<PAGE> 1
MEDICAL RESEARCH INVESTMENT FUND, INC.
SUPPLEMENT DATED JUNE 7, 1995
to
PROSPECTUS DATED DECEMBER 30, 1994
and
SUPPLEMENTED FEBRUARY 9, 1995
THE FOLLOWING PARAGRAPH IS ADDED TO THE END OF THE PURCHASING SHARES SECTION ON
PAGE 20 OF THE PROSPECTUS:
Effective June 7, 1995, payment for all orders to purchase Fund shares must
be received by the Fund's Transfer Agent within three business days after the
order was placed.
THE FOLLOWING INFORMATION REPLACES THE LAST TWO SENTENCES OF THE PURCHASING
SHARES - TELPEHONE PURCHASE AUTHORIZATION (INVESTING BY PHONE) SECTION ON PAGE
20 OF THE PROSPECTUS:
Effective June 7, 1995, payment for the telephone purchase must be received
by the Transfer Agent within three business days after the order is placed. If
payment is not received within three business days after the order is placed,
the stockholder will be liable for all losses incurred as a result of the
purchase. (Prior to June 7, 1995, payment must be received by the Transfer
Agent within 7 days).
<PAGE> 2
MEDICAL RESEARCH INVESTMENT FUND, INC.
5847 San Felipe, Suite 4100
Houston, TX 77057
1-800-262-6631
December 30, 1994
As Supplemented February 9, 1995
PROSPECTUS
Medical Research Investment Fund, Inc. (the "Fund") is a diversified, open-
end management investment company. The Fund's primary investment objective is
long-term growth of capital, a goal it seeks by investing primarily in common
stocks, and securities (including debt and warrants) convertible into common
stocks, of domestic and foreign companies engaged in medical research and the
health care industry. Current income is a secondary objective. No assurance
can be given that the Fund will realize its objectives. This Prospectus sets
forth certain information about Medical Research Investment Fund, Inc. that a
prospective investor should know before investing. Investors should read and
retain this Prospectus for future reference.
A STATEMENT OF ADDITIONAL INFORMATION about the Fund dated December 30,
1994 and supplemented February 9, 1995 has been filed with the Securities and
Exchange Commission and contains further information about the Fund. A copy of
the Statement of Additional Information may be obtained without charge by
calling or writing the Fund at the telephone number or address listed above.
The Statement of Additional Information is incorporated herein by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSIONER NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
MEDICAL RESEARCH INVESTMENT FUND, INC.
<TABLE>
<S> <C>
Investment Adviser: Administrator:
G/A Capital Management, Inc. Capstone Asset Management Company
41 Madison Avenue, 40th Floor 5847 San Felipe, Suite 4100
New York, New York 10010-2202 Houston, Texas 77057
Distributor: Shareholder Servicing Agent:
Capstone Asset Planning Company Fund/Plan Services, Inc.
5847 San Felipe, Suite 4100 P.O. Box 874
Houston, Texas 77057 2 W. Elm Street
Conshohocken, Pennsylvania 19428
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . 3
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial Highlights . . . . . . . . . . . . . . . . . . . . . 7
Investment Objectives and Policies . . . . . . . . . . . . . . 8
Other Investments and Investment Practices . . . . . . . . . . 9
Special Considerations . . . . . . . . . . . . . . . . . . . .13
Investment Restrictions. . . . . . . . . . . . . . . . . . . .13
Performance Information. . . . . . . . . . . . . . . . . . . .14
Management of the Fund . . . . . . . . . . . . . . . . . . . .15
Purchasing Shares. . . . . . . . . . . . . . . . . . . . . . .18
Distributions and Taxes. . . . . . . . . . . . . . . . . . . .22
Redemption and Repurchase of Shares. . . . . . . . . . . . . .25
Determination of Net Asset Value . . . . . . . . . . . . . . .26
Stockholder Services . . . . . . . . . . . . . . . . . . . . .27
General Information. . . . . . . . . . . . . . . . . . . . . .29
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . .31
</TABLE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund or its Distributor. This Prospectus does
not constitute an offer by the Fund or by the Distributor to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Fund or the
Distributor to make such offer or solicitation in such jurisdiction.
2
<PAGE> 4
MEDICAL RESEARCH INVESTMENT FUND, INC.
PROSPECTUS SUMMARY
The Fund. . . . . . . . .The Fund is an open-end diversified management
investment company. (see page 29)
Investment Objectives . .The Fund's primary investment objective is long-term
growth of capital, a goal it seeks by investing
primarily in common stocks, and securities (including
debt and warrants) convertible into common stocks, of
domestic and foreign companies engaged in medical
research and the health care industry. Current income
is a secondary objective. No assurance can be given
that the Fund will realize its objectives. (see page
8)
Investment Policies. . . The Fund will invest in common stocks and securities
convertible into common stocks, of domestic and foreign
companies which obtain at least fifty percent of their
profits and revenues from medical research or health
care products or services. Except during temporary
defensive periods, not less than 65% of the Fund's
total assets will be invested in the securities of such
companies and, except during temporary defensive
periods, the Fund would normally expect at least 80% of
its total assets to be so invested. (see page 8)
Special Considerations. .Investing in a portfolio consisting primarily of U.S.
and foreign securities issued by companies engaged in
medical research and the health care industry involves
certain risks. Companies in medical research and
health care are generally subject to greater
governmental regulation and products and services of
such companies are also subject to relatively high
risks of rapid obsolescence. The Fund's foreign
investments may be adversely affected by fluctuations
in exchange rates, revaluation of currencies, political
and economic instability and the imposition of currency
exchange or other foreign governmental restrictions.
