<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1996
FILE NO. 2-15893
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 61
And
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 61
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NATIONAL INDUSTRIES FUND, INC.
(Exact name of registrant as specified in its charter)
5990 Greenwood Plaza Boulevard
Englewood, Colorado 80111
(303) 220-8500
(Address of principal executive offices)
Debra L. Newman, President
National Industries Fund, Inc.
1801 Century Park East
Los Angeles, California 90067
(Name and address of agent for service)
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Copy to:
Michael Glazer,
Paul, Hastings, Janofsky & Walken
555 S. Flower St. 23rd FL
Los Angeles, California 90071
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
NATIONAL INDUSTRIES FUND, INC.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS AND IN STATEMENT OF
ADDITIONAL INFORMATION OF INFORMATION REQUIRED BY ITEMS OF FORM N-1A
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FORM N-1A
ITEM AND HEADING PROSPECTUS CAPTION
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<S> <C> <C>
PART A --
Item:
1. Cover Page............................................... Cover Page
2. Synopsis................................................. Summary of Expenses
3. Condensed Financial Information.......................... Financial Highlights
4. General Description of Registrant........................ What is the Fund; Objectives and Investment
Policy
5. Management of the Fund................................... Board of Directors; Investment Adviser; The Fund
Manager; The Custodian; The Transfer Agent
6. Capital Stock and Other Securities....................... Capital Stock; Taxes On Dividends and Capital
Gains Distributions; Systematic Cash Withdrawal
Plan; Reinvestment of Income Dividends and
Capital Gains Distributions
7. Purchase of Securities Being Offered..................... Cover Page; The Distributor; Systematic Cash
Withdrawal Plan; Pricing; How to Buy and
Redeem Fund Shares; Group Investment Plan
8. Redemption or Repurchase................................. Systematic Cash Withdrawal Plan; How to Buy
and Redeem Fund Shares
9. Pending Legal Proceedings................................ Inapplicable
PART B -- STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
Item:
10. Cover Page............................................... Cover Page
11. Table of Contents........................................ Table of Contents
12. General Information and History.......................... Inapplicable
13. Investment Objectives and Policies....................... Investment Objectives, Policies and Restrictions;
Brokerage Transactions
14. Management of the Fund................................... Management of the Registrant
15. Control Persons and Principal Holders of Securities...... Management of the Registrant
16. Investment Advisory and Other Services................... Investment Advisory and Other Services
17. Brokerage Allocation..................................... Brokerage Transactions
18. Capital Stock and Other Securities....................... Inapplicable
19. Purchase, Redemption and Pricing of Securities
Being Offered........................................... Purchase, Redemption and Pricing of Securities
Being Offered
20. Tax Status............................................... Inapplicable
21. Underwriters............................................. Inapplicable
22. Calculation of Yield Quotations of Money Market
Funds................................................... Inapplicable
23. Financial Statements..................................... Financial Statements
PART C --
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C
to this Registration Statement.
</TABLE>
<PAGE>
NATIONAL INDUSTRIES FUND, INC.
5990 GREENWOOD PLAZA BOULEVARD
ENGLEWOOD, COLORADO 80111
(303) 220-8500
PROSPECTUS
National Industries Fund, Inc. (the"Fund") is a no-load, diversified,
open-end investment company. Its investment objective is long-term growth of
capital and increased future income through investment primarily in common
stocks. The Fund uses certain other investment techniques in an effort to
enhance income and reduce market risks. Shares may be purchased directly from
the Fund without a sales charge or underwriting commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INVESTOR IS ADVISED TO READ THIS PROSPECTUS
AND TO RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT INVESTORS SHOULD KNOW ABOUT
THE FUND PRIOR TO INVESTING AND SHOULD BE RETAINED FOR FUTURE REFERENCE. A
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 30, 1996 HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY
REFERENCE. A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE
UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING THE FUND.
THIS PROSPECTUS IS DATED MARCH 30, 1996.
<PAGE>
SUMMARY OF EXPENSES
This table is designed to assist stockholders in understanding the
various fees and expenses associated with investing in the Fund. The Example
shown below should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
STOCKHOLDER TRANSACTION EXPENSES
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Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)............................... none
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)...................................................... none
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable)................................................. none
Redemption Fees (as a percentage of amount redeemed,
if applicable).............................................. none
Exchange Fee................................................. none
ANNUAL FUND OPERATING EXPENSES (FOR THE YEAR ENDED NOVEMBER 30, 1995)
(as a percentage of average net assets)
Management Fees.............................................. 0.65%
12b-1 Fees................................................... none
Other Expenses (audit, legal, stockholder services,
transfer agent, custodian, and miscellaneous)............... 0.84%
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Total Fund Operating Expenses................................ 1.49%
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</TABLE>
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<CAPTION>
EXAMPLE 1 YEAR 3 YEAR 5 YEAR 10 YEAR
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<S> <C> <C> <C> <C>
You would pay the following
total fees and expenses on a
$1,000 investment, assuming
(1) 5% annual return* and
(2) redemption at the end of
each time period: $16 $51 $88 $200**
--- --- ---
</TABLE>
__________________
* Use of this assumed annual return is mandated by the Securities and
Exchange Commission and is not intended to be an illustration of past or
future investment results.
** These are cumulative totals; the average fees and expenses paid over a
10 year period would be approximately $20 per year.
2
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FINANCIAL HIGHLIGHTS
The information in the following table for the years ended November 30,
1995, 1994 and 1993 has been audited by Hein + Associates LLP, independent
auditors, whose report thereon and on the financial statements and the
related notes is included in the Fund's 36th Annual Report to Stockholders
incorporated by reference into the Statement of Additional Information.
The per share data and ratios for each of the six years in the period ended
November 30, 1991, were audited by other auditors whose report dated
December 20, 1991, expressed an unqualified opinion on those selected per share
data and ratios. Further information about the performance of the Fund is
contained in the Fund's Annual Report to Stockholders which may be obtained from
the Fund without charge.
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year....... $ 12.61 $ 12.62 $ 14.78 $ 14.94 $ 12.55 $ 14.16 $ 11.70 $ 11.04 $ 13.08 $ 12.31
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................... .17 .07 .06 .15 .20 .22 .20 .12 .09 .13
Net Gains or Losses on Securities
(both realized and unrealized)......... 2.34 . 29 (.19) 1.10 2.64 (.16) 2.91 1.79 (.68) 1.39
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations......... 2.51 .36 (.13) 1.25 2.84 .05 3.11 1.91 (.59) 1.52
LESS DISTRIBUTIONS
Dividends (from net investment income)... (.07) (.07) (.10) (.21) (.22) (.21) (.18) (.10) (.13) (.25)
Distributions (from capital gains)....... (.69) (.30) (1.11) (1.10) (.33) (1.48) (.50) (1.15) (1.32) (.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year............. $ 14.36 $ 12.61 $ 12.62 $ 14.78 $ 14.84 $ 12.55 $ 14.18 $ 11.70 $ 11.04 $ 13.08
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Return............................. 23.50% 2.81% (1.22)% 8.29% 23.53% 0.46% 27.89% 18.37% (5.22)% 12.36%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (in 000's)....... $34,775 $30,775 $32,448 $34,560 $33,710 $29,491 $31,617 $26,829 $24,294 $27,957
Ratio of Expenses to Average Net Assets.. 1.49% 1.64% 1.60% 1.50% 1.48% 1.70% 1.69% 1.70% 1.65% 1.68%
Ratio of Net Income to Average Net
Assets.................................. 1.27% .53% .50% .99% 1.46% 1.69% 1.52% 1.04% .64% .89%
Portfolio Turnover Rate.................. 38% 36% 56% 45% 22% 64% 83% 32% 68% 74
</TABLE>
WHAT IS THE FUND
National Industries Fund, Inc. (the "Fund") is an investment company
which was organized in the State of Delaware. Purchasers of the Fund's shares
invest in a company that itself invests in securities. The Fund is an
open-end investment company because, upon demand of an investor, the Fund has
a legal duty to redeem its shares held by the investor and to pay the
investor the net asset value of the shares. See "Pricing" and "How to Buy and
Redeem Fund Shares." The Fund makes investments in various securities and is
a type of management company commonly known as a mutual fund.
The purpose of the Fund is to provide investors with an opportunity
to acquire an interest in a comprehensive common stock program under the
continuous supervision of impartial and experienced professional investment
management. Investment companies operate in accordance with their objectives
and policies. The Fund's investment objectives and policies are set forth
below under "Objectives and Investment Policies."
With respect to the purchase and sale of investments, the Fund receives
investment advice and other services from Stonebridge Capital Management,
Incorporated (the "Adviser"), which is paid a fee pursuant to its contract
with the Fund's manager, NIF Management Co., Inc. (the "Fund Manager"). See
"Investment Adviser" for a discussion of the Adviser and its contract with
the Fund Manager. The Fund pays costs including custodian,
3
<PAGE>
management, and transfer agency fees, audit and legal fees, brokerage fees
and fees for certain administrative services.
The value of the Fund's shares, which are priced daily, fluctuates with
the value of the securities in which the Fund invests. When the Fund sells
portfolio securities it may realize a gain or a loss, depending on whether
it sells them for more or less than their cost. The Fund will earn dividend
or interest income to the extent that it receives dividends and interest from
its investments.
The Fund offers its shares to the public at net asset value on a
continuous basis. Such shares have been qualified for sale in 43 states of
the United States.
