Adviser.................. 18
ARTICLE XIII. Bonding of Officers and Employees......................... 18
ARTICLE XIV. Seal...................................................... 19
ARTICLE XV. Miscellaneous............................................. 19
Section 1. Fiscal Year........................................ 19
Section 2. Reports to Stockholders............................ 19
ARTICLE XVI. Amendments................................................ 19
ARTICLE XVII. Indemnification of Directors and Officers................. 19
Section 1. Actions by or in the Right of the Corporation to
Procure a Judgment in its Favor.................... 19
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Section 2. Other Actions or Proceedings....................... 20
Section 3. Payment of Indemnification Other Than by Court
Award.............................................. 20
Section 4. Indemnification by a Court......................... 21
Section 5. Limitations on Advancement of Expenses and
Indemnification.................................... 21
Section 6. Other Limitations and Restrictions of
Indemnification.................................... 23
<PAGE>
BY-LAWS
OF
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
ARTICLE I.
Offices.
SECTION 1. LOCATION. The principal office of the Corporation shall be
in the City of New York, County and State of New York. The Corporation shall
also have offices or agencies at such other places, either within or without the
State of New York, as the Board of Directors from time to time may designate, or
as the business of the Corporation may require.
ARTICLE II.
Meetings of Stockholders.
SECTION 1. PLACE OF MEETING. All meetings of the stockholders shall be
held at the principal office of the Corporation in the City of New York, New
York, or at such other place as may be fixed by the Board of Directors.
SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders, for
the purposes of electing directors and transacting such other business as may
properly come before it, shall be held on such date and at such time and place,
as may be specified by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose may be called to be held at any time by a majority of the members of
the Board of Directors then in office. Special meetings shall be called upon the
written request, addressed to the President or the Secretary of the Corporation,
of the holders of not less than 25 per cent in amount of the stock of the
Corporation outstanding and entitled to vote. Such call and written request
shall state the purpose or purposes of the proposed meeting, and the business
transacted at any special meeting shall be confined to such stated purpose or
purposes.
SECTION 4. NOTICE OF MEETINGS. Written notice of the place, date, hour
and purpose or purposes of each annual meeting of the stockholders and each
special meeting of the stockholders shall be given by the Secretary, either
personally or by mail, not less than ten nor more than sixty days before the
date of the meeting. Said written notice, unless it is for the annual meeting,
shall indicate that it is being issued by or at the direction of the person or
persons calling the meeting.
<PAGE>
If mailed, the notice of an annual or special meeting of the
stockholders shall be deemed to be given when deposited in the United States
mail, postage prepaid, addressed to each stockholder at his address as it
appears on the record of stockholders, or, if a stockholder shall have filed
with the Secretary of the Corporation a written request that notices to him be
mailed to some other address, then directed to him at such other address.
If any meeting of the stockholders is adjourned to another time or
place, no notice of such adjourned meeting need be given other than by
announcement at the meeting at which such adjournment is taken.
Notice of the place, date, hour and purpose of any meeting of the
stockholders may be waived in writing by any stockholder either before or after
the meeting, and any such waiver shall be filed with the Secretary and by him
entered upon the records of the meeting. The attendance of any stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice to him. Whenever all of the stockholders shall consent in writing to the
holding of a meeting, such meeting shall be valid without call or notice.
SECTION 5. QUORUM. At any meeting of the stockholders the holders of a
majority in amount of the outstanding shares of stock entitled to vote, present
in person or represented by proxy, shall constitute a quorum for the transaction
of any business. When a quorum is once present to organize a meeting, it shall
not be broken by the subsequent withdrawal of any stockholders.
If a quorum is present, directors shall, except as otherwise required
by law, be elected by a plurality of the votes cast at the meeting of the
stockholders. Any other corporate action by vote of the stockholders, except as
otherwise required by law, shall be authorized by a majority of the votes cast
at the meeting of the stockholders.
In the absence of a quorum at any meeting, the holders of a majority in
amount of the outstanding shares of stock entitled to vote, present in person or
represented by proxy at the meeting may adjourn the meeting from time to time
until the holders of the number of shares requisite to constitute a quorum is
present in person or represented by proxy at the meeting. At any adjourned
meeting at which a quorum is present, any business may be transacted that might
have been transacted at the meeting as originally convened.
SECTION 6. ORGANIZATION. The President, or in his absence the Executive
Vice President, or in the absence of the President and the Executive Vice
President, the Vice President, or in the absence of each of the foregoing, a
person chosen by a majority in number of the holders of stock entitled to vote
and present in person or represented by proxy, shall act as chairman of the
meeting. The Secretary, or in his absence, the Assistant Secretary, or in the
absence of both the Secretary and the Assistant Secretary, any person designated
by the Chairman, shall act as Secretary of the meeting.
SECTION 7. VOTING. Each outstanding share of stock shall be entitled to
one vote on each matter submitted to a vote at a meeting of the stockholders. A
<PAGE>
stockholder may vote either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except in those cases
where an irrevocable proxy is provided by law.
Whenever stockholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of all outstanding shares
entitled to vote thereon.
SECTION 8. INSPECTORS. The Board of Directors, in advance of any
stockholders' meeting, shall appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a stockholders' meeting, may, and on the request of any
stockholder entitled to vote thereat shall, appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. A report or certificate
made by them shall be prima facie evidence of the facts stated and of the vote
as certified by them.
SECTION 9. LIST OF STOCKHOLDERS AT MEETING. A list of stockholders as
of the record date, certified by the Secretary of the Corporation or by the
transfer agent, shall be produced at any meeting of the stockholders upon the
request thereat or prior thereto of any stockholder. If the right to vote at any
meeting is challenged, the inspectors of election or person presiding thereat,
shall require such list of stockholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
ARTICLE III.
Board of Directors.
SECTION 1. NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The business of
the Corporation shall be managed by a Board of Directors, each member of which
shall:
(a) be at least twenty-one years of age;
<PAGE>
(b) throughout his term of office, be a director, trustee or senior
officer of an institution which is qualified to be a stockholder
of the Corporation or a director, trustee or senior officer of a
holding company owning a majority of the outstanding stock of such
an institution or an officer of the Corporation;
(c) not have been convicted within ten years of any felony or
misdemeanor involving the purchase or sale of any security or
arising out of conduct as an underwriter, broker, dealer, or
investment adviser, or as an affiliated person, salesman, or
employee of any investment company, bank, or insurance company;
(d) not be, by reason of any misconduct, permanently or temporarily
enjoined by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer, or
investment adviser, or as an affiliated person, salesman, or
employee of any investment company, bank, or insurance company, or
from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the
purchase or sale of any security;
(e) not remain in office for a period in excess of three months from
the date such director no longer qualifies as a director pursuant
to paragraph (b) above; and
(f) not remain in office if he fails to attend at least sixty percent
of the regular meetings of the Board of Directors between March
and February held in each such twelve-month period; provided,
however, that the Board of Directors may waive such attendance
requirement as to any director for any such twelve-month period
for good cause shown.
In the nomination and election of directors, appropriate consideration
shall be given to the geographical distribution of the stockholders of the
Corporation, but representation from each of the groups established by the
Savings Banks Association of New York State shall not be required.
Such directors shall be divided into three classes, which shall be as
nearly equal in number as possible, and no class shall include less than three
directors. The terms of office of the directors shall be as follows: That of the
first class shall expire at the next annual meeting of stockholders, the second
class at the second annual meeting and the third class at the third succeeding
annual meeting. At each annual meeting after such initial classification,
directors replacing those whose terms expire at such annual meeting shall be
elected to hold office until the third succeeding annual meeting. Each director
shall serve for the term for which he is elected and until his successor is
elected and shall qualify.
SECTION 2. VACANCIES. Newly created directorships resulting from an
increase in the number of directors and all vacancies occurring in the Board of
<PAGE>
Directors may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, if immediately
after filling any such vacancy at least two-thirds of the directors then holding
office shall have been elected by the holders of the outstanding stock of the
Corporation at an annual or special meeting. In the event that at any time less
than a majority of the directors of the Corporation holding office were so
elected by the holders of the outstanding stock, the Board of Directors shall
forthwith cause to be held as promptly as possible, and in any event within
sixty days, a meeting of such holders for the purpose of electing directors to
fill any existing vacancies in the Board of Directors. Any director elected by
the Board of Directors shall fill such vacancy until the next annual meeting of
stockholders, and until his successor is elected and shall qualify. Any director
elected by the holders of the outstanding stock shall fill such vacancy for the
unexpired portion of the term of his predecessor in office, and until his
successor is elected and shall qualify.
SECTION 3. RESIGNATIONS. Any director may resign at any time by giving
written notice to the President or to the Secretary of the Corporation; such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation by the Board of Directors shall not be necessary
to make it effective.
SECTION 4. INCREASE OR DECREASE IN SIZE OF BOARD. The number of
directors may be established by the vote of a majority of the entire Board of
Directors from time to time but shall not be more than twenty-five nor less than
nine. When the number of directors is increased by the Board of Directors and
any newly created directorships are filled by the Board of Directors, there
shall be no classification of the additional directors until the next annual
meeting of stockholders. No decrease in the number of directors shall shorten
the term of any incumbent director.
SECTION 5. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of New York as it
may from time to time determine.
SECTION 6. ANNUAL MEETING. A meeting of the Board of Directors, to be
known as the annual meeting, shall be held without notice immediately after, and
at the same place as, the meeting of the stockholders at which such Board of
Directors is elected, for the purpose of electing the officers and appointing an
Executive Committee of the Corporation.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at least quarterly at such time and place as the Board of
Directors may from time to time determine, without call and without notice.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called at any time by the President, and shall be called by the Secretary
on the written request of any two directors. Any such special meetings may be
held at such place as shall be specified in the call, but if no place is
specified, then at the principal office of the Corporation in the City of New
York, New York.