(see page 13)
Investment Adviser . . . G/A Capital Management, Inc. (the "Adviser") is the
Fund's investment adviser. (see page 15)
Administrator . . . . . .Capstone Asset Management Company is the Fund's
administrator (the "Administrator"). The Administrator
provides advisory and/or administrative services to the
other mutual funds in the Capstone Group. (see page 16)
Dividends and . . . . . .The Fund pays any dividends from net investment income
Distribution and distributions from capital gains at least annually.
(see page 22)
3
<PAGE> 5
Offering Price and . . .The public offering price of Fund shares is equal to
Sales Charge the net asset value plus a sales charge of up to 4.75%
of the public offering price (up to 4.99% of the amount
invested), reduced on investments of $100,000 or more.
The Fund pays certain expenses pursuant to a written
distribution plan. (see page 19)
Minimum Purchase. . . . .The minimum initial investment is $200, except for
continuous investment plans, and there is no minimum
for subsequent purchases. (see page 18)
Redemption. . . . . . . .Shares of the Fund can be redeemed at the next
determined net asset value, without charge. (see page
25)
Distributor . . . . . . .The Distributor is Capstone Asset Planning Company.
4
<PAGE> 6
FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 4.75% on initial investment
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price) 0%
Deferred Sales Load (as a percentage of
original purchase price or redemption
of proceeds, as applicable) 0%
Redemption Fees (as a percentage of
amount redeemed, if applicable) 0%
Exchange Fee 0%
a 4.75% maximum sales load applies to
exchanges of shares that have not been
outstanding at least 15 days
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management and Administration Fees 1.08%
(after expense reimbursements)
12b-1 Fees* 0.25%
Other Expenses 1.17%
Total Fund Operating Expenses 2.50%
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period: $72 $122 $174 $318
</TABLE>
______________
* Under rules of the National Association of Securities Dealers ("NASD"), a
12b-1 fee may be treated as a sales charge for certain purposes under those
rules. Because the 12b-1 fee is an annual fee charged against the assets of a
Fund, long-term stockholders may indirectly pay more in total sales charges than
the economic equivalent of the maximum front-end sales charge permitted by the
rules of the NASD (see "Distributor").
5
<PAGE> 7
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The information disclosed in the table under the heading
"Shareholder Transaction Expenses" is based on the maximum sales load now in
effect for the Fund. See "Purchasing Shares" and "Redemption and Repurchase of
Shares" below for more complete descriptions of those expenses, including a
description of available reductions in the sales charge. The management and
administration fee information contained in the table includes reimbursement to
the Fund by the Adviser and Administrator as a result of an expense limitation
agreement. See "Expenses" herein, and "Investment Advisory Agreement", and
"Administration Agreement" and "Note 2 to Financial Statements" in the Fund's
Statement of Additional Information. Had there been no reimbursements to the
Fund, the management and administrative fees would have amounted to 1.25% as a
percent of average net assets, and total Fund operating expenses would have
amounted to 2.67%, which is higher than most investment companies. A pricing
charge is also included in the expense information contained in the table. See
"Management of the Fund" for more complete descriptions of the fees paid to the
Adviser and Administrator. The information disclosed in the table for "Other
Expenses" is based on expenses actually incurred by the Fund during its last
fiscal year ended August 31, 1994. The example which immediately follows the
table should not be considered a representation of past or future expenses.
Actual Fund expenses may be greater or lesser than those shown in the example or
in the table.
6
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data for
a share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each year indicated. This information has been
derived from information provided in the Fund's financial statements which have
been examined by Tait, Weller & Baker, independent certified public accountants.
The Fund's Annual Report contains additional performance information and is
available free of charge upon request by calling the Fund at 800-262-6631.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------------------------------------------------
1994(1) 1993(1) 1992(1) 1991(1) 1990(1) 1989 1988 1987 1986 1985*
------- ------ ------ ------- ------- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at
beginning of year $19.27 $17.94 $17.15 $14.70 $13.92 $10.60 $15.26 $13.65 $10.08 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (.31) (.27) (.26) (.23) (.33) (.86) (.45) (.20) (.45) .08
Net realized and unrealized gain
(loss) on investments 0.86 3.72 2.30 4.30 1.83 4.18 (3.17) 2.60 4.07 --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.55 3.45 2.04 4.07 1.50 3.32 (3.62) 2.40 3.62 .08
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Less Distributions From:
Net investment income .-- .-- .-- .-- .-- .-- .05 .-- .-- .--
Net realized gain on investments 1.52 2.12 1.25 1.62 .72 .-- 1.04 .79 .-- .--
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total distributions 1.52 2.12 1.25 1.62 .72 .-- 1.04 .79 .05 .--
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value at end of year $18.30 $19.27 $17.94 $17.15 $14.70 $13.92 $10.60 $15.26 $13.65 $10.08
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 2.69% 21.37% 12.04% 30.60% 11.13% 31.32% (25.30)% 19.81% 36.04% --
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year
(in thousands) $13,231 $10,223 $11,415 $6,955 $3,771 $2,754 $2,819 $4,015 $1,623 $101
Ratio of operating expenses to
average net assets (2):
Before expense reimbursement 2.67% 2.87% 2.59% 3.74% 4.77% 5.54% 5.71% 6.72% 9.90% --
After expense reimbursement 2.50% 2.50% 2.48% 2.50% 3.51% 5.27% 5.59% 6.08% 7.87% --
Ratio of net investment loss to
average net assets:
Before expense reimbursement (1.82)% (1.90)% (1.56)% (2.71)% (3.51)% (4.00)% (4.12)% (5.01)% (8.13)% --
After expense reimbursement (1.65)% (1.53)% (1.45)% (1.47)% (2.26)% (3.73)% (4.00)% (4.37)% (6.10)% --
Portfolio turnover rate 49% 77% 71% 81% 143% 75% 59% 95% 69% --
</TABLE>
- --------------
* For the period July 26, 1985 (commencement of operations) to August 31,
1985
(1) Based on average shares outstanding determined monthly.