OBJECTIVES AND INVESTMENT POLICIES
The Fund principally seeks long term growth of capital and increased
future income through investment primarily in common stocks. Immediate income
return is a secondary consideration. In order to achieve its investment
objectives, the Fund invests primarily in the common stocks of those
companies that, based upon in-depth fundamental research, appear to have the
potential to achieve growth in sales, earnings per share, and ultimately in
dividends at a rate greater than that of the overall economy and the rate of
inflation. The Fund's Adviser believes that companies that are able to
achieve above average records of growth will eventually be rewarded by higher
prices for their stocks. These companies may be large or small and there are
no restrictions on the market capitalization of a company in which the Fund
may invest. However, investors should be aware that during periods of poor
economic performance or adverse market conditions, common stocks and hence
the per share value of the Fund may not reflect favorable earnings trends.
In addition, the securities of smaller companies may be subject to more
volatile market movements and greater risk than the securities of more
well-established companies.
The Fund's Adviser selects securities by studying macro-economic
and industry trends to determine where the best opportunities for growth might
be found. Companies operating within these high growth areas of the economy
are carefully analyzed to determine their particular strengths and
weaknesses, as well as their global competitive position. Generally, a company
that has the ability to achieve superior growth will have the following
characteristics: it will be a leader in its industry; have a proprietary
product or service; spend heavily on research and development; have a strong
balance sheet with little or no debt; and have a superior return on equity.
Fundamental valuation measures are used to determine the best relative values
given present market prices of stocks being considered for the Fund.
The Funds investment policy is based upon the conviction of the
management that the long-term growth and prosperity of American business will
continue. Management seeks to attain the objectives of the Fund primarily
through the ownership of securities of companies which possess potential
growth in the years ahead or appear to have good prospects for increased
earnings and dividends and through the use of certain other investment
techniques in an effort to enhance income and reduce market risks. There can
be no assurance that these objectives will be achieved since all investments
are subject to risk in varying degrees. Such objectives can be changed by the
Board of Directors of the Fund.
It is the policy of the Fund, which may not be changed without approval
of a majority of the outstanding voting securities of the Fund, to diversify
its investments and not to concentrate its assets in any one industry.
Diversification and non-concentration tend to reduce, though they do not
eliminate, the market risk inherent in all securities. At the same time they
broaden investment opportunities.
While it is the general policy of the Fund to be fully invested in
common stocks, under certain circumstances, investments may be made in other
types of securities such as convertible and non-convertible bonds, preferred
stocks, stock index and foreign currency futures, options, American Depository
Receipts and securities of investment companies and foreign issuers. The Fund
may also make short sales of securities or maintain a short position as
discussed in "Short Sales Against the Box" below. The policy of the Fund is
that investments in neither bonds nor preferred stock will exceed 5% of the
Fund's total assets each. For a discussion of the Fund's investments in stock
index and foreign currency futures, options, American Depository Receipts
4
<PAGE>
and securities of foreign issuers, see "Foreign Investments" and "Hedging and
Income Enhancement Strategies" below.
In addition, during adverse or transition periods in the stock market,
reserves may be held without percentage limitation in order to protect and
preserve the assets of the Fund. These temporary defensive reserves will be
invested in money market instruments, including U.S. Government Treasury Bills,
repurchase agreements secured by U.S. Government securities, certificates of
deposit, high grade bankers' acceptances, and high grade commercial paper with
a maximum maturity of not more than one year.
The Fund may not invest an amount which exceeds 5% of the value of the
Fund's total assets in the securities of any one issuer. This restriction
does not apply to holdings of government securities. The Fund does not trade
actively for a quick profit which is derived in a short period of time
between the purchase and sale of a security. However, changes are made in
the portfolio whenever such action appears advisable. During periods of broad
economic growth, emphasis is placed on seeking investments in leading
companies in those industries that are expected to lead the expansion. During
periods when the economy is sluggish, emphasis is placed on seeking to invest
in companies selected because of their individual prospects for improved
earnings. In recent years, companies that have provided unusual investment
opportunities notwithstanding a sluggish economy have often been found to be
among the leaders in the development of new technology in their respective
industries. Management approaches these decisions with essentially the point
of view of long-term investing but securities may occasionally be sold for
investment reasons even though they have been held for short periods.
Therefore, there may be a limited number of short-term transactions. This
flexibility gives management freedom to adjust the portfolio to changing
business conditions. Because of this policy, it is anticipated that the
annual portfolio turnover will normally be in the range of 25% to 75%. A 50%
turnover rate would occur, for example, if one-half of the Fund's portfolio
was replaced in a period of one year. The rate of portfolio turnover for the
fiscal years ended November 30, 1993 through 1995 was 56.4%, 36.4% and 38.3%,
respectively. Brokerage cost to the Fund is commensurate with the rate of
portfolio activity and may affect taxes paid by the stockholder (see
discussion of "Taxes on Dividends and Capital Gains Distributions").
Investments in common stocks have over the long term provided returns
superior to those achieved through investment in bonds or money market
instruments. However in the short to intermediate term returns can vary
substantially from year to year. It is probable that there will be periods
when the net asset value of the Fund will actually decline. Diversification
and temporary reserves can be expected to reduce the risks inherent in
investing in common stocks but will not eliminate such risk. Accordingly,
investors should be prepared and able to maintain their investment in the
Fund during periods when the market declines. In addition, while maintaining
the purchasing power of the capital of the Fund is an important consideration
of the management in the determination of the investment policy, there can be
no assurance that investors in the Fund will be protected from the effects of
inflation.
An additional risk factor peculiar to investment in the Fund arises
from the fact that long term growth is sought by the Fund at the possible
expense of short term profits.
FOREIGN INVESTMENTS. The Fund may invest up to 20% of its total assets,
either directly or indirectly through investments in American Depository
Receipts ("ADRs") and closed-end investment companies, in securities issued
by foreign companies wherever organized. ADRs are receipts issued by an
American bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs may be listed on a national securities
exchange or may trade in the over-the-counter market. ADR prices are
denominated in United States dollars; the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which would reduce the yield on such securities.
ADR's may be sponsored by foreign issuer or may be unsponsored (organized
independently from the foreign issuer).
Although the Fund is authorized to invest in any kind of investment
company, it intends to limit its investments to securities of closed-end
investment companies within the limits prescribed by the Investment Company
Act of 1940. The Fund currently intends to limit such investments so that,
immediately after such investment: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one
5
<PAGE>
investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; and (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund. The Fund will invest in
closed-end investment companies only in furtherance of its investment
objective. Growth in appreciation and dividends in foreign markets sometimes
occurs at a faster rate than in domestic markets. The ability of the Fund to
invest in closed-end investment companies that invest in foreign securities
would provide, indirectly greater variety and added expertise with respect to
investments in foreign markets than if the Fund invested directly in such
markets. Such companies, themselves, however, may have policies that are
different from those of the Fund and will bear management and other expenses
that are similar to those paid by the Fund and which may be greater or lesser
in amount than those paid by the Fund. No adjustments will be made to the
advisory fee with respect to assets of the Fund invested in such investment
companies.
Investing in securities issued by companies whose principal business
activities are outside the United States will involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the United States
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, political or
financial instability or diplomatic and other developments which could affect
such investments. Further, economies of particular countries or areas of the
world may differ favorably or unfavorably from the economy of the United
States. The extent to which the Fund will be invested in foreign companies
will fluctuate from time to time within the 20% limitation stated above
depending on the Adviser's assessment of prevailing market, economic and
other conditions.
SHORT SALES AGAINST THE BOX. The Fund may from time to time make short
sales of securities if at the time of the short sale it owns or has the right
to acquire, at no additional cost, an equal amount of the securities sold
short. This investment technique is known as a "short sale against the box."
While the short position is maintained, the Fund will collateralize its
obligation to deliver the securities sold short in an amount equal to the
proceeds of the short sale plus an additional margin amount established by
the Board of Governors of the Federal Reserve (presently 10% of the market
value of the securities sold short). If the Fund engages in a short sale the
collateral account will be maintained by the Fund's custodian or a duly
qualified subcustodian. While the short sale is open the Fund will maintain
in a segregated custodial account an amount of securities equal in kind and
amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities at no additional cost. The
Fund's Adviser currently anticipates that no more than 25% of the Fund's
total assets would be invested in short sales against the box, but this
limitation is a nonfundamental policy which could be changed by the Board of
Directors of the Fund.
The Fund may make a short sale against the box when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible into or exchangeable for such
security), or when the Fund wants to sell the security it wants at a current
attractive price, but also wishes to defer recognition of gain or loss for
federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
In such a case, any future losses in the Fund's long position should be
reduced by a gain in the short position. The extent to which such gains or
losses are reduced would depend upon the amount of the security sold short
relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Fund
will endeavor to offset these costs with income from the investment of the
cash proceeds of short sales.
HEDGING AND INCOME ENHANCEMENT STRATEGIES. In addition to its
investments in securities, the Fund may buy and sell stock index and foreign
currency futures contracts, options and options on futures with respect to
all or a portion of its assets. Transactions in such options and futures
contracts may afford the Fund the opportunity to hedge against a decline in
the value of securities it owns, may provide a means for the Fund to generate
additional income on its investments or may provide opportunities for capital
appreciation. The Fund may also purchase and sell stock index futures
contracts and options to manage cash flow and to attempt to remain fully
invested in the stock market. Although the Fund has no specific fundamental
limitations on its ability to
6
<PAGE>
engage in options and futures contracts, it does not use options or futures
contracts for speculative purposes. The Fund may engage in additional hedging
techniques as new techniques become available.