<PAGE>
SECTION 9. NOTICE OF SPECIAL MEETINGS. Notice of the time and place,
date and hour, of each special meeting stating the person or persons calling the
meeting shall be given by the Secretary to each director at least twenty-four
hours prior to such meeting. Such notice may be given verbally, in person or by
telephone, in writing by personal delivery, by mail, by facsimile or by
telegraph and shall specify the purpose or purposes of such meeting. Any
director may waive notice of any meeting, and the attendance of a director at
any meeting shall constitute a waiver of notice of such meeting. No business
shall be transacted at any special meeting except such as shall have been
specified in the notice or waiver of notice thereof.
SECTION 10. ORGANIZATION. Unless the Board of Directors shall by
resolution otherwise provide, the President, or in his absence the Executive
Vice President, or in the absence of both the President and Executive Vice
President, the Vice President, shall act as chairman at all meetings of the
Board of Directors; and the Secretary, or in his absence the Assistant
Secretary, or in the absence of both the Secretary and the Assistant Secretary,
such person as may be designated by the chairman, shall act as secretary at all
such meetings.
A majority of the entire Board of Directors shall constitute a quorum
necessary for the transaction of business or of any specified item of business,
and, except as otherwise provided by law, the vote of a majority of directors
present at any meeting at which a quorum is present, shall be the act of the
Board of Directors. If at any meeting of the Board of Directors a quorum is not
present, a majority of the directors present may adjourn the meeting from time
to time.
SECTION 11. CONTRACTS. The Corporation shall not deal or contract with
any vendor, purchaser or supplier if any director of the Corporation is either
the owner of such vendor, purchaser or supplier or is a partner in, a principal
officer or the owner of 15% or more of the outstanding stock of such vendor,
purchaser or supplier, or if two or more directors of the Corporation own in the
aggregate 25% or more of the outstanding stock of such vendor, purchaser or
supplier; provided, however, that the provisions of this section shall not apply
to any savings bank organized under the laws of the State of New York or to a
corporation all of the stock of which shall be owned by savings banks organized
under the laws of the State of New York.
SECTION 12. SUPERVISION BY NEW YORK STATE BANKING DEPARTMENT. The
Corporation makes itself subject to the supervision of the New York State
Banking Department and, pursuant to such supervision, submits itself to periodic
examinations by the New York State Banking Department at such times and in such
manner as the Superintendent of Banks shall provide, and will pay the charges
for such examinations assessed against it by the Superintendent of Banks in the
same manner as if it were a banking organization organized under the laws of the
State of New York.
SECTION 13. COMPENSATION AND REIMBURSEMENT OF EXPENSES. The Board of
Directors, by resolution, may authorize the Corporation to compensate each
director for his services as a director of the Corporation, and each director,
<PAGE>
as such, shall be entitled to reimbursement for his reasonable expenses incurred
in attending meetings or otherwise in connection with his attention to the
affairs of the Corporation.
SECTION 14. PRESUMPTION OF CONCURRENE. A director who is present at a
meeting of the Board of Directors, or any committee thereof, at which action is
taken on the declaration of any dividend or other distribution in cash or
property, the purchase of the shares of the Corporation, the distribution of
assets to stockholders after dissolution of the Corporation without paying or
adequately providing for all known liabilities of the Corporation, excluding any
claims not filed by creditors within the time limit set in a notice given to
creditors under law, or the making of any loan to any director unless authorized
by vote of the stockholders, shall be presumed to have concurred in the action
unless his dissent thereto shall be entered in the minutes of the meeting, or
unless he shall submit his written dissent to the person acting as secretary of
the meeting before the adjournment thereof, or shall deliver or send by
registered mail such dissent to the Secretary of the Corporation promptly after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action. A director who is absent from the
meeting of the board or any committee thereof, at which such action is taken,
shall be presumed to have concurred in the action unless he shall deliver or
send by registered mail his dissent thereto to the Secretary of the Corporation
or shall cause such dissent to be filed with the minutes of the proceedings of
the Board of Directors or committee within a reasonable time after learning of
such action.
SECTION 15. ACTION OF DIRECTORS OR COMMITTEES WITHOUT MEETING. Whenever
the Board of Directors or any committee thereof is required or permitted to take
action, such action may be taken without a meeting if all members of the Board
or the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consents by the members of the Board
or committee shall be filed with the minutes of the proceedings thereof.
SECTION 16. TELEPHONIC MEETINGS OF THE BOARD OR COMMITTEES. Whenever
permitted by the President or, in his absence, by the Executive Vice President,
any one or more members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting, except that any action with
respect to the entry into, renewal or performance by the Corporation of any
contract or agreement whereby a person undertakes regularly to act or serve as
investment advisor of or principal underwriter for the Corporation shall be
taken only at a meeting where the requisite directors are physically present.
ARTICLE IV.
Committees.
The Board of Directors of the Corporation, by resolution adopted by a
majority of the entire Board of Directors, may designate from among its members
<PAGE>
an executive committee and other committees, each consisting of three or more
directors, and each of which, to the extent provided in the resolution, shall
have all the authority of the Board of Directors, except that no such committee
shall have authority as to the following matters:
(1) the submission to stockholders of any action that needs
stockholder authorization;
(2) the filling of vacancies in the Board of Directors or in any
committee;
(3) the fixing of compensation of the directors for serving on the
Board of Directors or on any committee;
(4) the amendment or repeal of any resolution of the Board of
Directors which by its terms shall not be so amendable or
repealable; and
(5) the amendment or repeal of these By-laws, or the adoption of new
By-laws.
Each such committee shall serve at the pleasure of the Board of
Directors and may adopt its own rules of procedure and shall keep regular
minutes of its proceedings and report the same to the Board of Directors.
ARTICLE V.
Officers.
SECTION 1. NUMBER AND DESCRIPTION. The officers of the Corporation, all
of whom shall be elected by the Board of Directors, shall be a President, an
Executive Vice President, a Vice President, a Secretary, one or more Assistant
Secretaries, a Treasurer, and, at the option of the Board of Directors, one or
more Assistant Treasurers.
The Board of Directors may elect or appoint such other officers and
agents as it shall deem necessary or as the business of the Corporation may
require, each of whom shall hold office for such period, have such authority and
perform such duties as the Board of Directors may prescribe from time to time.
The President shall have authority to appoint any agents or employees, other
than those elected or appointed by the Board of Directors, and to prescribe
their authority and duties, which may include the authority to appoint
subordinate officers, agents or employees.
Any two or more offices, except the office of President and Secretary,
may be held by the same person, but no officer shall execute, acknowledge or
certify any instrument in more than one capacity.
SECTION 2. TERM OF OFFICE. Each officer elected or appointed by the
Board of Directors shall hold office until the next annual meeting of the Board
of Directors and until his successor has been elected or appointed and
<PAGE>
qualified. Any officer may be removed at any time, with or without cause, by the
affirmative vote of a majority of the whole Board of Directors. Any officer,
agent or employee not elected or appointed by the Board of Directors shall hold
office at the discretion of the President or of the officer appointing him.
SECTION 3. RESIGNATION. Any officer may resign at any time by giving
written notice to the Board of Directors, or to the President, or Secretary, or
to the officer appointing him. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. VACANCIES. A vacancy in any office caused by the death,
resignation, removal or disqualification of the person elected or appointed
thereto, or by any other cause, shall be filled for the unexpired portion of the
term in the same manner as prescribed in these By-laws for regular election or
appointment to such office. In case of the absence or disability or refusal to
act of any officer of the Corporation, or for any other reason that the Board of
Directors deems sufficient, the Board of Directors may delegate, for the time
being, the powers and duties or any of them, of such officer, to any other
officer or to any director.
SECTION 5. THE PRESIDENT. The President shall be a director and the
principal executive officer of the Corporation. He shall have general charge,
control and supervision of the management and direction of the business,
property and affairs of the Corporation subject to the control and direction of
the Board of Directors.
The President is authorized to sign, execute and acknowledge in the
name and on behalf of the Corporation, all deeds, mortgages, bonds, notes,
debentures, stock certificates, contracts, leases, reports, and other documents
and instruments, except where the signing and execution thereof by some other
officer, agent or representative of the Corporation shall be expressly
authorized and directed by law or by the Board of Directors or by these By-laws.
Unless otherwise provided by law or by the Board of Directors, the President may
authorize any officer, employee or agent of the Corporation to sign, execute and
acknowledge, in the name and on behalf of the Corporation and in his place and
stead, all such documents and instruments. The President shall have such other
powers and perform such other duties as are incident to the office of president
and as from time to time may be prescribed by the Board of Directors.
SECTION 6. THE EXECUTIVE VICE PRESIDENT. In the absence or inability to
act of the President, or if the office of President be vacant, the powers and
duties of the President shall temporarily devolve upon the Executive Vice
President, who shall be a director.
The Executive Vice President shall have such other powers and perform
such other duties as from time to time may be assigned to him by the Board of
Directors or be delegated to him by the President, including, unless otherwise
ordered by the Board of Directors, the power to sign, execute and acknowledge
all documents and instruments.
SECTION 7. THE VICE PRESIDENT. In the absence or inability to act of
the Executive Vice President, or if that office be vacant, the powers and duties
of the Executive Vice President shall temporarily devolve upon the Vice
President.