(2) Beginning September 1, 1989 the Adviser and Administrator have reimbursed a
portion of their fees in order to allow the Fund to operate within the
expense limitation of any state having jurisdiction over the Fund.
7
<PAGE> 9
INVESTMENT OBJECTIVES AND POLICIES
The Fund is an open-end diversified management investment company whose
primary objective is long-term growth of capital, a goal it seeks by investing
primarily in common stocks and securities (including debt and warrants)
convertible into common stocks, of domestic and foreign companies engaged in
medical research and the health care industry. Such companies obtain at least
fifty percent of their profits and revenues from medical research or health care
products or services. Current income is a secondary objective. See "Taxes."
Except during temporary defensive periods, not less than 65% of the Fund's
total assets will be invested in the securities of companies primarily engaged
in medical research and the health care industry, and, except during temporary
defensive periods, the Fund would normally expect at least 80% of its total
assets to be so invested. As a diversified investment company, at least 75% of
the Fund's total assets are required to be invested in securities limited in
respect of any one issuer to not more than 5% of the Fund's total assets and to
not more than 10% of the issuer's voting securities. Both the Fund's investment
objectives and these policies are fundamental and may not be changed without the
vote of a majority of the Fund's outstanding shares.
The Adviser believes that favorable investment opportunities are offered by
companies that provide products or services designed for the prevention,
diagnosis and treatment of physical and mental disorders. Both the expanding
world population and the increasing average age of citizens in the
industrialized countries have contributed to dramatic growth in the health care
industry. In addition to the increased demand for health care services,
substantial public and private expenditures on basic medical research and
advances in technology have accelerated the pace of medical discoveries, thereby
offering the prospect of new services, products and markets. Examples of these
developments include improved drugs and delivery systems for treating cancer,
hypertension and heart attacks as well as technological advances in research
such as gene splicing, monoclonal antibodies for diagnosis and therapy and new
imaging devices. Accordingly, the Fund seeks to invest in common stocks, and
securities (including debt) convertible into common stocks, of companies whose
research and development efforts, in the opinion of the Adviser, may result in
higher stock values.
An important yardstick the Adviser employs in making portfolio selections,
in addition to evaluating trends in corporate revenues, earnings and dividends,
is the amount of capital currently being expended on research and development,
and the nature thereof. The Adviser believes that dollars invested in research
and development today frequently have significant bearing on future growth.
Portfolio securities generally will be selected from companies in the
following groups: Pharmaceuticals--Companies involved in the development,
manufacture and sale of pharmaceuticals.
Biotechnology Companies--Companies which are producing or plan to produce
as a result of current research, diagnostic and therapeutic drugs and reagents
based on genetic engineering and the use of monoclonal antibodies; also,
specialty companies catering to the unique requirements of biotechnology
companies such as those providing enzymes, media and purification equipment.
8
<PAGE> 10
Medical and Dental Equipment and Suppliers--Companies engaged in the
manufacture of medical, surgical, laboratory and diagnostic products (ranging
from needles and syringes through kidney dialyses equipment to CAT scanners).
Hospital Suppliers--Companies distributing health care products to
hospitals, physicians and dentists, including intravenous solutions,
pharmaceuticals, diagnostics, laboratory and hospital instruments, eye care
products and capital goods.
Hospital Management Companies--Operators of investor-owned hospital chains
(including acute care psychiatric hospitals) which seek to deliver hospital care
on an efficient cost basis.
Nursing Centers--Companies which provide long-term health care for the
rapidly expanding elderly population.
Diagnostic Centers--Private organizations that maintain sophisticated
diagnostic equipment such as CAT scanners and Magnetic Resonance Imaging as well
as urological and serological assays.
FOREIGN SECURITIES
The Fund may purchase securities, including common stocks and convertible
debt securities, of foreign companies engaged in medical research and the
health care industry which are listed on a U.S. or foreign stock exchange. Such
securities may or may not be in the form of American Depository Receipts (ADRs).
ADRs are typically issued by United States banks or trust companies and evidence
ownership of underlying securities issued by a foreign company. ADRs may be
listed on a national securities exchange or traded in the over-the-counter
market. ADR prices are denominated in United States dollars; the underlying
security may be denominated in a foreign currency. Except with respect to the
diversification requirements discussed above, the Fund is subject to no maximum
limit on the amount of foreign securities it may hold.
Although there is no minimum percentage of assets the Fund must invest in
foreign securities, the Fund intends to diversify its investments across a broad
spectrum of countries, including the United States, Canada, Japan, Australia,
the United Kingdom, Holland, Belgium, Denmark, Norway, Sweden, West Germany,
Italy and Switzerland. The Board of Directors of the Adviser believes that the
Fund's international diversification may serve to reduce the investment risk
associated with being invested in the economy of only one country since foreign
markets have generally moved with a degree of independence from the U.S. market.
There is, of course, no assurance that this will occur, and investors should
also be aware of certain risks involved in investing in the securities of
foreign companies. See "Special Considerations."