OPTIONS TRANSACTIONS. The Fund may write covered put and call options
on securities to attempt to increase the return on its investments through
the receipt of premium income. The Fund also may write put options and
purchase call options to increase its exposure to the stock market when the
Fund has cash from new investments or holds a portion of its assets in money
market instruments or to protect against an increase in prices of securities
it intends to purchase. When the Fund wishes to sell securities because of
stockholder redemptions or to otherwise protect the value of a security it
owns against a decline in market value, it may write call options and
purchase put options.
A call option gives the purchaser, in return for payment of the option
premium (the option's current market price), the right to buy the option's
underlying security at a specified exercise price at any time during the term
of the option. The writer of a call option, who receives the premium, assumes
the obligation to deliver the underlying security against payment of the
exercise price at any time the option is exercised. A put option is a
similar contract that gives the purchaser of the option, in return for the
premium paid, the right to sell the underlying security at a specified
exercise price at any time during the term of the option. The writer of the
put receives the premium and assumes the obligation to buy the underlying
security at the exercise price whenever the option is exercised. The premium
paid for purchasing an option reflects, among other things, the relationship
of the exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates. The Fund intends to limit the aggregate value of the securities
underlying the calls or obligations underlying the put options to no more
than 25% of the net assets of the Fund, taken at market value, determined as
of the date the options are written. All options, whether written or
purchased, would be listed on a national securities exchange and issued by
the Options Clearing Corporation.
A call option written by the Fund is "covered" if the Fund owns the call
option's underlying security or has an absolute and immediate right to
acquire that security without the payment of additional consideration (or
upon payment of additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities it owns. A
call option written by the Fund is also covered if the Fund owns, on a
share-for-share basis, a call option on the same security whose exercise
price is equal to or less than the call written, or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash
or liquid high-grade short-term debt securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if the Fund
maintains cash or liquid high-grade short-term debt securities with a value
equal to the put option's exercise price in a segregated account with its
custodian, or else owns, on a share-for-share basis, a put option on the same
security whose exercise price is equal to or greater than the put written.
Securities held to cover an option may not be sold so long as the Fund
remains obligated under the option, unless they are replaced by other
appropriate securities.
STOCK INDEX AND FOREIGN CURRENCY FUTURES AND OPTIONS ON SUCH FUTURES.
The Fund may purchase and sell stock index and foreign currency futures
contracts (as well as purchase and sell related options on such future
contracts) as a hedge against changes resulting from market conditions and
exchange rates in the values of the domestic and foreign securities held in
the Fund or which it intends to purchase and where the transactions are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Fund.
A stock index assigns relative value to the common stocks included in
the index (for example, the Standard & Poor's 500 or the New York Stock
Exchange Composite Index), and the stock index fluctuates with changes in the
market value of such stocks. A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference
between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks in the index is made. A foreign
currency futures contract creates an obligation on one party to deliver, and
a corresponding obligation on another party to accept delivery of, a stated
quantity of a foreign currency, for an amount fixed in United States dollars.
The Fund may purchase and sell foreign currency futures contracts as a hedge
against changes in currency exchange rates when the Fund is invested in the
securities of foreign issuers.
7
<PAGE>
The Fund may not purchase or sell futures contracts and related
option sunless immediately after any such transaction, the aggregate initial
margin that is required to be posted by the Fund under the rules of the
exchange on which the futures contract (or futures option) is traded, plus any
premium paid by the Fund on its open futures options positions, does not
exceed 5% of the Fund's total assets, after taking into account any unrealized
profits and losses on the Fund's open contracts and excluding the amount that
a futures option is "in-the-money" at the time of purchase. (An option to buy
a futures contract is"in-the-money" if the then current purchase price of
the contract that is subject to the option exceeds the exercise or strike
price; an option to sell a futures contract is "in-the-money" if the exercise
or strike price exceeds the then current purchase price of the contract that
is the subject of the option.)
RISKS INHERENT IN TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS. In
selecting futures contracts and options for the Fund, the Adviser will
assess such factors as current and anticipated stock prices and interest
rates, the relative liquidity and price levels in the options and futures
markets compared to the securities markets, and the Fund's cash flow and cash
management needs. If the Adviser judges these factors incorrectly, or if
price changes in the Fund's futures or options positions are not well
correlated with its other investments, use of futures contracts and options
may leave the Fund in a worse position than if it had not used these
strategies. Other risks inherent in the use of options, foreign currency and
stock index futures contracts and options on futures contracts include the
fact that skills needed to use these strategies are different from those
needed to select portfolio securities, the imperfect correlation between
movements in the price of the options and futures contracts and movements in
the price of the securities or currencies which are the subject of the hedge,
the possible absence of a liquid secondary market for any particular
instrument at any time and the possible need to defer closing out certain
hedged positions to avoid adverse tax consequences.
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is
vested with the Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to the Fund, including the Fund's agreements with its investment
adviser, manager, transfer agent, custodian and dividend disbursing agent.
The day-to-day operations of the Fund are delegated to the Fund Manager,
subject always to the objectives and policies of the Fund and the general
supervision of the Fund's Board of Directors.
INVESTMENT ADVISER
Stonebridge Capital Management, Incorporated, 1801 Century Park East, Los
Angeles, California 90067, is retained as the Adviser to the Fund pursuant to
a written Investment Advisory Agreement with the Fund Manager, who pays
the Adviser a monthly fee. The Investment Advisory Agreement (the "Agreement")
was approved by the Board of Directors on February 11, 1992 subject to
stockholder approval. The Agreement was approved by the stockholders of the
Fund on May 26, 1992. The continuance of the Agreement was approved by the
Board of Directors on March 28, 1995.
The Agreement requires the Adviser to supervise the investment of
the assets of the Fund, and place orders with securities broker/dealers for
the purchase or sale of securities on behalf of the Fund, subject to the
policies and controls of the Board of Directors of the Fund. In doing so, the
Adviser is to obtain and evaluate information, reports and studies, some or
all of which may be provided to the Adviser by the securities broker/dealers
that execute securities transactions for the Fund, for which their
compensation may consist solely of the brokerage commissions paid by the Fund.
As consideration for furnishing such services, the Agreement provides that the
Adviser will receive from the Fund Manager a monthly advisory fee which is a
percentage of the average weekly net assets of the Fund equal to the
following: 1/2 of 1% on the first $10,000,000 of the Fund's average monthly
net assets, 1/4 of 1% of the Fund's average weekly net assets in excess of
$10,000,000 and less than $25,000,000 and 1/8 of 1% of the Fund's average
weekly net assets in excess of $25,000,000. During the fiscal years ended
November 30, 1993, 1994 and 1995, the Adviser received from the Fund Manager
$93,401, $96,056 and $97,356, respectively, in fees for investment and
advisory services pursuant to the Investment Advisory Agreement, representing
.3%, .3% and .3%, respectively, of the Fund's net assets in each year.
8
<PAGE>
The Agreement provides that it shall remain in force and effect for two
years and thereafter from year to year so long as such continuance is
approved at least annually by the Board of Directors of the Fund or by a
majority of the outstanding voting securities of the Fund, but in either
event it must be approved by a majority of the directors who are not parties
to the Investment Advisory Agreement or interested persons of any such party.
The Agreement also provides that it may be terminated without penalty at any
time by the Board of Directors of the Fund or by vote of a majority of the
Fund's outstanding voting securities or by the Adviser upon sixty days
written notice and that it shall terminate automatically in the event of its
assignment.
The Adviser is owned by six of its employees. Richard C. Barrett, Vice
President of the Fund and President of the Adviser, has been primarily
responsible for the day-to-day management of the Fund's portfolio since 1984.
Although the organizational arrangements of the Adviser do not require that
all investment decisions be made by committee, it is the practice of the
Adviser to make such decisions by committee.
THE FUND MANAGER
NIF Management Co., Inc., 5990 Greenwood Plaza Blvd., Englewood,
Colorado 80111, which is a wholly owned subsidiary of Preferred Financial
Corp. ("PFC"), operates as Fund Manager pursuant to a management agreement
(the "Management Agreement") with the Fund. The Management Agreement was last
approved by the Board of Directors on March 28, 1995 and by the shareholders
of the Fund on May 26, 1992. All of the outstanding shares of PFC are held by
Health Care Service Corporation, a Mutual Legal Reserve Company. PFC also
owns all of the stock of Industry Savings Plans, Inc., the principal
underwriter of the Fund's shares. The Fund Manager is also the Transfer Agent.
The Management Agreement provides that it will remain in force and
effect from year to year provided that its continuance is specifically
approved at least annually by a majority of the directors of the Fund or a
majority of the outstanding securities of the Fund, but in either event it
must be approved by a majority of the directors who are not parties to the
Management Agreement or interested persons of any such party by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Management Agreement may be terminated without penalty at any time by the
Board of Directors of the Fund or by vote of a majority of the outstanding
securities or by the Fund Manager upon sixty days written notice. The
Management Agreement will automatically terminate in the event of its
assignment, except that it will not terminate in the event of an assignment
caused by any direct or indirect transfer of a controlling block of the
outstanding voting securities of the Fund Manager if a majority of the Board
of Directors of the Fund and a majority of the disinterested directors (a)
adopt a resolution to the effect that the assignment will not adversely
affect the Fund and (b) determines to submit the Management Agreement for
ratification by vote of a majority of the outstanding voting securities of
the Fund at the next annual meeting of stockholders.