<PAGE>
The Vice President shall have such other powers and perform such other
duties as from time to time may be assigned to him by the Board of Directors or
be delegated to him by the President or Executive Vice President, including,
unless otherwise ordered by the Board of Directors, the power to sign, execute
and acknowledge all documents and instruments.
SECTION 8. THE SECRETARY. The Secretary shall: (1) keep the minutes of
the proceedings of the stockholders, Board of Directors and executive committee
and other committees, if any, in one or more books provided for that purpose;
(2) see that all notices are duly given in accordance with the provisions of
these By-laws or as required by law; (3) be custodian of the corporate records
and of the seal of the Corporation and see that the seal of the Corporation is
affixed to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized; (4) file each written request by a
stockholder that notice to him be mailed to some address other than the address
which appears on the record of stockholders; (5) sign with the President, or a
Vice President, certificates representing shares of stock of the Corporation,
the issuance of which shall have been authorized by resolution of the Board of
Directors; (6) have general charge of the record of stockholders of the
Corporation; and (7) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 9. ASSISTANT SECRETARIES. In the absence of the Secretary, or
during his disability or refusal to act, his powers and duties shall temporarily
devolve upon such one of the Assistant Secretaries as the President or the Board
of Directors may direct, or, if there be but one Assistant Secretary, then upon
such Assistant Secretary. The Assistant Secretaries shall have such other powers
and perform such other duties as from time to time may be assigned to them,
respectively, by the Board of Directors or be delegated to them by the President
or the Secretary.
SECTION 10. TREASURER. The Treasurer, subject to the provisions
hereinafter set forth respecting a custodian or custodians, and any agreements
entered into by the Corporation pursuant thereto, shall have responsibility for
the custody and safekeeping of all funds of the Corporation and shall have
charge of their collection, receipt and disbursement; shall have responsibility
for the custody and safekeeping of all securities of the Corporation; shall
receive and have authority to sign receipts for all moneys paid to the
Corporation and shall deposit the same in the name and to the credit of the
Corporation in such banks or depositaries as the Board of Directors shall
approve; shall endorse for collection on behalf of the Corporation all checks,
drafts, notes and other obligations payable to the Corporation; shall disburse
the funds of the Corporation only in such manner as the Board of Directors may
require; shall sign or countersign all notes, endorsements, guarantees and
acceptances made on behalf of the Corporation when and as directed by the Board
of Directors; shall keep full and accurate accounts of the transactions of his
office in books belonging to the Corporation and render to the Board of
Directors, whenever they may require, an account of his transactions as
Treasurer; and in general shall have such other powers and perform such other
duties as are incident to the office of Treasurer and as from time to time may
be prescribed by the Board of Directors.
SECTION 11. ASSISTANT TREASURERS. In the absence of the Treasurer, or
during his disability or refusal to act, his powers and duties shall temporarily
<PAGE>
devolve upon such one of the Assistant Treasurers as the President or the Board
of Directors may direct, or, if there be but one Assistant Treasurer, then upon
such Assistant Treasurer. The Assistant Treasurers shall have such other powers
and perform such other duties as shall from time to time be assigned to them,
respectively, by the Board of Directors or be delegated to them by the President
or the Treasurer.
SECTION 12. COMPENSATION. The salaries or other compensation of all
officers elected or appointed by the Board of Directors shall be fixed from time
to time by the Board of Directors. The salaries or other compensation of all
other officers, agents and employees of the Corporation shall be fixed from time
to time by the President, but only within such limits as to amount, and in
accordance with such other conditions, if any, as from time to time may be
prescribed by the Board of Directors.
ARTICLE VI.
Stock.
SECTION 1. REPRESENTATION OF SHARES OF STOCK. The shares of stock of
the Corporation shall be held in open accounts or represented by certificates
for shares of stock. Certificates shall be issued if a stockholder shall request
such issuance.
SECTION 2. OPEN ACCOUNTS. Open accounts shall be maintained and
recorded by the Transfer Agent or the Registrar of the Corporation. Each open
account shall bear the name and address of the record owner of the shares held
in the open account and such other information as the Board of Directors may
deem appropriate for complete and accurate identification. Upon any change in
the number of shares held in an open account, written notice of such change
shall be mailed to the record owner.
SECTION 3. CERTIFICATES OF STOCK. Certificates representing shares of
stock of the Corporation shall be in such form as may be determined by the Board
of Directors. All such certificates shall be consecutively numbered and shall be
signed by the President or a Vice President and the Secretary or an Assistant
Secretary or the Treasurer of the Corporation and may, but need not be, sealed
with the seal of the Corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a Transfer Agent or registered by a Registrar other than the
Corporation itself or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Each certificate representing shares of stock of the Corporation shall
when issued state upon the face thereof: that the Corporation is formed under
the laws of the State of New York; the name of the person or persons to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate. Each certificate
shall also on its face have noted conspicuously the restrictions on transfer set
forth in Article IX of these By-laws.
<PAGE>
The name and address of the persons to whom certificates for shares of
stock are issued and the number of shares represented by and the date of issue
and transfer of each certificate, shall be entered on books of the Corporation
kept for that purpose. The stock record and transfer books and the blank stock
certificates shall be kept by such Transfer Agent or by the Secretary or such
other officer as shall be designated by the Board of Directors for that purpose.
Every certificate surrendered to the Corporation for redemption, transfer,
exchange, or credit to an open account shall be cancelled and shall show thereon
the date of cancellation.
SECTION 4. LOST, DESTROYED OR WRONGFULLY TAKEN CERTIFICATES. The Board
of Directors of the Corporation may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, apparently destroyed or wrongfully taken. When authorizing such issue
of a new certificate the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as it deems
adequate, to protect the Corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost, destroyed or
wrongfully taken.
SECTION 5. RECORD DATE. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining the stockholders entitled
to receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than sixty nor less than ten days before the date of any meeting,
nor more than sixty days prior to any other action. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided herein, such determination shall apply to
any adjournment thereof, unless the Board of Directors fixes a new record date
for the adjourned meeting.
SECTION 6. RECORD OF STOCKHOLDERS. The Corporation shall keep at its
principal office, or at the office of its transfer agent or registrar in the
State of New York, a record containing the names and addresses of all
stockholders, the number of shares held by each, and the dates when they
respectively became the owners of record thereof. Except as otherwise provided
by law, the Corporation shall be entitled to recognize the exclusive right of a
record owner to receive dividends and other distributions and to vote the shares
held in his name, and the Corporation shall not be bound to recognize any other
person's equitable or legal claim to or interest in such shares.
SECTION 7. TRANSFER OF STOCK. Shares of stock of the Corporation, to
the extent transferable, shall be transferred on the books of the Corporation
only upon surrender of a certificate or certificates therefor, if any, to the
Corporation or its Transfer Agent properly endorsed or accompanied by or, if no
certificates therefor have been issued, by delivery of proper assignments duly
executed by the registered holder thereof in person or by his attorney duly
authorized in writing.
<PAGE>
ARTICLE VII.
Determination of Net Asset Value.
The net asset value of each share of stock shall be determined in
accordance with generally accepted accounting principles as of such time as may
be specified by the Board of Directors and, unless the Corporation shall be
exempted therefrom, in accordance with the applicable provisions of the
Investment Company Act of 1940 and the rules and regulations promulgated
thereunder.
ARTICLE VIII.
Repurchase of Stock.
The option granted to each holder of shares of stock requiring the
Corporation to purchase all or any part of such shares may be exercised only in
accordance with the following:
1. Such right shall be exercised in each instance by a notice of
redemption given to the Corporation or its Transfer Agent during
usual business hours. Such notice shall consist of an irrevocable
offer to sell each of such shares to the Corporation at the
redemption price per share and may be made orally or in writing in
form acceptable to the Corporation or its Transfer Agent. Prior to
payment of the redemption price by the Corporation,
(a) all oral notices shall be confirmed in writing; and
(b) certificates, if any, for the shares to be redeemed by the
Corporation in proper form for transfer, together with such
proof of the authenticity of signatures as may be required by
the Corporation or its Transfer Agent shall be surrendered to
the Corporation or its Transfer Agent; provided that in any
case where a certificate has been issued for part or all of
the shares to be redeemed, a duly executed stock power or
other instrument of assignment covering such shares, together
with such proof of authenticity of signatures on such stock
power or other instrument of assignment as may be required by
the Corporation or its Transfer Agent shall be delivered, if
required, to the Corporation or its Transfer Agent.
2. The redemption price applicable to any such redemption shall be
computed as of the close of the New York Stock Exchange on the day
on which notice of redemption is received by the transfer agent of
the Corporation, if received on a business day before the close of
the New York Stock Exchange; if the notice of redemption is not
received on a business day, or if such notice is received after
<PAGE>
the close of the New York Stock Exchange on a business day, then
the redemption price shall be computed as of the close of the next
succeeding business day. Such computation shall apply only to the
extent of 2500 shares or 10% of the total number of shares owned
on the date of giving such notice by the holder presenting shares
for redemption, whichever is greater. The computation of the
redemption price of any excess number of shares as to which notice
is received from a shareholder shall be made at the close of the
New York Stock Exchange on the business day next succeeding the
date of the first computation, subject to the same maximum
limitation of the greater of 2500 shares or 10% of the total
number of shares owned on the date of giving such notice, with
continuing like computations on each succeeding business day,
until the redemption price for all shares for which notice has
been received shall have been so determined. A business day is a
day, other than a public holiday in the State of New York, on
which the New York Stock Exchange is open for trading. The
procedures for computation of redemption prices for large
redemptions contained in the second and third sentences of this
paragraph 2 may be waived by the Board of Directors in the event
that it determines that such restrictions are not in the best
interests of the Corporation and its stockholders.