OTHER INVESTMENTS AND INVESTMENT PRACTICES
Due to the changing nature of national economies and market and political
conditions, the Fund may, as a temporary defensive measure, invest without
limitation as to the amount in money market securities of United States and
foreign issuers, including certificates of deposit, bankers' acceptances,
commercial paper and repurchase agreements, debt obligations of the United
States Government or its political subdivisions, negotiable Eurodollar time
deposits, and cash or cash equivalents, including short-term money market
instruments, short-term Treasury instruments, and
9
<PAGE> 11
certificates of deposit maturing in less than six months, in United States
dollars or foreign currencies.
In order to have funds available for redemption and investment
opportunities, the Fund may also hold a portion of its portfolio in cash or U.S.
and foreign short-term money market instruments. The commercial paper of U.S.
issuers purchased by the Fund will consist of issues rated (at the time of
purchase) A-1 or better by Standard & Poor's Corporation ("S&P") or Prime-1 by
Moody's Investors Service, Inc. ("Moody's"). These rating symbols are described
in Appendix A to the Statement of Additional Information. Certificates of
deposit purchased by the Fund will be those of U.S. or foreign banks having
total assets at the time of purchase in excess of $1 billion, and bankers'
acceptances purchased by the Fund will be guaranteed by U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion. The Fund
anticipates that not more than 20% of its total assets will be so invested in
money market instruments or held in cash at any given time, except when the Fund
is in a temporary defensive posture. The Fund may invest in debt securities
convertible into common stocks. Debt purchased by the Fund will consist of
obligations of medium grade or higher, having at least adequate capacity to pay
interest and repay principal. Non-convertible debt obligations will be rated
BBB or higher by S&P, or Baa or higher by Moody's. Convertible debt obligations
will be rated B or higher by S&P or B or higher by Moody's. Securities rated
Baa by Moody's are considered by Moody's to be medium grade securities and have
speculative characteristics and securities rated BBB by S&P are regarded by S&P
as having adequate capacity to pay principal and interest. Securities rated B
by S&P are regarded, on balance, as predominately speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation. The Fund does not currently intend to invest in convertible or non-
convertible debt obligations rated lower than B by S&P or Moody's.
The Fund may accrue and report interest income on high-yield bonds such as
zero coupon bonds or pay-in-kind securities, even though the Fund receives no
cash interest until the security's maturity or payment date. In order to
qualify for beneficial tax treatment afforded regulated investment companies,
and to be relieved of Federal tax liabilities, the Fund must distribute
substantially all of its net income to stockholders generally on an annual
basis. Thus, the Fund may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash or leverage itself by borrowing
cash in order to satisfy the distribution requirement.
The Fund does not trade in securities for short-term profits but, when
circumstances warrant, securities may be sold without regard to the length of
time they have been held. The Fund's annual portfolio turnover rate for the
fiscal year ended August 31, 1994 was 49%.
Options and Futures. To the extent deemed advisable by the Adviser, the
Fund may write covered call options which are traded on national securities
exchanges and issued by the Options Clearing Corporation, with respect to
foreign or domestic common stocks in its portfolio. The Fund may write covered
call options on the Fund's common stocks in an attempt to realize a greater
current return than would be realized in the securities alone or to provide
greater flexibility in disposing of such securities. In view of its investment
objectives, the Fund generally would write call options only in circumstances
where the Adviser does not anticipate significant appreciation of the underlying
security in the near future or has otherwise determined to dispose of the
security. As the writer of a call option, the Fund receives a premium for
undertaking the obligation to sell the underlying security at a fixed price
during the option period, if the option is exercised. So long as the Fund
remains obligated as a writer of a call, it foregoes the opportunity to profit
from increases in
10
<PAGE> 12
the market price of the underlying security above the exercise price of the
option, except insofar as the premium represents such a profit, and retains the
risk of loss should the value of the underlying security decline. The writing
of call options could result in increases in the Fund's portfolio turnover rate
especially during periods when market prices of the underlying securities
appreciate. See "Taxes." The Fund may also enter into "closing purchase
transactions" in order to terminate its obligation as a writer of a call option
prior to the expiration of the option. Although the writing of call options
only on national securities exchanges increases the likelihood of the Fund's
being able to make closing purchase transactions, there is no assurance that the
Fund will be able to effect such transactions at any particular time or at an
acceptable price.
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 by the Fund or which the Fund 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 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 (which assigns
relative values to the stocks included in the index) 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 U.S.
dollars. The Fund may not purchase or sell futures contracts and purchase or
sell related options unless 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 premiums 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 subject to the option.)
A principal consideration in trading in futures contracts for hedging
purposes is the possibility of an imperfect correlation, or no correlation at
all, between movements in the price of the futures contract and the securities
being hedged. In addition, the ordinary spreads between prices in the
securities and futures markets, due to differences in the nature of those
markets, are subject to distortions (e.g., the margin requirements on futures
and the relative liquidity of the respective markets). To compensate for the
possibility of imperfect correlations, the Fund may buy or sell futures
contracts in a greater dollar amount than the dollar amount of the securities
being hedged if the historical volatility of the prices of such securities has
been greater than the historical volatility of the futures contracts.
Conversely, the Fund may buy or sell fewer contracts if the historical
volatility of the price of the securities being hedged is less than the
historical volatility of the futures contracts. Another risk assumed in
transactions in futures contracts is the possibility that the Adviser may be
incorrect in its expectations as to the extent of the various market, currency
or interest rate movements, or the time spans within which themovements take
place. Should the Adviser be incorrect in its predictions, the Fund's return
might have been better had hedging not
11
<PAGE> 13
been attempted. Further, although the Fund intends to trade in futures and
futures options only on exchanges or boards of trade where there appear to be
active secondary markets, there is no assurance that a liquid secondary market
on any exchange or board of trade will exist for any particular contract or
option or at any particular time. Additionally, the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open futures
positions. Finally, it is conceivable that, under certain circumstances, the
Fund would be required to sell portfolio securities at a time when it otherwise
would not do so in order to make margin payments on its futures positions. For
the reasons above, the purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract.