The Management Agreement provides that the Fund Manager will supervise
and manage the business of the Fund subject to the direction and control of
the officers and directors of the Fund. This responsibility requires that the
Fund Manager provide certain services and facilities including, but not
limited to, the services of a chief executive officer and administrator for
the Fund and other personnel required by the Fund, the services of an
investment adviser, office space, furniture, equipment, supplies, files and
records, supervision of the maintenance of the books and records of the Fund,
pricing of the portfolio securities of the Fund on a daily basis, and the
supervising of the relationship between the Fund and the stockholders,
custodian, transfer agent and others, including the preparation of
registration statements and proxy material. The Fund Manager is also
obligated to pay the fee of the Adviser. See "Investment Adviser."
As consideration for furnishing such management services, the Management
Agreement provides that the Fund Manager will receive a monthly management
fee equal to the annual rate of 3/4 of 1% of the first $10,000,000 of the
average weekly net assets of the Fund, 5/8 of 1% of the next $15,000,000, and
9/16 of 1% of the excess over $25,000,000. The Management Agreement also
provides that if the total expenses of the Fund, including the management fee
but excluding taxesand interest, should exceed 2% of the average weekly net
asset value of the Fund, the management fee paid the Fund Manager will be
reduced to an amount which, together with all other expenses of the Fund
(excluding taxes and interest), shall equal 2% of the average weekly net
asset value of the Fund. The Fund Manager is required to reimburse the Fund
if total Fund expenses exceed 2%. The
9
<PAGE>
Management Agreement also provides that the Fund's expenses are subject to
the maximum limitation as from time to time provided in the regulations
adopted under the California securities laws, unless the express consent of
the Board of Directors is obtained. The present California limitation is
2 1/2% of the first $30,000,000 of annual average net assets, 2% of the next
$70,000,000,and 1 1/2% of average annual net assets in excess of $30,000,000.
The aggregate management fees, prior to payment of the Adviser fee, paid
during the years ended November 30, 1993, 1994, and 1995 were $214,723
$208,619 and $213,093, respectively, representing .6%, .7% and .6%,
respectively, of the Fund's net assets in each year. The Fund is obligated
to pay the cost of its principal financial officer and of personnel operating
under the direction of the principal financial officer and bear the cost of
all legal and auditing fees and other business expenses of the Fund. The
expenses of the Fund borne by the Fund, including the fees paid to the Fund
Manager, during the year ended November 30, 1995 amounted to 1.49% of the
Fund's average net assets.
THE CUSTODIAN
Colorado National Bank, 17th and Champa Street, Denver, Colorado 80202,
is retained as Custodian for the Fund.
THE TRANSFER AGENT
The Fund's transfer agent and dividend disbursing agent is NIF Management
Co., Inc., 5990 Greenwood Plaza Blvd., Englewood, Colorado 80111.
THE DISTRIBUTOR
Industry Savings Plans, Inc., 5990 Greenwood Plaza Blvd., Englewood,
Colorado 80111 serves as the Distributor and principal underwriter of the Fund's
shares without compensation and bears the expense of distribution of the
shares of the fund.
CAPITAL STOCK
The Fund was organized as a corporation in the state of Delaware on
November 13, 1958. The authorized capitalization of the Fund consists of
10,000,000 shares of capital stock, all of one class, having a par value
of $1.00 per share. All shares participate equally in dividends and
distributions and in net assets on liquidation. The shares are fully paid and
non-assessable: they have no preference, pre-emptive, conversion, or
exchange rights. Fractional share interests have proportionate dividend and
redemption rights, but no voting rights.
Each full share has one vote, except that each stockholder entitled to
vote at any election of directors has the right to cumulate his votes. Under
the cumulative voting method, each stockholder is entitled to cast a total
number of votes equal to the number of directors to be elected multiplied by
the number of shares. The total number of cumulative votes may be cast for
one candidate or distributed among any number of candidates.
Stockholder inquiries concerning the Fund should be directed to a Fund
Manager's representative by calling (303) 220-8500.
10
<PAGE>
REPORTS TO STOCKHOLDERS
The Fund issues semi-annual and annual reports to its stockholders
listing securities held in its portfolio, complete financial statements, and
other information. The financial statements of the Fund are audited annually
by independent public accountants.
TAXES ON DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code
(the "Code"). In any fiscal year in which the Fund so qualifies and
distributes at least 90% of its taxable net investment income, the Fund will
be relieved of Federal income tax on the net investment income and net
realized capital gains distributed to stockholders. Any net investment
income or realized capital gains not distributed will be subject to Federal
income tax. One of the requirements the Fund must meet in order to qualify
under Subchapter M as a regulated investment company is that at least 90% of
the Fund's gross income be derived from certain sources, which include
dividends, interest, payments with respect to securities, loans and gains
from the sale or other disposition of stock or securities. In addition, the
Fund must meet certain asset diversification and holding period requirements.
Net investment income and net short-term capital gains distributed by
the Fund, if any, will be taxable to stockholders as ordinary income whether
received in cash or additional shares. Any net long-term capital gains
realized by the Fund, and distributed, will be taxable to stockholders as
long-term capital gains regardless of the length of time investors have held
their shares.
A 4% non-deductible excise tax is imposed on a regulated investment
company which fails to distribute to its stockholders a specified amount of
its taxable ordinary income and capital gains during a calendar year.
The Fund may be required to withhold for Federal income taxes 31% of
distributions payable to stockholders who fail to provide the Fund with their
correct taxpayer identification numbers or to make required representations,
or who have been notified by the Internal Revenue Service they are subject to
back-up withholding. Corporate stockholders, and other stockholders
specified by the Internal Revenue Code, are exempt from back-up withholding.
Dividends from net investment income are taxable to shareholders as
ordinary income and are generally eligible, in the case of corporations, for
the 70% deduction for corporate shareholders provided by the Internal Revenue
Code. Capital gains distributions do not qualify for such exclusion. For the
fiscal year ended November 30, 1995, there were no dividends paid from
investment income of the Fund so none were eligible for such exclusion.
Shareholders who are citizens or residents of the United States pay federal
taxes at capital gains rates on long-term capital gains which are distributed
to them, whether or not reinvested in the Fund, and regardless of the period
of time that such shares have been owned by the shareholders. Advice as to
the tax status and amount of each year's dividends and distributions will be
mailed annually.
SYSTEMATIC CASH WITHDRAWAL PLAN
A stockholder owning $10,000 or more of Fund shares at net asset value
may establish a Systematic Cash Withdrawal Plan (a "Withdrawal Plan")
upon completion of an authorized form. Qualified participants may then
receive monthly or quarterly checks of $50 or more in multiples of $10 as they
choose. The redemption is made on the 20th day of the month and payment is
made within seven days thereafter. These payments are drawn from shares
redeemed from the stockholder's account to meet the payment amounts he
requests. To the extent that these redemptions exceed dividends and capital
gains distributions, participants will eventually deplete their investments,
particularly if the net asset value of the Fund decreases. A systematic
withdrawal participant may discontinue receiving payments at any time, and if
he wishes, resume them at any time thereafter. The Fund also reserves the
right to cancel any Withdrawal Plan.
Under this program, all dividends and capital gains distributions
are automatically reinvested, and share certificates are not issued. Amounts
paid to stockholders should not be considered income. NIF Management
11
<PAGE>
Co., Inc. makes a service charge of $5.00 upon the establishment of a
Withdrawal Plan. No particular amount of periodic or quarterly payments is
recommended. An authorization form may be obtained from the Fund upon request.
PRICING
The public offering price per share, which is the net asset value
pershare, is determined once daily as of the close of the New York Stock
Exchange on each day it is open for trading. This price is applicable to all
orders to buy or sell Fund shares received prior to 4:15 p.m. Eastern time
each day the Exchange is open. Orders received after such time are held until
the next day on which the public offering price is determined.
The net asset value per share is determined by dividing the total market
value of all the Fund's portfolio securities and other assets, less all
liabilities, by the total number of Fund shares outstanding. Securities
listed or traded on a registered securities exchange are valued at the last
sale price on the day of the computation or, if there is not a sale on that
day, the last reported bid price. Where market quotations of over-the-counter
stocks or other securities are readily available, the mean between the bid
and asked price is used; however, for dates on which the last sale price is
available from NASDAQ, or other source of equivalent reliability, the last
sale price for such date isused and for dates on which there is no last sale
price available, the mean of the bid and asked price is used. Short-term debt
securities are valued at fair value. The value of any other securities for
which no market quotations are available and other assets will be determined
at fair value in good faith by the Board of Directors. Dividends receivable
are treated as assets from the date on which stocks go ex-dividend, interest
on bonds not traded flat is accrued weekly, and insofar as is practicable,
liabilities are accrued semi-monthly.
HOW TO BUY AND REDEEM FUND SHARES
TO BUY SHARES: Complete a Share Purchase Application and send it to the
Distributor, Industry Savings Plans, Inc., P.O. Box 17007, Denver, Colorado
80217, along with your check or money order for $250 or more. Additional
purchases may be made without a new application at any time in amounts of $25
or more by sending payments directly to the Distributor. After each purchase,
you will receive a confirmation showing the number of full and fractional
shares purchased and total shares owned. The Fund reserves the right to
reject any purchase order which it judges to be disadvantageous to the Fund.
See "Pricing."
Certificates representing the shares purchased are not issued
unless specifically requested. The Transfer Agent credits the stockholder's
account with the number of shares purchased. Each stockholder receives
account statements after every transaction and also annually to provide him
with a record of the total number of shares in his account. This relieves
the stockholder of responsibility for safekeeping of certificates, and should
here deem his shares, eliminates the need to deliver certificates. The
stockholder may at any time request the Transfer Agent to issue certificates,
for full shares, for all or a part of his holdings upon payment of $1.00 for
handling costs, which payment should accompany the request.