3. The redemption price shall be paid by the Corporation in cash
within seven business days after receipt of the notice of
redemption by the Corporation or its Transfer Agent, provided the
certificates for the shares to be redeemed, if any, have been
surrendered or any documentation required has been delivered to
the Corporation or its Transfer Agent; except that
(a) in the event that the redemption price of any share shall be
computed pursuant to this article on a day other than the day
of delivery of notice of redemption, then the redemption
price of such share shall be paid by the Corporation within
seven business days after such day of computation;
(b) any such payment may be postponed or the right of redemption
suspended,
(i) for any period during which the New York Stock Exchange
is closed other than customary weekend and holiday
closings or during which trading on the New York Stock
Exchange is restricted;
(ii) for any period during which the Board of Directors
determines that an emergency exists as the result of
which disposal by the Corporation of securities owned
<PAGE>
by it is not reasonably practicable or it is not
reasonably practicable for the Corporation fairly to
determine the value of its net assets;
(iii) for such other period as the Securities and Exchange
Commission may by order permit for the protection of
security holders of the Corporation; provided that
applicable rules and regulations of the Securities and
Exchange Commission (or any succeeding governmental
authority) shall govern as to the existence of
restricted trading under (i) above or the emergency
under (ii) above; or
(iv) for such other period as may be fixed by the Board of
Directors, if the Board of Directors shall determine
that it is contrary to the best interests of the
Corporation and to its other stockholders to commit the
Corporation to an earlier repurchase of any or all of
the shares so offered, but such determination shall be
made only when a prior offer remains unaccepted or when
the Board of Directors expressly concludes that by
reason of the number of shares offered or the condition
of the securities markets there is doubt as to the
ability of the Corporation to liquidate assets
sufficient to raise the necessary funds within an
earlier time without undue sacrifice and that the
existence of extraordinary conditions requires adoption
of an emergency measure; and
(c) any such payment may be made in whole or in part in kind, in
securities or other assets of the Corporation, if the Board
of Directors shall determine that, by reason of the closing
of the New York Stock Exchange or otherwise, the orderly
liquidation of securities owned by the Corporation is
impracticable, or payment in cash would be prejudicial to the
best interests of the remaining stockholders of the
Corporation, provided that in making any such payment in
kind, the Corporation shall, as nearly as may be practicable,
deliver securities or other assets of a market value
representing the same proportionate interest in the assets of
the Corporation as is represented by the shares so to be paid
for; whenever delivery of securities or other assets is so to
be made, such delivery shall be made as promptly as
practicable after receipt by the Corporation or its Transfer
Agent of a request for redemption in proper form accompanied
by such other documents as may be required by the Corporation
pursuant to these By-laws.
<PAGE>
ARTICLE IX.
Restrictions on Sale and Transfer of Shares.
In addition to such restrictions as may be set forth in Article Fourth
of the Corporation's certificate of incorporation, shares of stock of the
Corporation shall not be sold or be transferable to or be owned by, any person
other than (i) a savings bank or savings and loan association which is organized
under the laws of the State of New York, (ii) a federal savings association
organized under the laws of the United States, (iii) a holding company owning a
majority of the outstanding shares of such a savings bank, savings and loan
association or savings association, (iv) a life insurance department of any such
savings bank, savings and loan association or savings association, (v) a wholly-
or majority-owned subsidiary of any such savings bank, savings and loan
association or savings association, including without limitation a life
insurance subsidiary, or (vi) a pension trust, fund, plan or agreement
participated in by one or more such savings banks, savings and loan
associations, savings associations or holding companies to provide retirement
benefits, death benefits or disability benefits for any or all of its or their
active officers and employees.
ARTICLE X.
Investments.
As a general policy it shall be the objective of the Corporation to the
fullest extent reasonably possible to keep at least 80% of the assets (at market
value) of the Corporation invested in common stocks but it shall not be deemed
inconsistent with such general policy to invest part of said assets from time to
time in preferred stocks and obligations that are convertible into such common
stocks, or to write (sell) call options, which are listed on an organized
securities exchange, on securities which are owned by the Corporation.
All investments shall also be subject to the following restrictions and
limitations:
1. All investments shall meet the requirements of the New York
Banking Law, the requirements of the Investment Company Act of
1940 for a "diversified company" and the requirements of the
Internal Revenue Code for qualification as a "regulated investment
company".
2. The Corporation may not:
(i) purchase securities of an issuer if such purchase would
cause more than 25% of the value of the Corporation's
total assets (taken at current value) to be invested in
the securities of any one issuer or group of issuers in
the same industry;
<PAGE>
(ii) purchase securities of an issuer if such purchase would
cause more than 5% of any class of securities of such
issuer to be held by the Corporation;
(iii) purchase securities of an issuer (other than
obligations of the United States and its
instrumentalities) if such purchase would cause more
than 5% of the Corporation's total assets, taken at
market value, to be invested in the securities of such
issuer;
(iv) invest in any issuer for the purpose of exercising
control of management;
(v) underwrite securities of other issuers;
(vi) purchase or sell real estate, or real estate mortgage
loans;
(vii) deal in commodities or commodities contracts;
(viii)loan money, except that the Corporation may (A)
purchase debt obligations and (B) make sales of Federal
funds;
(ix) purchase on margin or sell short any security (but the
Corporation may obtain such short-term credits as may
be necessary for the clearance of purchases and sales
of securities);
(x) borrow money or mortgage or pledge any of its assets,
except that the Corporation may borrow money from banks
for temporary or emergency (but not leveraging)
purposes in an amount up to 5% of the Corporation's
total assets when the borrowing is made, and may pledge
up to 15% of its assets to secure such borrowings;
(xi) purchase or retain securities of an issuer if any
officer, director or employee of or counsel for the
Corporation is an officer, director or employee of such
issuer; and
(xii) write, purchase or sell puts, calls or combinations
thereof, except that the Corporation may (A) write
covered call options with respect to any or all of its
portfolio securities and (B) enter into closing
purchase transactions with respect to such options.
<PAGE>
ARTICLE XI.
Custodian.
All securities and funds owned by the Corporation shall at all times be
held in the custody of one or more custodians or sub-custodians appointed by the
Board of Directors upon such terms and conditions as the Board of Directors may
fix. Each such custodian or sub-custodian shall be a bank (as defined in the
Investment Company Act of 1940, as amended) which shall have at all times an
aggregate capital, surplus and undivided profits of not less than $500,000. The
Corporation or any such custodian or sub-custodian may deposit all or any part
of the securities owned by the Corporation in a securities depository or
clearing agency or the federal bookentry system in accordance with the
requirements of the Investment Company Act of 1940, as amended.
ARTICLE XII.
Investment Adviser.
SECTION 1. APPOINTMENT OF INVESTMENT ADVISER. The Board of Directors
may appoint an investment adviser to furnish to the Corporation investment
management services and other facilities and services upon such terms and
conditions as the Board of Directors may authorize.
SECTION 2. AGREEMENT WITH INVESTMENT ADVISER. The appointment of an
investment adviser shall be by written agreement, which agreement shall be in
compliance with the Investment Company Act of 1940.
ARTICLE XIII.
Bonding of Officers and Employees.
All officers and employees of the Corporation who may singly or jointly
with others have access to securities or funds of the Corporation, either
directly or through authority to draw upon such funds or to direct generally the
disposition of such securities, shall be bonded by a reputable fidelity
insurance company against larceny and embezzlement in such reasonable amounts as
a majority of the Board of Directors of the Corporation who are not such
officers and employees shall determine with due consideration to the value of
the aggregate assets of the Corporation to which such persons shall have access,
the type and terms of the arrangements made for the custody and safekeeping of
such assets, and the nature of securities in the Corporation's portfolio. Such
determination shall be made at least once a year.
The Secretary of the Corporation shall make all the filings and give
all the notices required by Rule 17g-1 promulgated under the Investment Company
Act of 1940.
<PAGE>
ARTICLE XIV.
Seal.
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal, New
York". The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any manner reproduced.
ARTICLE XV.
Miscellaneous.
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year.
SECTION 2. REPORTS TO STOCKHOLDERS. The Board of Directors shall at
least semi-annually submit to the stockholders a written financial report of the
transactions of the Corporation including financial statements which shall at
least annually be reported on by independent public accountants.
ARTICLE XVI.
Amendments.
These By-laws, except as otherwise provided by law, may be amended or
repealed or new By-laws may be adopted by the affirmative vote of the Board of
Directors at any regular or special meeting of the Board, except that Section 11
or Section 12 of Article III shall not be altered, amended or repealed without
the prior written approval of the Superintendent of Banks of the State of New
York and Article X may not be altered, amended or repealed except upon a
majority vote of the Corporation's outstanding shares. If any By-law regulating
an impending election of directors is adopted, amended or repealed by the Board
there shall be set forth in the notice of the next meeting of stockholders for
the election of directors the By-law so adopted, amended or repealed, together
with a precise statement of changes made. By-laws adopted by the Board of
Directors may be amended or repealed by the stockholders.
ARTICLE XVII.
Indemnification of Directors and Officers.
SECTION 1. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION TO PROCURE A
JUDGMENT IN ITS FAVOR. The Corporation shall indemnify any person made, or
threatened to be made, a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the Corporation,
<PAGE>
or is or was serving at the request of the Corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign, of any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with the defense or
settlement of such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation, except that no
indemnification under this Section shall be made in respect of (1) a threatened
action, or a pending action which is settled or otherwise disposed of, or (2)
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
SECTION 2. OTHER ACTIONS OR PROCEEDINGS. The Corporation shall
indemnify any person made, or threatened to be made, a party to an action or
proceeding (other than one by or in the right of the Corporation to procure a
judgment in its favor), whether civil (including administrative) or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Corporation or that he had reasonable
cause to believe that his conduct was unlawful.