Investments in options on futures contracts involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase of an option also entails the risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option purchased. Depending on the pricing of the option compared
to either the futures contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than ownership
of the futures contract or such securities. In general, the market prices of
options can be expected to be more volatile than the market prices on the
underlying futures contracts. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts may
frequently involve less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs). For a more
detailed description of futures contracts and related options and the costs and
risks related to such instruments, see Appendix B to the Statement of Additional
Information.
Repurchase Agreements. To the extent deemed advisable by the Adviser, the
Fund may enter into repurchase agreements pursuant to which the Fund would
purchase a security from a financial institution (such as a bank or
broker-dealer) subject to the institution's agreement to repurchase it from the
Fund at a future specified time and price. Generally, the Fund intends to enter
into repurchase agreements which mature within seven days. However, to the
extent that the Fund invests in repurchase agreements maturing in more than
seven days, such investment will be subject to the Fund's policy on illiquid
securities described below. See "Investment Restrictions." The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price. If the seller
defaulted on its repurchase obligation, the Fund would suffer a loss on the
underlying securities (including accrued interest) to the extent that the
proceeds from a sale of the underlying securities (including accrued interest)
were less than the repurchase price under the agreement.
In the event that such a defaulting seller was a bank which filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. There is no controlling legal precedent
confirming that the Fund would be entitled, as against a claim by such bank
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities.
Restricted Securities. The Fund may invest up to 10% of the value of its
net assets in illiquid securities, including securities subject to legal or
contractual restrictions on resale, repurchase agreements with remaining
maturities in excess of seven days, and other securities for which
12
<PAGE> 14
market quotations are not readily available. Disposition of such securities may
require the Fund to sell such securities at a discount from market prices, to
sell during periods when such disposition is not desirable, or to make many
small sales over a lengthy period of time.
For more information concerning these investment practices, see "Investment
Objectives and Policies" in, and Appendix B to, the Statement of Additional
Information.
SPECIAL CONSIDERATIONS
There can be no assurance that a portfolio consisting primarily of
securities issued by companies engaged in medical research and the health care
industry will achieve the Fund's investment objectives. Because the Fund
concentrates its investments in this area, its shares do not represent a
complete investment program and their value may fluctuate more than shares
invested in a broader range of industries. The value of Fund shares will also
be especially susceptible to factors affecting companies engaged in medical
research and health care. Such companies are generally subject to greater
governmental regulation than those in many other industries. Changes in
governmental policies, such as reductions in the funding of third-party payment
programs, may have a material effect on the demand for particular health care
products and services. Regulatory approvals (often entailing lengthy
application and testing procedures) are also generally required before new drugs
and certain medical devices and procedures may be introduced. Many of the
products and services of companies engaged in medical research and health care
are also subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances.
Investing in securities of foreign issuers involves considerations not
typically associated with investments in domestic companies. The value of the
Fund's foreign investments may be adversely affected by fluctuations in currency
exchange rates, revaluation of currencies, political and economic instability
and the imposition of currency exchange or other foreign governmental
restrictions. Often less information is publicly available with respect to
foreign issuers or foreign companies, which are not generally subject to the
uniform accounting and financial reporting requirements that apply to domestic
companies. Securities of foreign companies may be less liquid and their prices
more volatile than the securities of domestic companies. In buying and selling
securities on foreign exchanges, the Fund will normally pay fixed commissions
that are higher than the negotiated commissions charged in the United States.
The Fund's operating expenses will also tend to be higher than those of
investment companies having portfolios consisting exclusively of domestic
securities because of additional costs associated with maintaining custody of
foreign securities, and transaction costs involved in converting foreign
currency into U.S. dollars. The economies of foreign countries of course may
differ significantly from the United States economy with respect to gross
domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Foreign securities purchased
by the Fund may also be subject to foreign taxes that could reduce their yield.
13
<PAGE> 15
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions described here and
in the Statement of Additional Information which may be changed only with the
approval of the holders of a majority of the Fund's outstanding shares.
1. With respect to 75% of its total assets, the Fund will not invest more
than 5% of its assets in the securities of any one issuer (except securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities);
2. With respect to 75% of its total assets, the Fund will not invest in
the securities of any issuer if as a result the Fund holds more than 10% of the
outstanding securities or more than 10% of the outstanding voting securities of
such issuer;
3. The Fund will not borrow money or pledge, mortgage or hypothecate its
assets except to facilitate redemption requests which might otherwise require
untimely disposition of portfolio securities and then only from banks and in
amounts not exceeding the lesser of 10% of its total assets valued at cost or
5% of its total assets valued at market at the time of such borrowing, pledge,
mortgage or hypothecation and except that the Fund may enter into futures
contracts and related options;
4. The Fund will not invest more than 10% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, restricted securities and other securities
for which market quotations are not readily available;
5. The Fund will not invest in the securities of any one industry, except
the medical research and health care industry (and except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if as a
result more than 25% of the Fund's total assets would be invested in the
securities of such industry;
6. The Fund will not purchase or sell commodities or commodity contracts,
or invest in oil, gas or mineral exploration or development programs except that
the Fund may enter into futures contracts and related options; and
7. The Fund will not invest in the securities of any issuer which has not
been in continuous operation for at least three years.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value in the
Fund's portfolio securities will not constitute a violation of such limitation.