Prior to purchasing shares of the Fund, the impact of dividends or
capital gains distributions which have been declared but not paid should be
carefully considered. Any such dividends or capital gains distributions paid
to an investor shortly after the purchase of shares by the investor will have
the effect of reducing the per share net asset value of his shares by the
amount of the dividends or distributions. All or a portion of such dividends
or distributions, although in effect a return of capital, are subject to
taxes, which may be at ordinary income tax rates
TO REDEEM SHARES: If you wish to redeem shares for which you do not hold
share certificates, simply send your written redemption request, signed by
all registered owners, to the Transfer Agent. If you hold certificates for
your shares, endorse them for transfer and send them and a written redemption
request to the Transfer Agent.
A signature guarantee by a guarantor institution which participates in
The Securities Transfer Agents Medallion Program (STAMP), The Stock
Exchange Medallion Program (SEMP) or The New York Stock Exchange, Inc.
Medallion Signature Program (MSP), is required if payment is to be made to
someone other than the registered stockholder at his address as listed on the
Fund's stock records.
12
<PAGE>
In case of a redemption, the redemption price will be paid as soon
as possible but not later than the seventh day following the day of surrender
of shares in proper form as described above, except as further postponement
may be permissible under the Investment Company Act of 1940 for any period
when (a) the exchange is closed for other than weekends or holidays or trading
thereon is restricted under conditions set forth by the Securities and
Exchange commission (the "Commission"), (b) the Commission has by order
permitted such suspension, or (c) there is an emergency as defined by the
rules of the Commission, which makes disposal of portfolio securites or
valuation of the net assets of the Fund not reasonably practicable. Payment
for redemption of recently purchased shares will be delayed until the Transfer
Agent has been advised that the purchase check has been honored, which may
take up to 15 days.
The redemption price may be more or less than the cost of the
shares redeemed, depending upon the market value of the securities owned by
the Fund at the time of redemption.
As authorized by the Fund's Certificate of Incorporation, the Board of
Directors may, at its option, effect a redemption of any shares of a
stockholder who is a participant in the group investment plan described
below, which on the determination date aggregate less than $100 in net asset
value of shares, and which during the previous six months prior to the
determination date have not increased except through automatic dividend
reinvestment of such stockholder's account. See "Group Investment Plan." At
least 60 days prior to the determination date, all such Group Investment Plan
Accounts will be notified by mail at the last known address of record as
shown on the Fund's books, that if an investment is not made prior to the
determination date, which will be specified, such stockholder's shares will
be automatically redeemed at the net asset value determined on the
determination date. The redemption shall be effected in the same manner as
if the stockholder had requested such redemption. The proceeds will be
immediately mailed to the former stockholder in accordance with law. If the
Fund is unable to deliver the money to the stockholder, then the proceeds
will be held for the account of the stockholder in a non-interest bearing
account.
GROUP INVESTMENT PLAN
The Distributor may, at its discretion, waive the minimum initial and
subsequent investment requirement for individuals who are offered an
opportunity to participate in a salary deduction plan. At the present time
the initial and subsequent investment requirement for individuals in a salary
deduction plan is $5.00 for each investment. Individual accounts will be
established for each participant who will receive a separate confirmation, and
may be terminated by the participant at any time. Payments must be sent
directly to Industry Savings Plans, Inc., and will be invested in the same
manner as in any other investment account described above. Complete
information about group investments may be obtained from the Distributor. A
participant in the Group Investment Plan should be aware that if his account
is less than $100 and he has made no investment for a period of 6 months his
shares may be automatically redeemed. See the caption "How to Buy and Redeem
Fund Shares."
With respect to each stockholder account established between April 1,
1974, and March 31, 1982, under a Group Investment Plan, the Fund will
annually charge a maintenance fee on each such account at the rate of $2.00
per twelve-month period the account is maintained. Effective April 1, 1982,
all newly established Group Investment Plan accounts will be charged a $5.00
account setup fee. The Fund will annually charge a maintenance fee on each
such account of $5.00 for each twelve-month period the account is maintained.
The Transfer Agent may collect such charge either by deducting the same from
distributions to the stockholders involved or by causing on the date such
charge is assessed a redemption in each such account sufficient to pay such
charge. An investor is not required to pay the maintenance fee charge if he is
not participating in the Group Investment Plan, but would be required to make
a minimum initial investment of $250 and subsequent investments of $25 or more.
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Income dividends and capital gains distributions, if any, are
automatically reinvested. Under this arrangement, the Fund pays the dividend
or distribution to the Transfer Agent which in turn purchases for the
stockholder full and fractional shares at the net asset value per share on the
day a dividend or distribution would otherwise be paid in cash and adds these
shares to the stockholder's account. The policy of the Fund has been to
13
<PAGE>
pay dividends annually. Only holders of certificates are paid dividends or
capital gains distributions, if any, in cash.
14
<PAGE>
NATIONAL INDUSTRIES FUND, INC.
5990 Greenwood Plaza Boulevard
Englewood, Colorado 80111
<PAGE>
NATIONAL INDUSTRIES FUND, INC.
OFFICERS AND DIRECTORS
DEBRA L. NEWMAN, President
RICHARD C. BARRETT, Vice President and Director
MICHAEL J.B. STONE, Vice President
COLLEEN M. SCHOMER, Secretary
JOANNE E. ASHTON, Treasurer & Assistant Secretary
SELVYN B. BLEIFER, M.D., Director
MARVIN FREEDMAN, Director
CHARLES F. HAAS, Director
EXECUTIVE OFFICES
1801 Century Park East
Los Angeles, California 90067
Telephone -- (310) 277-1450
DISTRIBUTOR
Industry Savings Plans, Inc.
5990 Greenwood Plaza Blvd.
Englewood, Colorado 80111
Telephone -- (303) 220-8500
FUND MANAGER AND TRANSFER AGENT
NIF Management Co., Inc.
5990 Greenwood Plaza Blvd.
Englewood, Colorado 80111
Telephone -- (303) 220-8500
INVESTMENT ADVISER
Stonebridge Capital Management, Incorporated
1801 Century Park East
Los Angeles, California 90067
CUSTODIAN
Colorado National Bank
17th and Champa Street -- Denver, Colorado 80202
AUDITORS
Hein + Associates LLP
717 17th Street, Suite 1600, Denver, Colorado 80202
NATIONAL INDUSTRIES FUND, INC.
5990 Greenwood Plaza Boulevard
Englewood, Colorado 80111
PROSPECTUS
MARCH 30, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NATIONAL INDUSTRIES FUND, INC.
5990 Greenwood Plaza Boulevard, Englewood, Colorado 80111
(303) 220-8500
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH A PROSPECTUS, WHICH MAY BE OBTAINED BY WRITING
NATIONAL INDUSTRIES FUND, INC., 5990 GREENWOOD PLAZA BOULEVARD, ENGLEWOOD,
COLORADO 80111, (303) 220-8500
STATEMENT OF ADDITIONAL INFORMATION DATED: MARCH 30, 1996
RELATING TO THE PROSPECTUS DATED: MARCH 30, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives, Policies and Restrictions . . . . . . . . . . . . . . 2
Management of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . 8
Brokerage Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchase, Redemption and Pricing of Securities being Offered . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
INTRODUCTION
National Industries Fund, Inc. (the "Fund") is a no-load diversified,
open-end investment company, commonly known as a mutual fund. The
rules and regulations of the United States Securities and Exchange
Commission (the "SEC") require all mutual funds to furnish prospective
investors certain information concerning the activities of the company being
considered for investment. This information is included in a
Prospectus dated March 30, 1996, (the "Prospectus"), which may be
obtained without charge by writing or calling the Fund. This Statement of
Additional Information is intended to furnish investors with additional
information concerning the Fund. Some of the information required to be
in this Statement of Additional Information is also included in the Fund's
current Prospectus; and, in order to avoid repetition, reference will be made
to sections of the Prospectus. Additionally, the Prospectus and this
Statement of Additional Information omit certain information contained in
the registration statement filed with the SEC. Copies of the
registration statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC
by paying the charges prescribed under its rules and regulations.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Information concerning the Fund's fundamental investment objective is
set forth in the Prospectus under the heading "Objectives and Investment
Policy. "The Fund's principal objective is long-term growth of capital
and increased future income through investments primarily in common stocks.
Immediate income return is a secondary consideration. In order to
achieve its investment objectives, the Fund invests in securities of
companies which appear to have good prospects for increased earnings and
dividends, and uses certain other investment techniques in an effort to
enhance income and reduce market risks.
BANK CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates
of deposit are negotiable certificates issued against funds deposited
in a commercial bank for a definite period of time and earning a specified
return. Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specified
merchandise, which are "accepted" by a bank, meaning in effect that the
bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit and bankers' acceptances acquired by the
Fund will be dollar-denominated obligations of domestic banks or financial
institutions which at the time of purchase meet certain credit standards.
REPURCHASE AGREEMENTS. Pursuant to a repurchase agreement, the Fund
purchases securities and the seller agrees to repurchase them from the Fund
at a mutually agreed-upon time and price. The period of maturity is
usually overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money
is invested in the security. Each Fund's repurchase agreements will be fully
collateralized at all times in an amount at least equal to the purchase
price. The instruments held as collateral are valued daily. If the seller
defaults and the value of the collateral securing the repurchase agreement
declines, the Fund may incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by
the Fund may be delayed or limited. The Fund will only enter into
repurchase agreements with financial institutions and brokers and dealers
which meet certain creditworthiness and other criteria.