SECTION 3. PAYMENT OF INDEMNIFICATION OTHER THAN BY COURT AWARD. A
person who has been successful, on the merits or otherwise, in the defense of a
civil (including administrative) or criminal action or proceeding of the
character described in Section 1 and Section 2 above shall be entitled to
indemnification as authorized in such Sections.
<PAGE>
Except as provided in the paragraph above, any indemnification under
Section 1 or Section 2 of this Article, unless ordered by a court under Section
4 of this Article, shall be made by the Corporation, only if authorized in the
specific case:
(i) By the Board acting by a quorum consisting of directors who are not
parties to such action or proceeding upon a finding that the director or
officer has met the standard of conduct set forth in Section 1 or Section
2, as the case may be; or
(ii) If such a quorum is not obtainable with due diligence or even if
obtainable, a quorum of disinterested directors so directs:
(a) By the Board upon the opinion in writing of independent legal
counsel that indemnification is proper in the circumstances because the
applicable standard of conduct set forth in such Sections has been met
by such director or officer; or
(b) By the stockholders upon a finding that the director or
officer has met the applicable standard of conduct set forth in such
Sections.
Expenses incurred in defending a civil or criminal action or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount as, and to the extent, required by
Section 5(a) of this Article, subject to Section 5(b).
SECTION 4. INDEMNIFICATION BY A COURT. Notwithstanding any failure of
the Corporation to provide indemnification, and despite any contrary resolution
of the Board or of the stockholders in the specific case under Section 3,
indemnification shall be awarded by a court to the extent authorized under
Section 1, Section 2 and the first paragraph of Section 3.
Where indemnification is sought by judicial action, the court may allow
a person such reasonable expenses, including attorneys' fees, during the
pendency of the litigation as are necessary in connection with his defense
therein, if the court shall find that the defendant has by his pleadings or
during the course of the litigation raised genuine issues of fact or law.
Section 5. Limitations on Advancement of Expenses and Indemnification.
(a) All expenses incurred in defending a civil or criminal action or
proceeding which are advanced by the Corporation under the last paragraph of
Section 3, or allowed by a court under the last paragraph of Section 4, shall be
repaid in case the person receiving such advancement or allowance is ultimately
found, under the procedure set forth in this Article of the bylaws not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced by the Corporation or allowed by the court exceed the
indemnification to which he is entitled.
(b) No advancement of expenses shall be made pursuant to this Article
unless:
<PAGE>
(i) the indemnitee, or someone on behalf of the indemnitee,
undertakes to repay the advance unless it is ultimately determined that
the indemnitee is entitled to indemnification; and
(ii) one of the following conditions has been met:
(a) the indemnitee provides security for his undertaking,
(b) the Corporation is insured against losses arising by
reason of any lawful advance, or
(c) a majority of a quorum of the disinterested non-party
directors, or an independent legal counsel in a written
opinion, determines, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.
(c) The Corporation shall indemnify any officer or director
("indemnitee") only after the occurrence of any one of the following events:
(i) a final decision on the merits by a court or other body before
whom a proceeding was brought that the indemnitee was not liable by
reason of "Disabling Conduct," i.e., willful misfeasance, bad faith,
gross negligence or reckless disregard of duty,
(ii) a dismissal of a court action or administrative proceeding
against the indemnitee for insufficient evidence of any Disabling
Conduct with which he has been charged,
(iii) a determination, made in good faith and upon a review of the
facts, by the vote of a majority of those directors who are neither
interested persons of the Corporation or parties to the action or
proceeding, that the indemnitee was not liable by reason of Disabling
Conduct,
(iv) the receipt by the Board of Directors of a written opinion by
legal counsel not representing the indemnitee determining, upon a
review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct, or
(v) under other circumstances in which indemnification may
lawfully be given.
(d) No indemnification, advancement or allowance shall be made under
this Article in any circumstance where:
(i) that the indemnification, advancement or allowance would be
inconsistent with a provision of the certificate of incorporation , a
<PAGE>
by-law, a resolution of the board or of the stockholders, an agreement
or other proper corporate action, in effect at the time of the accrual
of the alleged cause of action asserted in the threatened or pending
action or proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification;
or
(ii) if there has been a settlement approved by the court, the
indemnification would be inconsistent with any condition with respect
to indemnification expressly imposed by the court in approving the
settlement.
(e) If, under this Article of the by-laws any expenses or other amounts
are paid by way of indemnification, otherwise than by court order or action by
the stockholders, the Corporation shall, not later than the next annual meeting
of stockholders unless such meeting is held within three months from the date of
such payment, and in any event, within fifteen months from the date of such
payment, mail to its stockholders of record at the time entitled to vote for the
election of directors a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
SECTION 6. OTHER LIMITATIONS AND RESTRICTIONS OF INDEMNIFICATION.
Notwithstanding anything contained in Sections 1 through 5 above of this Article
to the contrary, this Article does not 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.
EXHIBIT 5
Investment Advisory Agreement dated as of December 9, 1997, between the
Registrant and Shay Assets Management, Inc.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of December 9, 1997, by and
between Institutional Investors Capital Appreciation Fund, Inc., a New York
corporation (the "Fund"), and Shay Assets Management, Inc., a Florida
corporation (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company incorporated in New York on October 29, 1952; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. ADVISORY SERVICES. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund with respect to the assets belonging to the
Fund's common stock, $1.00 par value, for the period and on the terms set forth
in this Agreement. Shares of the Fund's common stock, $1.00 par value, are
referred to herein as "Fund Shares". The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. The Fund, at its option, may also appoint the Adviser to act as
investment adviser to the Fund hereunder with respect to the assets belonging to
any other class of capital stock of the Fund from time to time created, but the
Adviser shall not be required to accept any such appointment. The Adviser shall
furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of the assets and its business affairs and matters
incidental thereto, all subject to the supervision of the Board of Directors of
the Fund and subject to the provisions of the Certificate of Incorporation (as
defined in paragraph 3(a) of this Agreement) and By-Laws (as defined in
paragraph 3(b) of this Agreement) of the Fund and any resolution, rules or
regulations adopted by the Board of Directors of the Fund. The Adviser shall for
all purposes herein provided be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Board of
Directors of the Fund from time to time, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent for the Fund. The
Fund shall also be free to retain, at its own expense, other persons to provide
it with any services whatsoever including, but not limited to, statistical,
factual or technical information or advice. The services of the Adviser herein
provided are not to be deemed exclusive and the Adviser shall be free to render
similar services or other services to others.
2. DUTIES OF THE ADVISER. Subject to the general supervision of the
Board of Directors of the Fund, the Adviser shall, employing its discretion,
manage the investment operations of the Fund and the composition of the
portfolio of securities and investments (including cash) belonging to the Fund,
<PAGE>
including the purchase, retention and disposition thereof and the execution of
agreements relating thereto, in accordance with the investment objective,
policies and restrictions of the Fund as stated in the Prospectus (as defined in
paragraph 3(f) of this Agreement), Registration Statement (as defined in
paragraph 3(d) of this Agreement), Certificate of Incorporation and By-Laws of
the Fund and subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will be
purchased, retained or sold by the Fund, and what portion of the assets will be
invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Certificate of Incorporation,
the By-Laws and Prospectus of the Fund and with the instructions and directions
of the Board of Directors of the Fund and will conform to and comply with the
requirements of the Investment Company Act of 1940, as amended from time to
time, and the rules and regulations of the Securities and Exchange Commission
thereunder (collectively, the "1940 Act") and all other applicable Federal and
state laws and regulations, including without limitation the provisions of the
Internal Revenue Code, as amended from time to time, applicable to the Fund as a
regulated investment company.
(d) The Adviser shall determine the securities and other investments to
be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the issuer or
with any broker and/or dealer in such securities. In placing orders with brokers
and/or dealers the Adviser intends to seek the best price and execution for
purchases and sales and will comply with such policies with respect to brokerage
as are set forth in the Fund's Registration Statement and Prospectus or as the
Fund's Board of Directors may adopt from time to time. On occasions when the
Adviser deems the purchase or sale of a security to be in the best interest of
the Fund as well as other customers, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased in order to obtain the best price and
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Adviser in
a manner it considers to be equitable and consistent with its fiduciary
obligations to the Fund and, if applicable, to such other customers.
(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board of
Directors such periodic and special reports as the Board of Directors may
reasonably request.
(f) The Adviser shall provide the Fund's custodian and administrator on
each business day with information relating to all transactions concerning the
assets of the Fund, except redemptions of and any subscriptions for Fund Shares,
and will provide on a timely basis to the Fund's administrator and other persons
<PAGE>
providing services to the Fund such information as the administrator or such
other persons may reasonably request in connection with the performance of their
respective duties and obligations with respect to the Fund.