14
<PAGE> 16
PERFORMANCE INFORMATION
The Fund may from time to time include figures indicating the Fund's yield,
total return or average annual total return in advertisements or reports to
stockholders or prospective investors. Quotations of the Fund's yield will be
based on all investment income per share earned during a given 30-day period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and will be computed by dividing net investment
income by the maximum public offering price per share on the last day of the
period. Average annual total return and total return figures represent the
increase (decrease) in the value of an investment in the Fund over a specified
period. Both calculations assume that all income dividends and capital gain
distributions during the period are reinvested at net asset value in additional
Fund shares. Quotations of the average annual total return reflect the
deduction of the maximum sales charge and a proportional share of Fund expenses
on an annual basis. The results, which are annualized, represent an average
annual compounded rate of return on a hypothetical investment in the Fund over a
period of 1, 5 and 10 years ending on the most recent calendar quarter (but not
for a period greater than the life of the Fund). Quotations of total return,
which are not annualized, represent historical earnings and asset value
fluctuations. Total return figures used in advertisements or sales literature
will not usually reflect the deduction of the maximum sales charge which if
deducted would reduce the Fund's total return. Total return is based on past
performance and is not a guarantee of future results.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA") and the National Association of
Securities Dealers Automated Quotations ("NASDAQ") Composite Index; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets; and (iii) the Consumer Price Index (measure
of inflation) to assess the real rate of return from an investment in the Fund.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and polices, the types and quality of
the Fund's portfolio investments, market conditions during the particular time
period and operating expenses. Such information should not be considered as a
representation of the Fund's future performance. For a description of the
methods used to determine the Fund's yield, average annual total return and
total return, see the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is an open-end diversified management investment company, commonly
called a mutual fund. Through the purchase of shares of the Fund, investors
with goals similar to the investment objectives of the Fund can participate in
the investment performance of the portfolio of investments held by the Fund.
The management and affairs of the Fund are supervised by its Board of Directors
whose names and general background information appear in the Statement of
Additional Information.
15
<PAGE> 17
ADVISER
G/A Capital Management, Inc. ("G/A"), located at 41 Madison Avenue, 40th
Floor, New York, New York, 10010-2202 serves as the Fund's investment adviser
(the "Adviser"). G/A was incorporated in Delaware on February 24, 1989 and is
principally owned by Samuel D. Isaly, who serves as the President of G/A and
Chairman of the Board and President of the Fund. The Fund is the only
investment company registered under the 1940 Act advised by G/A.
Pursuant to the terms of an Investment Advisory Agreement between the Fund
and G/A which became effective on August 17, 1989 and was last approved by the
Board of Directors on May 2, 1994, G/A manages the Fund's portfolio in
accordance with the Fund's stated policies, makes investment decisions for the
Fund, places orders to purchase and sell securities, employs at its own expense
executive and clerical personnel for the Fund, and provides office space and
services required for the transaction of business. The Adviser has the
authority to place orders for Fund portfolio transactions with Capstone Asset
Planning Company, the Fund's Distributor, for which the Distributor may receive
brokerage commissions from the Fund. No such orders were placed with the
Distributor during the past year. The Adviser may also consider sales of Fund
shares as a factor in selecting broker-dealers to execute portfolio
transactions, subject to best execution.
For its services, G/A receives a fee computed daily and payable monthly at
an annual rate of 1.00% of the Fund's average daily net assets up to $30 million
of such assets, 0.90% of the next $20 million of such assets, and 0.75% on such
ssets in excess of $50 million. Effective September 1, 1989 the Adviser has
agreed to reimburse its fees until such time as the Fund can operate within the
expense limitation discussed below. For the fiscal year ended August 31, 1994,
the Fund paid advisory fees to G/A equal to 1.00% of the average net assets of
the Fund, less a portion which was reimbursed to the Fund.
Investment decisions for the Fund are made by the portfolio manager, Samuel
D. Isaly. Mr. Isaly has been active in international and health care investing
throughout his career, beginning at Chase Manhattan Bank in New York in 1968.
He studied international economics, mathematics and econometrics at Princeton
and the London School of Economics. His company, Gramercy Associates, was the
first to develop an integrated worldwide system of analysis on the 100 leading
worldwide pharmaceutical companies, with investment recommendations conveyed to
50 leading financial institutions in the United States and Europe beginning in
1982. Gramercy Associates was absorbed into S.G. Warburg & Company Inc. in
1986, where Mr. Isaly became a Senior Vice President. In July of 1989, Mr.
Isaly joined with Dr. Viren Mehta to found the partnership of Mehta and Isaly.
The operations of the combined effort are (1) to provide investment ideas to
institutional investors on the subject of worldwide health care, (2) to
undertake cross-border merger and acquisition projects in the industry and (3)
to provide investment management services to selected investors. The latter
activity is undertaken through the legal entity G/A Capital Management, Inc.
which is an SEC-registered investment advisory firm.
ADMINISTRATOR
Pursuant to an Administration Agreement ("Administration Agreement") dated
March 1, 1988 ith the Fund, Capstone Asset Management Company (the
"Administrator"), a wholly-owned subsidiary of Capstone Financial Services, Inc.
provides administrative services for the Fund and supervises the Fund's daily
business affairs, including the activities of persons providing services to
16
<PAGE> 18
the Fund, and furnishes office space and equipment to the Fund. Such services
are subject to general review by the Board of Directors.