The Fund will not pledge, mortgage or hypothecate assets of the Fund
taken at market value to an extent greater than 15% of the gross assets of
the Fund taken at cost. The Fund will not invest in securities of companies
which have a record of less than three years continuous operations if such
purchase at the time thereof would cause more than 5% of the total assets
of the Fund to be invested in securities of such company or companies.
OPTIONS AND FUTURES TRANSACTIONS. The Fund intends to limit
its transactions in options to writing covered call options on stocks
and stock indexes, purchasing put options on stocks and stock indexes, and
closing out such options in closing transactions. The Fund intends
to limit its transactions in futures contracts (contracts to purchase or
sell an underlying instrument at a future date), to purchasing and selling
stock index and foreign currency futures contracts, and to the
purchase of related options. Transactions in such options and futures
contracts may afford the Fund the opportunity to hedge against a decline
in the value of securities it owns, may
-2-
<PAGE>
provide a means for the Fund to generate additional income on its investments,
or may provide opportunities for capital appreciation.
In purchasing futures contracts and related options the Fund will
comply with rules and interpretations of the Commodity Futures Trading
Commission ("CFTC"), under which the Fund is excluded from regulation as a
"commodity pool operator." CFTC regulations require, among other things,
(1) that futures be used solely for "bona fide hedging" purposes, as
defined in CFTC regulations, and (2) other positions for the establishment
of which the aggregate initial margin and option premiums (less the amount
by which such options are "in the money") do not exceed 5% of the Fund's
net assets (after taking into account unrealized gains and unrealized
losses on any contract it has entered into). The extent to which the Fund
may engage in futures transactions may also be limited by the Internal
Revenue Code's requirements for qualification as a regulated investment
company.
The above limitations on the Fund's investments in futures contracts
and options, and the Fund's policies regarding futures contracts and
options discussed elsewhere in this Statement of Additional Information,
are not fundamental policies and may be changed as regulatory agencies
permit. The Fund will not modify the above limitations to increase the
permissible futures and options activities without supplying additional
information in a current Prospectus or Statement of Additional Information
that has been distributed or made available to the Fund's shareholders.
OPTIONS ON SECURITIES. The Fund may write covered call options
on securities it owns to attempt to realize, through the receipt of premium
income, a greater return than would be realized on the securities alone. In
return for the premium, the Fund forfeits the right to any appreciation in the
value of the underlying security above the option's exercise price for the
life of the option (or until a closing transaction can be effected). The
Fund also gives up some control over when it may sell the underlying
securities, and must be prepared to deliver the underlying securities against
payment of the option's exercise price at any time during the life of the
option. The Fund retains the full risk of a decline in the price of the
underlying security held to cover the call for as long as its obligation
as a writer continues, except to the extent that the effect of such a
decline may be offset in part by the premium received.
The principal purpose of writing a covered put option would be to
realize income in the form of the option premium, in return for which the
Fund would assume the risk of a decline in the price of the underlying
security below the option's exercise price less the premium received. The
Fund's potential profit from writing a put option would be limited to the
premium received.
When the Fund has written an option it may terminate its obligation
by effecting a closing purchase transaction. This is accomplished by
purchasing at the current market price an option identical as to
underlying instrument, exercise price and expiration date to the option
written by the Fund. The Fund may not effect a closing purchase
transaction, however, after it has been notified that the option it has
written has been exercised. When the Fund has purchased an option it may
liquidate its position by exercising the option, or by entering into a
closing sale transaction by selling an option identical to the option it
has purchased. There is no guarantee that closing transactions can be
effected.
The Fund will realize a profit from a closing transaction if the price
at which the option is closed out is less than the premium received for
writing the option or more than the premium paid for purchasing the option.
Similarly, the Fund will realize a loss from a closing transaction if the
price at which the option is closed out is more than the premium received or
less than the premium paid. Transaction costs for opening and closing option
positions must be taken into account in these calculations.
The Fund may purchase put options on securities it owns to attempt
to protect those securities against a decline in market value during the
term of the option. To the extent that the value of the securities
declines, the Fund may be able to realize a gain by closing out the put option
(or, if the value of the securities falls below the put option's exercise
price, may exercise the option and sell the securities at the exercise
price), and thereby may partially or completely offset the depreciation of
the securities. If the price of the securities does not fall during the
life of the option, the Fund may lose all or a portion of the premium it paid
for the put option, and would lose
-3-
<PAGE>
the entire premium if an option were allowed to expire unexercised. Such a
loss could, however, be offset entirely or in part if the value of the
securities owned should rise.
STOCK INDEX AND FOREIGN CURRENCY FUTURES AND OPTIONS ON SUCH FUTURES.
The Fund may purchase and sell stock index and foreign currency futures
contracts (as well as purchase and sell related options) as a hedge
against changes resulting from market conditions and exchange rates in
the values of the domestic and foreign securities held in the Fund or which
it intends to purchase and where the transactions are economically
appropriate for the reduction of risks inherent in the ongoing management of
the Fund.
The Fund will sell stock index futures contracts in order to offset
a decrease in market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge the
value of its portfolio as a whole, or to protect against declines,
occurring prior to sales of securities, in the value of the securities to be
sold. Conversely, the Fund will purchase stock index futures contracts in
anticipation of purchases of securities. In a substantial majority of
these transactions, the Fund will purchase such securities upon
termination of the long futures position, but along futures position may
be terminated without a corresponding purchase of securities.
In addition, the Fund may utilize stock index futures contracts
in anticipation of changes in the composition of its portfolio holdings.
For example, in the event that the Fund expects to narrow the range of
industry groups represented in its holdings it may, prior to making
purchases of the actual securities, establish a long futures position based
on a more restricted index, such as an index comprised of securities of a
particular industry group. The Fund may also sell futures contracts in
connection with this strategy, in order to protect against the possibility
that the value of the securities to be sold as part of the restructuring of
the portfolio will decline prior to the time of sale.
No price is paid or received by the Fund upon the purchase or sale
of a futures contract. Initially, the Fund will be required to deposit
with the broker or in a segregated account with the Fund's custodian an amount
of cash or cash equivalents, the value of which may vary but is generally
equal to 10% or less of the value of the contract. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that
futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract assuming
all contractual obligations have been satisfied. Subsequent payments,
called variation margin, to and from the broker, will be made on a daily
basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable,
a process known as marking-to-market. For example, when the Fund
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the
broker a variation margin payment equal to that increase in value.
Conversely, where the Fund has purchased a futures contract and the price of
the futures contract has declined in response to a decrease in the underlying
instruments, the position would be less valuable and the Fund would be
required to make a variation margin payment to the broker. At any time
prior to expiration of the futures contract, the Fund's investment adviser
may elect to close the position by taking an opposite position, subject to
the availability of a secondary market, which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or gain.
Futures options possess many of the same characteristics as options
on securities. A futures option gives the holder the right, in return for
the premium paid, to assume a long positions (call) or short position
(put) in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise of a call option, the holder acquires
a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true.
Futures positions may be closed out only on an exchange or board of
trade which provides a market for such futures. Although the Fund intends to
purchase futures which appear to have an active market, there is no
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<PAGE>
assurance that a liquid market will exist for any particular contract or at
any particular time. Thus, it may not be possible to close a futures
position in anticipation of adverse price movements.
OPTIONS ON STOCK INDEXES. The Fund may write covered call options on
stock indexes to attempt to increase the return on its investments through the
receipt of premium income. The Fund will cover index calls by owning
securities whose price changes, in the opinion of the Fund's investment
adviser, are expected to be similar to those of the index. If the value of
an index on which the Fund has written a call option falls or remains the
same, the Fund would realize a profit in the form of the premium received
(less transaction costs) that could offset all or a portion of any decline
in the value of the securities it owns. If the value of the index rises,
however, the Fund would realize a loss in its call option position, which
would reduce the benefit of any unrealized appreciation of the Fund's
stock investments.
The principal reason for writing a covered put option on a stock
index would be to realize income in return for assuming the risk of a
decline in the index. To the extent that the price changes of securities
owned by the Fund correlate with changes in the value of the index, writing
covered put options on indexes would increase the Fund's losses in the
event of a market decline, although such losses would be offset in part by
the premium received for writing the option. The Fund would cover put
options on indexes by segregating assets equal to the option's exercise
price, in the same manner as put options on securities.
The Fund may purchase put options on stock indexes to hedge its
investments against a decline in value. By purchasing a put option on a
stock index, the Fund will seek to offset a decline in the value of
securities it owns through appreciation of the put option. If the value of
the Fund's investments did not decline as anticipated, or if the value of
the option did not increase, the Fund's loss would be limited to the premium
paid for the option. The success of this strategy will largely depend on the
accuracy of the correlation between the changes in value of the index and
the changes in value of the Fund's security holdings.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDICES. Because of
the imperfect correlation between movements in the price of the future and
movements in the price of the securities which are the subject of the hedge,
the price of the future may move more than or less than the price of the
securities being hedged. If the price of the future moves less than the
price of the securities which are the subject of the hedge, the hedge will
not be fully effective but, if the price of the securities being hedged
has moved in an unfavorable direction, the Fund would be in a better
position than if it had not hedged at all. If the price of the securities
being hedged has moved in a favorable direction, this advantage will be
partially offset by the loss on the future. If the price of the future
moves more than the price of the hedged securities, the Fund will experience
either a loss or gain on the future which will not be completely offset by
movements in the price of the securities which are the subject of the
hedge. It is also possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the future and also experience a decline in value
in its portfolio securities.