(g) The Adviser will report to the Board of Directors of the Fund at
each meeting thereof all changes in the investments and other assets of the Fund
since the prior report, and will keep the Board of Directors informed of
material developments affecting the Fund and the Adviser, and on its own
initiative, will furnish the Board of Directors from time to time with such
information as the Adviser may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in the Fund's
holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser also will furnish the Board of Directors with such
statistical and analytical information with respect to securities and other
investments of the Fund as the Adviser may believe appropriate or as the Board
of Directors may reasonably request. The Adviser shall prepare and furnish to
the Board of Directors all such other written materials and documents as may be
requested or as may otherwise be necessary or appropriate in connection with
meetings of the Board of Directors, and, if the Secretary of the Fund is an
officer, director, or employee of the Adviser or any of its affiliated persons,
the Adviser shall cause to be prepared and shall bear the costs of preparing and
keeping the minutes of the meetings of the Board of Directors and committees
thereof and of meetings of the stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities as may
be required by the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and will
promptly notify and deliver to it all future amendments and supplements if any:
(a) Certificate of incorporation of the Fund, as filed with the
Secretary of State of the State of New York and in effect on the date hereof and
as amended or restated from time to time (the "Certificate of Incorporation").
(b) By-Laws of the Fund, as in effect on the date hereof and as amended
or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the Fund and of
the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and, if applicable, the
Securities Act of 1933, as amended, on Form N-1A (the "Registration Statement")
as filed with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent amendments
thereto.
(e) Notification of Registration under the 1940 Act on Form N-8A as
filed with the Commission.
<PAGE>
(f) Prospectus or Prospectuses and Statement or Statements of
Additional Information of the Fund, if any, as currently in effect and as
amended or supplemented from time to time, being herein called the "Prospectus".
4. EMPLOYEES OF THE ADVISER. The Adviser shall authorize and permit any
of its directors, officers and employees who may be elected as Directors or
officers of the Fund to serve in the capacities in which they are elected.
5. BOOKS AND RECORDS. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of this
Agreement. The Adviser agrees that all records which it maintains for the Fund
are the property to the Fund and it will promptly surrender any of such records
to the Fund upon the Fund's request. The Adviser further agrees to preserve for
the period prescribed by Rule 31a-2 of the Commission under the 1940 Act any
such records as are required to be maintained by the Adviser with respect to the
Fund hereunder or by Rule 31a-1 of the Commission under the 1940 Act, as such
rule may be amended from time to time, and any other applicable rule that may be
adopted by the Commission.
6. EXPENSES. During the term of this Agreement the Adviser will pay all
expenses (including without limitation the compensation of all its directors,
officers and employees serving as Directors or officers of the Fund pursuant to
paragraph 4 of this Agreement) incurred by it in connection with its activities
under this Agreement other than the cost of the securities and investments
purchased for the Fund (including taxes and brokerage commissions, if any). The
Adviser also shall pay the salaries, fees and expenses of Directors, officers
and employees of the Fund who are affiliated persons of the Adviser or
affiliated persons of any affiliated person of the Adviser. All other expenses
shall be borne by the Fund, subject to the limitations and reimbursements
provided for in paragraphs 7 and 8 hereof.
7. COMPENSATION AND GENERAL EXPENSE LIMITATION.
(a) For the services provided and expenses borne by the Adviser
pursuant to this Agreement, the Fund shall pay to the Adviser compensation based
on the annual percentage of the Fund's average daily net assets paid monthly, as
follows: 0.75% of the first $100 million and 0.50% over $100 million; provided,
however, that if the Restricted Expenses (as defined below) of the Fund with
respect to any fiscal year of the Fund exceed an amount (the "Restricted Expense
Cap") equal to 1.10% of the average daily net asset value of the Fund during
such fiscal year, the fee payable to the Adviser with respect to such fiscal
year shall be reduced by the amount of such excess, but not below zero. The fee
payable to the Adviser pursuant to this paragraph 7 (the "Advisory Fee") shall
commence on the date hereof (the "Effective Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject to
further adjustment as provided in paragraph 8, and the fee for each month will
be paid to the Adviser during the succeeding month.
(b) The amount of compensation payable to the Adviser with respect to
each day during a fiscal year of the Fund shall be adjusted as follows:
<PAGE>
(i) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the close
of business on such day exceeds the Applicable Pro Rata
Portion of the Restricted Expense Cap (as defined below)
through such day, the compensation payable to the Adviser
with respect to such day shall be reduced by the amount of
such excess.
(ii) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the close
of business on such day is less than the Applicable Pro Rata
Portion of the Restricted Expense Cap through such day, the
compensation payable to the Adviser with respect to such day
shall be increased by the amount of such excess, except to
the extent such increase would cause the aggregate
compensation payable to the Adviser with respect to the
period from the beginning of such fiscal year through such
date to exceed the Applicable Pro Rata Portion of the
Advisory Fee (as defined below).
In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted Expense Cap'
as of any day shall mean the dollar amount computed by
multiplying 1.10% by (A) the ratio computed by dividing the
number of days elapsed since the beginning of the relevant
fiscal year by the number of days in such year and (B) the
average daily net asset value of the Fund from the beginning
of the relevant fiscal year through such day. (ii)
"Applicable Pro Rata Portion of the Advisory Fee" as of any
day shall mean the dollar amount of the Advisory Fee that
would be payable to the Adviser with respect to the period
from the beginning of the relevant fiscal year through such
day, if such amount were computed without regard to the
limitations set forth in paragraph 7(b) and paragraph 8,
multiplied by the ratio computed by dividing the number of
days elapsed since the beginning of the relevant fiscal year
by the number of days in such fiscal year.
(d) In the event this Agreement becomes effective on a date other than
the first day of any fiscal year, solely for the purpose of computing the amount
of the Advisory Fee for such fiscal year, such first fiscal year shall be deemed
<PAGE>
to begin on the Effective Date and to end on December 31 of such year. In the
event this Agreement terminates on a date other than the last day of any fiscal
year, solely for the purpose of computing the amount of the Advisory Fee for
such fiscal year, such fiscal year shall be deemed to begin on January 1 of such
year and to end on the date of the termination of this Agreement. In either of
such events, the Applicable Pro Rata Portion of the Restricted Expense Cap and
the Applicable Pro Rata Portion of the Advisory Fee shall be reduced by
multiplying such amount by the ratio computed by dividing the number of days
deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Restricted Expenses" means all expenses
of the Fund, including without limitation (i) the general expenses of the Fund,
(ii) the fees payable to the Adviser, the Fund's administrator, if any, the
Fund's transfer agent and dividend paying agent, if any, and the Fund's
custodian and (iii) registration fees and the costs and expenses of qualifying
the Fund's shares for offer and sale under the Blue Sky laws of any jurisdiction
where such shares may be qualified from time to time; but the Restricted
Expenses shall exclude (A) the fees and expenses of the Fund's outside counsel
(other than registration and filing fees disbursed by such counsel on behalf of
the Fund), (B) the fees and expenses of the Fund's independent accountants, (C)
Directors' fees and the expenses incurred by Directors and reimbursed by the
Fund and (D) fees and expenses paid under a plan of distribution, if any,
adopted pursuant to Rule 12b-1 under the 1940 Act.
8. BLUE SKY LIMITATION ON EXPENSES.
(a) In the event the Expenses (as defined in paragraph 8(b) below) of
the Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations of any
jurisdictions in which Fund Shares are then qualified for offer and sale (such
excess hereinafter called the "Blue Sky Excess Expense"), the compensation due
to the Adviser under paragraph 7 for the fiscal year in question shall be
reduced by an amount equal to the Blue Sky Excess Expense of the Fund, and if
the Blue Sky Excess Expense of the Fund exceeds the fees of the Fund payable to
the Adviser with respect to the Fund for the fiscal year in question, the
Adviser shall, to the extent required by such statute or regulations, reimburse
the Fund for the amount of such excess. If for any month the Expenses shall
exceed 1/12th of the percentage of average daily net assets allowable as
Expenses, the payment to the Adviser for that month shall be reduced, and, if
necessary, the Adviser shall make a refund payment to the Fund so that the
Expenses will not exceed such percentage. As of the end of the fiscal year,
however, the foregoing computations shall be readjusted so that the aggregate
compensation payable to the Adviser for the year is equal to the amount provided
for in paragraph 7 hereof, reduced by an amount equal to the Blue Sky Excess
Expense of the Fund. The aggregate of the repayments, if any, by the Adviser to
the Fund for the year shall be the amount necessary to reimburse the Fund for
the amount of such excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term
"Expenses" means the general expenses of the Fund, including without limitation
fees payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses shall
<PAGE>
exclude any interest, taxes, brokerage commissions and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business.
9. LIMITATION OF LIABILITY. The Adviser shall 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 this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. EFFECTIVE DATE AND TERM. This Agreement shall become effective on
the date hereof. This Agreement shall remain in effect until May 30, 1998, and
shall continue in effect thereafter for successive twelve-month periods (or for
such shorter periods as may be specified by the Fund's Board of Directors)
subject to termination as hereinafter provided, if such continuance is approved
at least annually (a) by vote of the Fund's Board of Directors, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by vote
of a majority of the Directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The annual approvals provided for herein shall be effective to
continue this Agreement from year to year (or for such shorter period referred
to above) if given within a period beginning not more than ninety (90) days
prior to (and including) the anniversary of the date upon which the most recent
previous continuance of this Agreement became effective, notwithstanding the
fact that more than three hundred sixty-five (365) days may have elapsed since
the date on which such approval was last given. This Agreement may be terminated
(i) by the Fund at any time, without the payment of any penalty, by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, on 30 (thirty) days'
written notice to the Adviser, or (ii) after May 19, 1998, by the Adviser at any
time, without the payment of any penalty, on 90 (ninety) days' written notice to
the Fund. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
11. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a majority of
those Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b), if required
by the 1940 Act, by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund.