As compensation for the provision of administrative services to the Fund,
the Administrator receives from the Fund at the end of each calendar month a fee
calculated at the annual rate of 0.25% of the Fund's average daily net assets.
Effective September 1, 1989 the Administrator has reimbursed a portion of its
fees until the Fund can operate within the expense limitation discussed below.
The Administrator also performs certain accounting, bookkeeping and pricing
services. For these services the Administrator receives a monthly fee for the
Fund to reimburse the Administrator for its costs. This amount is not intended
to include any profit to the Administrator, and is in addition to the
administrative fee described above.
The Administrator provides administrative and/or investment advisory
services to five other registered mutual funds: Capstone Government Income Fund
Capstone Growth Fund, Inc., Capstone Balanced Fund, Capstone New Zealand Fund
and Capstone Nikko Japan Fund.
EXPENSES
The Fund's expenses are accrued daily and are deducted from its total
income before dividends are paid. These expenses include, but are not limited
to: fees paid to the Adviser and the Administrator; taxes; legal fees;
custodian and auditing fees; reimbursement of the costs incurred by the
Administrator in providing pricing and accounting services to the Fund; and
printing and other miscellaneous expenses paid by the Fund. The Adviser and
Administrator have agreed that in any fiscal year the aggregate expenses of the
Fund (including advisory, administrative and transfer agency fees, but
excluding, to the extent permitted by applicable state law, interest, local,
state and Federal taxes, sales charges, distribution plan expenses and
extraordinary expenses as determined by the Fund's directors who are not
"interested persons" of the Administrator or the Fund's investment adviser as
defined in the 1940 Act) exceed the expense limitation of any state having
jurisdiction over the Fund, then the fees paid to the Adviser and Administrator
hereunder will be reduced pro rata (but not below zero) to the extent required
by such expense limitation. The Adviser and the Administrator have each agreed
to bear its pro rata share of any such fee reduction based on the percentage
that such person's fee bears to the total fees paid by the Fund to the Adviser
under the Investment Advisory Agreement and to the Administrator under the
Administration Agreement. For the fiscal year ended August 31, 1994 the Fund's
total operating expenses (after reimbursement from the Adviser and the
Administrator) were 2.50% of the average net assets of the Fund.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Fund dated April 22, 1988,
Capstone Asset Planning Company (the "Distributor") is the principal underwriter
of the Fund and, acting as exclusive agent, sells shares of the Fund to the
public on a continuous basis.
The Fund has adopted a Service and Distribution Plan ("Plan") pursuant to
which it uses its assets to finance activities relating to the distribution of
its shares to investors and provision of certain stockholder services. The Plan
permits payments to be made by the Fund to the Distributor to reimburse it for
the payment of fees to broker-dealers, financial institutions or other industry
17
<PAGE> 19
professionals for administrative services, servicing Fund stockholders or
distribution services. Payments under the Plan may also be made to the
Distributor for providing such services. (See below.) In addition, the
Distributor receives the sales charge described under "Purchasing Shares," which
amounts do not offset amounts payable to the Distributor under the Plan.
The Investment Company Act of 1940 prohibits a fund from acting as a
istributor of securities of which it is an issuer, except through an underwriter
or pursuant to a written distribution plan meeting certain standards. Pursuant
to these provisions, the Fund has adopted the Plan, under which monthly payments
made by the Fund to the Distributor may not exceed an amount computed at an
annual rate of 0.25% of the Fund's average net assets. Of this amount, at the
end of each calendar quarter the Distributor may reallocate to broker-dealers
(which may include the Distributor itself), financial institutions or other
industry professionals (collectively, the "Service Organizations") fees at
annual rates of up to 0.25% of the average net assets of Fund shares owned by
stockholders for whom the Service Organizations are the dealers or holders of
record and with whom the Service Organizations have a servicing relationship
pursuant to a Service Agreement or a Dealer Agreement with the Distributor.
Normally the expenses paid by the Distributor will exceed the fees received by
the Distributor under the Plan (said fees will not be offset by any sales
charges received by the Distributor). During the fiscal year ended August 31,
1994, the effective rate of servicing fees paid by the Fund to Service
Organizations other than Capstone Asset Planning Company was approximately .09%
of the Fund's average net assets. The effective rate of servicing fees paid by
the Fund to Capstone Asset Planning Company and G/A Capital Management was
approximately .11% and .05%, respectively, of the Fund's average net assets.
The Plan was last approved on November 13, 1994 by a majority of the Fund's
directors, including a majority of the directors who have no direct or indirect
financial interest in the operation of the Plan or any of its agreements ("Plan
Directors"). The Plan will continue from year to year, provided that such
continuance is approved at least annually by a vote of a majority of the Board
of Directors, including a majority of the Plan Directors.
The Glass-Steagall Act and other applicable laws currently prohibit banks
from engaging in the business of underwriting, selling or distributing
securities Accordingly, unless such laws are changed, if the Fund engages banks
as Service Organizations, the banks would perform only administrative and
stockholder servicing functions. If a bank were prohibited from acting as a
Service Organization, alternative means for continuing the servicing of such
stockholders would be sought. State law may differ from Federal law and banks
and other financial institutions may be required to be registered as
broker-dealers to perform administrative and stockholder servicing functions.
The staff of the Securities and Exchange Commission (the "SEC") has
proposed amendments to Rule 12b-1. If the Rule is amended as proposed or in
some other manner, it may be necessary for the Fund to consider amending the
Plan and any related agreements.