Where futures are purchased to hedge against a possible increase in
the price of securities before the Fund is able to invest its cash or
cash equivalents in securities or options in an orderly fashion, it is
possible that the market may decline instead; if the Fund then concludes
not to invest in securities or options at that time because of concern as
to possible further market decline or for other reasons, the Fund will
realize a loss on the futures contract that is not offset by a reduction in
the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures
and the securities being hedged, the price of futures may not correlate
perfectly with movement in the cash market due to certain market
distortions. First, rather than meeting additional margin deposit
requirements, investors may close futures contracts through off-setting
transactions which could distort the normal relationship between the cash
and futures markets. Second, with respect to financial futures contracts, the
liquidity of the futures market depends on participants entering into
off-setting transactions rather than making or taking delivery. To
the extent participants decide to make or take delivery, liquidity in the
futures market could be reduced thus producing distortions. Third, from the
point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the
-5-
<PAGE>
possibility of price distortion in the futures market, and because of the
imperfect correlation between the movements in the cash market and movements
in the price of futures, a correct forecast of general market trends or
currency movements by the Fund's investment adviser may still not result in a
successful hedging transaction over a short time frame. Moreover, if the
Fund's adviser is incorrect in such forecasts or interest rates or other
applicable factors, the Fund would be in a worse position than if it had not
hedged at all. In addition, the Fund's purchase and sale of options on indexes
is subject to the risks described above with respect to options on securities.
In the event of the bankruptcy of a broker though which a Fund engages
in transactions in futures contracts or options, the Fund could experience
delays and losses in liquidating open positions purchased or sold through the
broker, and incur a loss of all or part of its margin deposits with the broker.
RESTRICTIONS. The Certificate of Incorporation of the Fund places
certain restrictions upon its activities which may be amended only upon
approval of a majority of the outstanding voting shares of the Fund. The
Fund may not:
(1) Purchase the securities of any issuer, except the United States
Government, if after such purchase more than 5% of the total assets
of the Fund would be invested in the securities of such issuer.
(2) Purchase more than 10% of the outstanding securities of any class of
any issuer including voting securities.
(3) Make short sales of securities or maintain a short position unless
at the time of the short sale the Fund owns or has the right to acquire
at no additional cost an equal amount of the securities being sold
short.
(4) Purchase securities on margin except for short-term credits as are
necessary for the clearance of transactions; provided, however, the
Fund may make initial and variation margin payments in connection
with purchases or sales of options or futures contracts.
(5) Borrow any money except temporarily and for extraordinary or
emergency purposes and then only in an amount not to exceed 10% of
the total assets of the Fund taken at cost.
(6) Lend any money to any person (for this purpose the purchase of a
portion of an issue of publicly distributed debt securities for the
investment purposes is not considered a loan).
(7) Act as an underwriter of securities.
(8) Invest in the securities of other investment companies if
immediately after such investment the Fund will own (i) securities
issued by an investment company having an aggregate value in excess
of 5% of the value of the total assets of the Fund, or (ii)
securities issued by all investment companies having an aggregate
value in excess of 10% of the value of the total assets of the Fund,
except to the extent permitted by the Investment Company Act of 1940
and any applicable rules or exemptive orders issued thereunder.
(9) Engage in activity which involves promotion or business management
by the Fund.
(10) Invest in any security about which reliable information is not
available with respect to the history, management, assets, earnings,
and income of the issuer.
(11) Purchase any real estate, real estate mortgage loans, or any
commodities or commodity contracts, except that the Fund may buy
and sell futures contracts and options.
(12) Issue any senior securities.
The Fund will not make any investment for the purpose of exercising
control or management of any other corporation; nor will it invest in any
security if the investment would subject the Fund to unlimited liability.
The Board of Directors of the Fund has adopted a policy that the Fund will
not invest in oil, gas and other mineral leases and, in addition to the
restrictions on real estate investments contained in paragraph (k) above,
the Fund will not purchase any real estate limited partnership interests.
Although the Fund's Certificate of Incorporation does not
prohibit purchases of restricted securities, the Fund does not
presently intend to purchase restricted securities.
-6-
<PAGE>
MANAGEMENT OF THE REGISTRANT
OFFICERS AND DIRECTORS OF THE FUND
Overall operations of the Fund are conducted by its officers under the
control of the Board of Directors. The officers and directors of the Fund,
their addresses and their principal occupation during the past 5 years are:
RICHARD C. BARRETT (age 54) - Vice President and Director*
President and Director, Stonebridge Capital Management, Incorporated,
1801 Century Park East, Los Angeles, California 90067; Vice President and
Director, Sierra Growth Fund, Inc.
SELVYN B. BLEIFER, M.D. (age 66) - Director
Physician, Cardiovascular Medical Group, 414 North Camden Drive,
Beverly Hills, California 90212; Director, Sierra Growth Fund, Inc.
MARVIN FREEDMAN (age 70) - Director
Partner, Freedman, Broder & Angen, Certified Public Accountants, 2501
Colorado Avenue, Suite 350, Santa Monica, California 90404.
CHARLES F. HAAS (age 82) - Director
Retired motion picture and television director, 12626 Hortense
Street, Studio City, California, 91604; Director, Sierra Growth Fund, Inc.
DEBRA L. NEWMAN (age 40) - President
Vice President, Chief Financial Officer, Secretary and Director,
Stonebridge Capital Management, Incorporated, 1801 Century Park East, Los
Angeles, California 90067; Vice President and Treasurer, Sierra Growth
Fund,Inc.
MICHAEL J.B. STONE (age 51) - Vice President
Vice President, Preferred Financial Corp., 5990 Greenwood Plaza
Boulevard, Englewood, Colorado 80111; President, Industry Savings Plans,
Inc.; President, NIF Management Co., Inc.
COLLEEN M. SCHOMER (age 29) - Secretary
Portfolio Administrator, Stonebridge Capital Management, Incorporated,
1801 Century Park East, Los Angeles, California 90067; Secretary, Sierra
Growth Fund, Inc.
JOANNE E. ASHTON (age 40) - Treasurer and Assistant Secretary
Secretary-Treasurer, Industry Savings Plans, Inc., 5990 Greenwood Plaza
Blvd., Englewood, Colorado 80111; Secretary-Treasurer, NIF Management Co.,
Inc.; Controller, Preferred Financial Corp.
As of February 1, 1996, officers and directors of the Fund, as a group,
owned of record and beneficially 2,169 shares or less than 1% of the
outstanding shares of the Fund.
None of the officers of the Fund received any compensation from the Fund
for his or her services during the fiscal year ended November 30, 1995. Each
director who is not an "interested person" of the Fund is entitled to receive
from the Fund $250 for each meeting of the Board of Directors attended, and
is not entitled to separate compensation for attendance at meetings of
committees of the Board of Directors. The following table sets forth more
detailed compensation information for the directors of the Fund who are not
affiliated with the Adviser during the fiscal year ended November 30, 1995:
- - ---------------------------
* "Interested person" of the Fund as defined by the Investment Company Act
of 1940, as amended.
-7-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
AGGREGATE PENSION OR ESTIMATED ANNUAL COMPENSATION
COMPENSATION RETIREMENT BENEFITS UPON FROM FUND AND
DIRECTOR FROM FUND BENEFITS RETIREMENT FUND COMPLEX(1)
PAID TO DIRECTORS
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph C. Youngerman 250 0 0 250
Marvin Freedman 750 0 0 850
Selvyn B. Bleifer, M.D. 750 0 0 900
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser is Stonebridge Capital Management,
Incorporated, 1801 Century Park East, Los Angeles, California 90067 (the
"Adviser"), which provides investment advisory services pursuant to
an investment advisory agreement (the "Agreement") approved by the
stockholders on May 26, 1992. John G. Ayer owns 9.8%, Richard C. Barrett owns
39.2%, Debra L.Newman owns 15.6%, Karen H. Parris, Timothy G. Walt and
Charles E. Woodhouse each owns 11.8% of the outstanding stock of the Adviser.
The Fund's Custodian is Colorado National Bank, 17th and Champa
Street, Denver, Colorado 80202. It receives and deposits all cash and
receives and collects income from the Fund's investments. All securities of
the Fund are held by the Custodian's bank affiliates, the Depository Trust
Company and Chase Manhattan Bank of New York. These institutions also receive
and deliver securities bought or sold by the Fund. The Custodian has no part
in the management or investment decisions of the Fund.
The Fund's transfer agent and dividend disbursing agent is NIF
Management Co., Inc., 5990 Greenwood Plaza Boulevard, Englewood, Colorado
80111. As transfer agent, NIF Management Co. maintains the Fund's records
for the stockholders who purchase shares. It accepts, confirms and processes
payments for purchase and redemptions, and disburses and reinvests dividends
and capital gains distributions, if any, made by the Fund to these
stockholders. The fee paid to the transfer agent for the year ended November
30, 1995, was $165,000 or.5% of the Fund's net assets.
Hein + Associates LLP, Denver, Colorado (the "Auditors") serve as
independent accountants to the Fund. The Auditors conduct the audit of the
Fund's annual financial statements and prepare the Fund's tax returns. The
Auditors have no part in the management or investment decisions of the Fund.