12. NOTICES. Notices of any kind to be given to the Adviser by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive Vice
President, or at such other address or to such other individual as shall be
specified by the Adviser to the Fund in accordance with this paragraph 12.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at 200 Park Avenue,
New York, NY 10166, Attention: President, or at such other address or to such
other individual as shall be specified by the Fund to the Adviser in accordance
with this paragraph 12, with copies to each of the Fund's Directors at their
respective addresses set forth in the Fund's Registration Statement and to the
legal counsel to the Fund.
<PAGE>
13. AUTHORITY. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually. The Adviser
agrees that neither the stockholders nor the Directors nor any officer,
employee, representative or agent of the Fund shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Fund, that the
stockholders, Directors, officers, employees, representatives and agents of the
Fund shall not be personally liable hereunder, and that the Adviser shall look
solely to the property of the Fund for the satisfaction of any claim hereunder.
14. CONTROLLING LAW. This Agreement shall be governed by the construed
in accordance with the laws of the state of New York.
15. MULTIPLE COUNTERPARTS. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed to be an
original, but which together shall constitute one and the same instrument.
16. CAPTIONS. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the content
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
------------------------------------
Harry P. Doherty
President
SHAY ASSETS MANAGEMENT, INC.
By: /s/ ROBERT T. PODRAZA
------------------------------------
Robert T. Podraza
Vice President
EXHIBIT 9(C)
Distribution Agreement dated as of December 9, 1997, between the
Registrant and Shay Financial Services, Inc.
<PAGE>
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 9th day of December,
1997, between INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC. , a New
York corporation (herein called the "Fund"), and SHAY FINANCIAL SERVICES, INC.,
a Florida corporation (herein called the "Distributor").
WHEREAS, the Fund is an open-end management investment company and is
so registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain the Distributor as the distributor
for the Fund to provide for the distribution of shares of common stock of the
Fund, each such share having a par value of $1.00 per share (herein collectively
called "Shares"), and is willing to render such services;
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Distributor copies of each of the following
documents and will deliver to it all future amendments and supplements thereto,
if any:
(a) The Fund's Certificate of Incorporation and all amendments
thereto (such Certificate of Incorporation, as currently in effect and as it
shall from time to time be amended, herein called the Fund's "Certificate of
Incorporation");
(b) The By-Laws of the Fund (such By-Laws, as currently in effect
and as it shall from time to time be amended, herein called the "By-Laws");
(c) Resolutions of the Board of Directors of the Fund authorizing
the execution and delivery of this Agreement;
(d) The most recent amendment to the Fund's Registration Statement
under the Investment Company Act of 1940, as amended (the "1940 Act"), on Form
N-1A as filed with the Securities and Exchange Commission (the "Commission"),
said Registration Statement, as presently in effect and as amended or
supplemented from time to time, is herein called the "Registration Statement";
(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission; and
(f) The Prospectus and Statement of Additional Information, if
any, of the Fund (such prospectus and statement of additional information, as
filed with the Securities and Exchange Commission and as they shall from time to
time be amended and supplemented, herein called the "Prospectus").
<PAGE>
II. DISTRIBUTION
1. APPOINTMENT OF DISTRIBUTOR. The Fund hereby appoints Distributor to
serve as the distributor of the Fund's Shares and Distributor hereby accepts
such appointment and agrees to render the services and duties set forth in this
Section II.
2. SERVICES AND DUTIES.
(a) Except as provided below, the Fund agrees to offer for sale
exclusively through Distributor as agent, from time to time during the term of
this Agreement, Shares of the Fund (whether authorized but unissued or treasury
shares, in the Fund's sole discretion) upon the terms and at the net asset value
as described in the Registration Statement or Prospectus, if any. Distributor
will act only in its own behalf as principal in making agreements with selected
dealers or others for the sale of Shares, and shall offer Shares only at the net
asset value thereof as set forth in the Registration Statement or Prospectus, if
any. Distributor shall devote its best efforts to effect sales of Shares of the
Fund, but shall not be obligated to sell any certain number of Shares. All
subscriptions for Shares solicited by the Distributor shall be directed to the
Fund for acceptance and shall not be binding on the Fund until accepted by it.
The Distributor shall have no authority to make binding subscriptions on behalf
of the Fund. The Fund reserves the right to offer Shares directly to investors,
including offers in connection with (i) the merger or consolidation of the Fund
or its series or classes with any other investment company or series or class
thereof, (ii) the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment company or
(iii) reinvestment in Shares by the Fund's stockholders of dividends or other
distributions or any other offering by the Fund of securities to its
stockholders.
(b) In all matters relating to the sale of Shares, Distributor will
act in conformity with the Fund's Certificate of Incorporation, By-Laws,
Registration Statement or Prospectus, if any, and with the instructions and
directions of the Board of Directors of the Fund and will conform to and comply
with the requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act, the regulations of the National Association of
Securities Dealers, Inc. and all other applicable federal or state laws and
regulations. In connection with such sales, Distributor acknowledges and agrees
that it is not authorized to provide any information or make any representations
other than as contained in the Fund's Registration Statement and Prospectus and
any sales literature specifically approved by the Fund.
(c) Distributor will bear the cost of (i) printing and distributing
the Prospectus, if any, and Statement of Additional Information, if any,
(including any supplement thereto) to persons who are not either shareholders
of, or counsel, independent accountants or other persons providing similar
services to, the Fund, and (ii) preparing, printing and distributing any
literature, advertisement or material which is primarily intended to result in
the sale of the Shares; provided, however, that Distributor shall not be
obligated to bear the expenses incurred by the Fund in connection with the
preparation and printing of any amendment to the Registration Statement.
<PAGE>
(d) All Shares of the Fund offered for sale by Distributor shall be
offered for sale at the net asset value (determined in the manner set forth in
the Fund's Certificate of Incorporation and then effective Registration
Statement and Prospectus, if any). No broker-dealer or other person who enters
into a selling agreement with Distributor shall be authorized to act as agent
for the Fund in connection with the offering or sale of its Shares or otherwise.
3. SALES OF SHARES.
(a) The Fund shall pay all costs and expenses in connection with the
registration of the Shares under the 1940 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder.
(b) Distributor shall pay all expenses connected with its
qualification as a dealer under state or federal laws and, except as otherwise
specifically provided in this Agreement, all other expenses incurred by
Distributor in connection with the sale of the Shares as contemplated in this
Agreement.
(c) The Fund shall have the right to suspend the offering and sale
of Shares of the Fund at any time in the absolute discretion of the Fund in
response to conditions in the securities markets or otherwise, and to suspend
the redemption of Shares of the Fund at any time permitted by the 1940 Act or
the rules of the commission ("Rules"). Upon notice of any such suspension of the
offering and sale of Shares, the Distributor shall cease to offer Shares. The
Distributor shall not make or cause to be made any offers of Shares in any state
or other jurisdiction where such Shares are not then qualified for offer or sale
or exempt from such qualification.
(d) All orders for the Fund's Shares shall be transmitted promptly
to the transfer agent of the Fund.
(e) The Fund reserves the right to reject any order for Shares.
4. RESTRICTIONS AND LIMITATIONS. The Distributor acknowledges that the
offer and sale of the Shares have not been registered under the 1933 Act and
that such offers and sales are to be made pursuant to the exemption from such
registration set forth in Section 3(a)(11) of the 1933 Act. In furtherance
thereof, the Distributor agrees that it shall offer Shares only to investors
that (i) are "Eligible Investors" as defined in the Fund's Certificate of
Incorporation and By-Laws and the Registration Statement and (ii) have their
principal office in the State of New York and have not been formed for the
specific purpose of acquiring Shares. In performing its obligations under the
immediately preceding sentence, the Distributor shall be entitled to rely on a
certification by each investor as to the specific facts necessary to establish
the status of such investor as an "Eligible Investor". The Distributor shall
cause each broker-dealer or other person that enters into a selling agreement
with the Distributor to comply with the requirements of this Section.
Notwithstanding any language herein to the contrary, the Fund and the
Distributor acknowledge and agree that until such time as registration under the
1933 Act is authorized and approved by the Fund, no action has been or will be
taken to qualify the Shares under the securities or blue sky laws of any state
or jurisdiction, but if deemed necessary and appropriate by the parties, steps
will be taken to qualify the shares under the blue sky laws of the State of New
York.
<PAGE>
IIA. COMPENSATION
The Distributor shall be entitled to no compensation or reimbursement
of expenses for the distribution and service activities provided by the
Distributor pursuant to this Agreement. Notwithstanding anything in this
Agreement to the contrary, affiliated persons of the Distributor may receive
compensation or reimbursement from the Fund with respect to the provision of
management services or service as a director or officer of the Fund.
III. LIMITATION OF LIABILITY
Distributor shall 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
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
IV. CONFIDENTIALITY
Distributor will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund, to the Fund's
prior or present shareholders and to those persons or entities who respond to
Distributor inquiries concerning investment in the Fund, and, except as provided
below, will not use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder or the performance of
its responsibilities and duties with regard to sales of the shares of any
portfolio which may be added to the Fund in the future. Any other use by
Distributor of the information and records referred to above may be made only
after prior notification to and approval in writing by the Fund. Such approval
shall not be unreasonably withheld and may not be withheld where (i) Distributor
may be exposed to civil or criminal contempt proceedings for failure to divulge
such information; (ii) Distributor is requested to divulge such information by
duly constituted authorities; or (iii) Distributor is so requested by the Fund.