BROKERAGE TRANSACTIONS
Decisions to buy and sell securities for the Fund, assignment of its
portfolio business and negotiation of its commission rates are made by the
Adviser. It is the Fund's policy that the Adviser shall seek to obtain both
quality research and "best execution" of purchase and sales transactions, and
that the Adviser shall seek to negotiate the brokerage commissions to provide
fair, competitive compensation for the broker's services, giving consideration
to the statistical and research services provided as well as the brokerage
execution services. Research services furnished by brokers through whom the
Fund effects security transactions may be used by the Adviser in servicing
all of its accounts and not all such services may be used by the Adviser in
connection with the Fund. Subject to periodic review by the Board of
Directors, the Adviser is authorized to pay higher commissions to brokerage
firms that provide it with investment and research information if the Adviser
determines such commissions are reasonable in relation to the overall
services provided. None of the
- - ---------------------------
(1) Sierra Growth Fund, Inc. and the Fund comprise a Fund Complex as such term
is defined in Item 22(a)(1)(v) of Rule 14a-101 of the Securities Exchange
Act of 1934, because they have the same investment adviser.
-8-
<PAGE>
broker/dealer firms with which the Fund conducts business is engaged in sales
of shares of the Fund and none is affiliated with either the Fund or the
Adviser.
Statistical and research material furnished to the Adviser may be useful
to the Adviser in providing services to clients other than the Fund.
Similarly, such material furnished to the Adviser by brokers through which
other clients of the Adviser in providing services to the Fund. The Board of
Directors of the Fund reviews from time to time the extent and continuation
of this practice.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the kind
made by the Fund may also be made by other such accounts. When a purchase or
sale of the same security is made at substantially the same time on behalf of
the Fund and one or more other accounts managed by the Adviser, available
investments are allocated in the discretion of the Adviser by such means as,
in its judgement, result in fair treatment. The Adviser aggregates orders for
purchases and sales of securities of the same issuer on the same day among
the Fund and its other managed accounts, and the price paid to or received by
the Fund and those accounts is the average obtained in those orders. In some
cases, such aggregation and allocation procedures may affect adversely the
price paid or received by the Fund or the size of the position purchased or
sold by the Fund.
When the Fund purchases or sells a security which is not listed on a
national securities exchange but which is traded in the over-the-counter
market, the transaction generally takes place directly with a principal
market maker, except in those circumstances where, in the opinion of the
Fund, better prices and executions will be achieved through the use of other
broker-dealers. The Adviser does not receive any benefit directly or
indirectly arising from these transactions.
The following provides information regarding the Fund's brokerage
transactions during the fiscal years ended November 30, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
ANNUAL TOTAL
PORTFOLIO TURNOVER BROKERAGE
RATE COMMISSIONS PAID
------------------ ----------------
<S> <C> <C>
1995 38% $ 67,890
1994 36% $ 104,550
1993 56% $ 176,836
</TABLE>
The anticipated annual portfolio turnover will normally be in the range
of 25% to 75%. Portfolio turnover is a function of market shifts and
relative valuation of individual securities and market sectors. The Fund's
Adviser attempts to keep the Fund invested in those securities that have the
potential to meet the Fund's growth objective and that represent the best
relative value.
The Fund has not acquired securities of any brokers or dealers, or
the parent thereof, during the fiscal year ended November 30, 1995.
FINANCIAL STATEMENTS
The financial statements of the Fund are incorporated by reference to
the 36th Annual Report to Stockholders dated November 30, 1995, as filed with
the Securities and Exchange Commission on January 17, 1996. The Fund will
furnish, upon request and without charge, a copy of this report. Please
contact Mary Beth Pickett, National Industries Fund, Inc., 5990 Greenwood
Plaza Boulevard, Englewood, Colorado 80111, (303) 220-8500.
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<PAGE>
PART C
OTHER INFORMATION
ITEM
24. (a) Financial Statements
In Part A:
Schedule of Condensed Financial Information
In Part B:
Report of Independent Auditors
Statement of Assets and Liabilities
Portfolio of Investments
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
(b) Exhibits (1) through (11):
Reference is made to the Exhibits to the Fund's Form N-1 and Form
N-1A and post-effective amendments thereto previously filed with
the Securities and Exchange Commission which are hereby
incorporated herein.
Exhibits (12) through (16):
Not applicable.
25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Selvyn G. Bleifer, Marvin Freedman, Charles F. Haas and Richard C.
Barrett, comprising all of the Directors of the Fund, also comprise a
majority of the members of the Board of Directors of [insert new
name] (formerly Sierra Growth Fund, Inc.) ("Sierra"), a
registered investment company. In addition, Mr. Barrett, Debra L.
Newman and Coleen Schomer, officers of the Fund and Sierra may be
deemed to be under common control.
26. NUMBER OF HOLDERS OF SECURITIES
As of March 1, 1996, the number of record holders of each class of
securities of the Registrant were:
TITLE OF CLASS
Capital Stock
(par value $1.00)
NUMBER OF RECORD HOLDERS
10,728
27. INDEMNIFICATION
The following indemnification of the corporation's directors and
officers is provided by Section 145 of the General Corporation Law of
Delaware and Section 7 of the Fund's bylaws:
(a) This corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee
S-1
<PAGE>
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) This corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which
the Delaware Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of this
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) or (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
(2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the board of directors in the specific case upon receipt
of an undertaking by or on behalf of such director or officer to repay
such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation as authorized in this
section. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those seeking indemnification
may be entitled under any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who
S-2
<PAGE>
has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(g) This corporation may, if the board of directors determines, purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status
as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this
section.
(h) For purposes of this section, references to "corporation" and to
"other enterprises" shall include the entities as defined in Section
145 of the Delaware General Corporation Law.
The corporation has been advised that it is the opinion of the
Securitiesand Exchange Commission that indemnification of officers and
directors forliabilities arising under the Securities Act of 1933 is against
public policy asexpressed in the Act and is, therefore, unenforceable. The
right of indemnification set forth above shall be subject to any limitations
imposed by the applicable federal or state securities laws.
28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
During the two fiscal years ended November 30, 1995, Stonebridge
Capital Management, Incorporated, the Investment Adviser to the Fund, has
engaged principally in the business of providing investment management
services to institutional and individual clients. All of the additional
information required by this Item 28 with respect to the Investment Adviser
is set forth in the form ADV, as amended, of the Investment Adviser (File
No. 801-5363), which is incorporated herein by reference.
29. PRINCIPAL UNDERWRITERS
(a) Industry Savings Plans, Inc. does not act as a principal underwriter,
depositor, or investment adviser for any other investment company.
(b) The following table sets forth the principal business positions of
each director and officer of Industry Savings Plans, Inc.
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH OFFICES WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
- - ---------------------------- ------------------- --------------------
<S> <C> <C>
Michael J.B. Stone President Vice President
5990 Greenwood Plaza Blvd.
Englewood, Colorado 80111
Joanne E. Ashton Secretary/Treasurer Treasurer &
5990 Greenwood Plaza Blvd. Assistant Secretary
Englewood, Colorado 80111
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
1801 Century Park East,
Suite 1800
Los Angeles, California 90067
S-3
<PAGE>
NIF Management Co., Inc.
5990 Greenwood Plaza Boulevard
Englewood, Colorado 80111
Colorado National Bank of Denver
17th and Champa Street
Denver, Colorado 80202
31. MANAGEMENT SERVICES
Inapplicable.
32. UNDERTAKINGS
The Fund hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Fund's latest annual report to its
shareholders upon the request of such person and without charge.
S-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Los Angeles and State of
California on the 30th day of March, 1996.
NATIONAL INDUSTRIES FUND, INC.
By:
---------------------------------
Debra L. Newman, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 61 to the Registration Statement
has been signed below by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
(1) Principal Executive Officers:
---------------------------------- President March 30, 1996
Debra L. Newman
---------------------------------- Vice President March 30, 1996
Richard C. Barrett
(2) Principal Financial and Accounting Officer:
---------------------------------- Treasurer March 30, 1996
Joanne E. Ashton
(3) Directors:
---------------------------------- Director March 30, 1996
Richard C. Barrett
---------------------------------- Director March 30, 1996
Selvyn B. Bleifer, M.D.
---------------------------------- Director March 30, 1996
Marvin Freedman
---------------------------------- Director March 30, 1996
Joseph C. Youngerman
</TABLE>
S-5
<PAGE>
CONSENT OF INDEPENDENT AUDITOR
We consent to the use in this Post-Effective Amendment No. 61 to
the Registration Statement (Form N-1A No. 2-15893) of our report dated
December 9, 1995 on the financial statements and the per share data and ratios
of National Industries Fund, Inc., incorporated herein by reference and to the
reference made to us under the caption "Financial Highlights" in the
Prospectus and under the caption "Investment Advisory and Other Services" in
the Statement of Additional Information.
HEIN + ASSOCIATES LLP
Denver, Colorado
March 1996
S-6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 25,005
<INVESTMENTS-AT-VALUE> 34,694
<RECEIVABLES> 40
<ASSETS-OTHER> 96
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 55
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,952
<SHARES-COMMON-STOCK> 2,422
<SHARES-COMMON-PRIOR> 2,484
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,622
<NET-ASSETS> 34,775
<DIVIDEND-INCOME> 351
<INTEREST-INCOME> 557
<OTHER-INCOME> 0
<EXPENSES-NET> 489
<NET-INVESTMENT-INCOME> 419
<REALIZED-GAINS-CURRENT> 1,342
<APPREC-INCREASE-CURRENT> 4,502
<NET-CHANGE-FROM-OPS> 6,263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (171)
<DISTRIBUTIONS-OF-GAINS> (1,678)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34
<NUMBER-OF-SHARES-REDEEMED> (206)
<SHARES-REINVESTED> 153
<NET-CHANGE-IN-ASSETS> 4,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 842
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 213
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 489
<AVERAGE-NET-ASSETS> 32,907
<PER-SHARE-NAV-BEGIN> 12.61
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 2.34
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.69)
<PER-SHARE-NAV-END> 14.36
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