V. INDEMNIFICATION
1. FUND REPRESENTATIONS. The Fund represents and warrants to
Distributor that at all times the Registration Statement and Prospectus, if any,
will, in all material respects, conform to the applicable requirements of the
1940 Act and the rules thereunder, that the Registration Statement did not
contain at the time it became effective and will not contain at the time any
subsequent amendment thereto becomes effective any untrue statement of material
fact or omit to state any material fact required to be stated therein or
<PAGE>
necessary to make the statements contained therein not misleading and that the
Prospectus, if any, will not contain at any time when it is authorized for use
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty in this subsection shall apply to statements
or omissions made in reliance upon and in conformity with written information
furnished to the Fund by or on behalf of or otherwise approved by and with
respect to Distributor or its affiliates expressly for use in the Registration
Statement or Prospectus.
2. DISTRIBUTOR REPRESENTATIONS. Distributor represents and warrants to
the Fund that it is duly incorporated as a Florida corporation and is registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended, and
the laws of each state where such registration is required for the distribution
of the Fund's Shares and is and at all times will remain duly authorized and
licensed to carry out its services as contemplated herein.
3. FUND INDEMNIFICATION. The Fund will indemnify, defend and hold
harmless Distributor, its several directors and officers, and any person who
controls Distributor within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus, if any, is authorized by the Fund, or in any application or other
document executed by or on behalf of the Fund, or arise out of, or are based
upon, information furnished by or on behalf of the Fund filed in any state in
order to qualify the Shares under the securities or blue sky laws thereof ("Blue
Sky Application"), or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
Distributor, its several directors and officers, and any person who controls
Distributor within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Fund shall not be liable in any case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, any untrue
statement, alleged untrue statement, or omission or alleged omission made in the
Registration Statement, the Prospectus, any Blue Sky Application or any
application or other document executed by or on behalf of the Fund in reliance
upon and in conformity with written information furnished to the Fund by or on
behalf of or otherwise approved by and with respect to Distributor or its
affiliates specifically for inclusion therein.
The Fund shall not indemnify any person pursuant to this subsection 3
unless the court or other body before which the proceeding was brought has
rendered a final decision on the merits that such person was not liable by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or his reckless disregard of obligations and duties,
under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of directors of the Fund who are neither
"interested persons" of the Fund (as defined in the 1940 Act) nor parties to the
proceeding, or by an independent legal counsel in a written opinion.
<PAGE>
The Fund shall advance attorneys' fees and other expenses incurred by
any person in defending any claim, demand, action or suit which is the subject
of a claim for indemnification pursuant to this subsection 3, so long as: (i)
such person shall undertake to repay all such advances unless it is ultimately
determined that he is entitled to indemnification hereunder; and (ii) such
person shall provide security for such undertaking, or the Fund shall be insured
against losses arising by reason of any lawful advances, or a majority of a
quorum of the disinterested, non-party directors of the Fund (or an independent
legal counsel in a written opinion) shall determine based on a review of readily
available facts (as opposed to a full trial-type inquiry) that there is a
reasonable likelihood that such person ultimately will be found entitled to
indemnification hereunder.
4. DISTRIBUTOR INDEMNIFICATION. Distributor will indemnify, defend and
hold harmless the Fund, the Fund's several officers and directors and any person
who controls the Fund within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
hereof) arise out of, or are based upon, any breach of its representations and
warranties in subsection 2 of this Section V or its agreements in subsection 2
or 3 of Section II hereof, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, if any, is authorized by the Fund, any
Blue Sky Application or any application or other document executed by or on
behalf of the Fund, or the 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 or
in conformity with information furnished in writing to the Fund or any of its
several officers and directors by or on behalf of or otherwise approved by and
with respect to Distributor specifically for inclusion therein, and will
reimburse the Fund, the Fund's several officers and directors, and any person
who controls the Fund or any Fund within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim.
The Distributor shall advance attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 4, so
long as: (i) such person shall undertake to repay all such advances unless it is
ultimately determined that he is entitled to indemnification hereunder; and (ii)
such person shall provide security for such undertaking, or the Fund shall be
insured against losses arising by reason of any lawful advances, or a majority
of a quorum of the disinterested, non-party directors of the Fund (or an
independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry) that
there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
5. GENERAL INDEMNITY PROVISIONS. No indemnifying party shall be liable
under its indemnity agreement contained in subsection 3 or 4 hereof with respect
to any claim made against such indemnifying party unless the indemnified party
<PAGE>
shall have notified the indemnifying party in writing within twenty (20) days
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the indemnified party (or after the
indemnified party shall have received notice of such service on any designated
agent), but failure to notify the indemnifying party of any such claim shall not
relieve it from any liability which it may otherwise have to the indemnified
party. The indemnifying party will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, and if the indemnifying party elects to assume the
defense, such defense shall be conducted by counsel chosen by it and reasonably
satisfactory to the indemnified party. In the event the indemnifying party
elects to assume the defense of any such suit and retain such counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by the indemnified party.
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall remain in
effect until May 30, 1998. Thereafter, if not terminated, this Agreement shall
continue automatically for successive terms of one year expiring on May 30 of
each year, provided that such continuance is specifically approved at least
annually (a) by a majority of those members of the Board of Directors of the
Fund who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Distribution Agreement (the
"Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund; provided, however, that this Agreement shall
automatically terminate in the event of its assignment and may be terminated by
the Fund at any time, without the payment of any penalty, by vote of a majority
of the Disinterested Directors or by a vote of a majority of the outstanding
voting securities on 60 days' written notice to, or by the Distributor at any
time, without the payment of any penalty, on 60 days' written notice to the
Fund. The terms "assignment" and "vote of a majority of the outstanding voting
securities' shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party against which
an enforcement of the change, waiver, discharge or termination is sought.
VIII. NOTICES
Notice of any kind to be given to the Distributor by the Fund shall be
in writing and shall be duly given if mailed or delivered to the Distributor at
111 East Wacker Dr., Chicago, IL 60601, Attention: Executive Vice President, or
at such other address or to such other individual as shall be specified by the
Distributor to the Fund in accordance with this Section VIII. Notices of any
<PAGE>
kind to be given to the Fund by the Distributor shall be in writing and shall be
duly given if mailed or delivered to the Fund at its address set forth in the
then effective Registration Statement, Attention: President, or at such other
address or to such other individual as shall be specified by the Fund to the
Distributor in accordance with this Section, with copies to each of the Fund's
Directors at their respective addresses set forth in the Fund's Registration
Statement and to the legal counsel to the Fund.
IX. CONSTRUCTION; GOVERNING LAW
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. 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 shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by New York law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their officers designated below as of the day and year first above
written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
------------------------------------
Harry P. Doherty
President
SHAY FINANCIAL SERVICES, INC.
By: /s/ ROBERT T. PODRAZA
------------------------------------
Robert T. Podraza
Vice President
<PAGE>
CERTIFICATION OF ELIGIBILITY
The undersigned hereby certifies to Institutional Investors Capital
Appreciation Fund, Inc. (the "Fund") and Shay Financial Services, Inc., a
Florida corporation which acts as the Distributor of shares of the Fund, for the
benefit of Shay Financial Services, Inc. and the Fund as follows:
1. The undersigned is:
(A) a savings bank or savings and loan association which is
organized under the laws of the State of New York; or
(B) a federal savings association organized under the laws of
the United States, or
(C) a holding company owning a majority of the outstanding
shares of such a savings bank, savings and loan association
or savings association, or
(D) a life insurance department of any such savings bank,
savings and loan association or savings association, or
(E) a wholly- or majority-owned subsidiary of any such savings
bank, savings and loan association or savings association,
including without limitation a life insurance subsidiary, or
(F) a pension trust, fund, plan or agreement participated in by
one or more such savings banks, savings and loan
associations, savings associations or holding companies to
provide retirement benefits, death benefits or disability
benefits for any or all of its or their active officers and
employees.
2. The undersigned's principal office is located in the State of New
York.
3. The undersigned has not been formed for the specific purpose of
acquiring interests in the Fund.
Dated:____________________________ ____________________________________
[Print name of institution]
By: _______________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE AUDITED FINANCIAL STATEMENTS OF THE FUND CONTAINED IN
THE FUND'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMET
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 67348265
<INVESTMENTS-AT-VALUE> 97052641
<RECEIVABLES> 1159064
<ASSETS-OTHER> 29584
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 98241289
<PAYABLE-FOR-SECURITIES> 733244
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21175
<TOTAL-LIABILITIES> 754419
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67774710
<SHARES-COMMON-STOCK> 591971
<SHARES-COMMON-PRIOR> 517169
<ACCUMULATED-NII-CURRENT> 7784
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 175
<ACCUM-APPREC-OR-DEPREC> 29704376
<NET-ASSETS> 97486870
<DIVIDEND-INCOME> 1213983
<INTEREST-INCOME> 335834
<OTHER-INCOME> 0
<EXPENSES-NET> 964831
<NET-INVESTMENT-INCOME> 584986
<REALIZED-GAINS-CURRENT> 4564123
<APPREC-INCREASE-CURRENT> 15918145
<NET-CHANGE-FROM-OPS> 21067254
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 578036
<DISTRIBUTIONS-OF-GAINS> 4564298
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135463
<NUMBER-OF-SHARES-REDEEMED> 91425
<SHARES-REINVESTED> 30764
<NET-CHANGE-IN-ASSETS> 27337551
<ACCUMULATED-NII-PRIOR> 834
<ACCUMULATED-GAINS-PRIOR> 167
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 621810
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 964831
<AVERAGE-NET-ASSETS> 82907958
<PER-SHARE-NAV-BEGIN> 135.64
<PER-SHARE-NII> 1.10
<PER-SHARE-GAIN-APPREC> 37.34
<PER-SHARE-DIVIDEND> 1.09
<PER-SHARE-DISTRIBUTIONS> 8.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 164.68
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