PURCHASING SHARES
Capstone Asset Planning Company (the "Distributor"), located at 5847 San
Felipe, Suite 4100, Houston, Texas 77057, is the principal underwriter of the
Fund and, acting as exclusive agent, sells shares of the Fund to the public on
a continuous basis. See "Management of the Fund." Edward L. Jaroski, an
officer of the Fund, is a director of the Distributor and the Administrator. In
addition,
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<PAGE> 20
some other officers of the Fund are also officers of the Distributor and
Administrator and of their parent company, Capstone Financial Services, Inc.
Shares of the Fund are sold in a continuous offering and may be purchased
on any business day through authorized investment dealers or directly from the
Fund's Distributor. Except for the Fund itself, only the Distributor and
investment dealers which have a sales agreement with the Distributor are
authorized to sell shares of the Fund. For further information, reference is
made to the caption "Distributor" in the Fund's Statement of Additional
Information.
Shares will be credited to a stockholder's account at the public offering
price next computed after an order is received by the Distributor. The minimum
initial investment is $200, except for continuous investment plans which have no
minimum, and there is no minimum for subsequent purchases. No stock
certificates representing shares purchased will be issued except upon written
request to the Fund's Transfer Agent. The Fund's management reserves the right
to reject any purchase order if, in its opinion, it is in the Fund's best
interest to do so.
The public offering price of the Fund's shares is the net asset value per
share (see "Determination of Net Asset Value") plus a sales charge which varies
in accordance with the amount of the purchase as follows:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS REALLOWANCE
A PERCENTAGE OF AS A
---------------- PERCENTAGE
NET OF
OFFERING AMOUNT OFFERING
AMOUNT OF SINGLE TRANSACTION PRICE INVESTED PRICE
- -------------------------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Less than $100,000 . . . . . . . . . . . . . . . . 4.75% 4.99% 4.25%
$100,000 but less than $250,000. . . . . . . . . . 3.50% 3.63% 3.00%
$250,000 but less than $500,000. . . . . . . . . . 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000. . . . . . . . . 2.00% 2.04% 1.75%
$1,000,000 but less than $2,500,000. . . . . . . . 1.00% 1.01% .90%
$2,500,000 but less than $5,000,000. . . . . . . . .50% .50% .45%
$5,000,000 and over. . . . . . . . . . . . . . . . .00% .00% .00%*
</TABLE>
_____________
* A negotiated broker commission will be paid by the Distributor.
The size of investment shown in the above table applies to the total amount
being invested by any person in shares of the Fund alone or in any combination
of shares of the Fund and shares of certain other mutual funds sponsored by the
Administrator. See "Reduced Sales Charges". The Distributor retains the entire
sales charge when it makes sales directly to the public.
At various times the Distributor may implement programs under which a
dealer's sales force may be eligible to win nominal awards for certain sales
efforts or under which the Distributor, during such programs, will reallow an
amount not exceeding the total applicable sales charges on the sales generated
by the dealer to any dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor. In addition, the Adviser, the
Administrator and/or the Distributor in their discretion may from time to time,
pursuant to objective criteria established by the Adviser, the Administrator
and/or the Distributor, sponsor programs designed to reward selected dealers for
certain services or activities which are primarily intended to result in the
sale of shares of the Fund. These programs
19
<PAGE> 21
will not change the price you pay for your shares or the amount that the Fund
will receive from such sale.
INVESTING THROUGH AUTHORIZED DEALERS
If any authorized dealer receives an order of at least $200, the dealer may
contact the Distributor directly. Orders received by dealers by the close of
trading on the New York Stock Exchange on a business day that are transmitted to
the Distributor by 4:00 p.m. Central time on that day will be based on the
public offering price per share determined as of the close of trading on the New
York Stock Exchange on that day. Otherwise, the orders will be based on the
next determined public offering price. It is the dealer's responsibility to
transmit orders so that they will be received by the Distributor before 4:00
p.m. Central time.
After each investment, the stockholder and the authorized investment dealer
receive confirmation statements of the number of shares purchased and owned.
PURCHASES THROUGH THE DISTRIBUTOR
An account may be opened by mailing a check or other negotiable bank draft
(payable to Medical Research Investment Fund, Inc.) for $200 or more together
with the completed investment application form included with this Prospectus, to
the Fund's Transfer Agent: Medical Research Investment Fund, Inc., c/o
Fund/Plan Services, Inc., P.O. Box 874, 2 W. Elm Street, Conshohocken,
Pennsylvania 19428. The $200 minimum initial investment may be waived by the
Distributor for plans involving continuing investments (see "Stockholder
Services"). There is no minimum for subsequent investments which may be mailed
directly to the Transfer Agent. All such investments are made at the public
offering price of Fund shares next computed following receipt of payment by the
Transfer Agent. Confirmations of the opening of an account and of all
subsequent transactions in the account are forwarded by the Transfer Agent to
the stockholder's address of record.
TELEPHONE PURCHASE AUTHORIZATION (INVESTING BY PHONE)
Stockholders who have completed the Telephone Purchase Authorization
section of the Investment Application Form may purchase additional shares by
telephoning the Fund's Transfer Agent at (800) 845-2340. The minimum telephone
purchase is $1,000 and the maximum is the greater of $1,000 or five times the
net asset value of shares (for which certificates have not been issued) held by
the stockholder on the day preceding such telephone purchase for which payment
has been received. The telephone purchase will be made at the offering price
next computed after receipt of the call by the Fund's Transfer Agent. Payment
for the telephone purchase must be received by the Transfer Agent within seven
days. If payment is not received within seven days, the stockholder will be
liable for all losses incurred as a result of the purchase.
INVESTING BY WIRE
Investors having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Fund by requesting their bank
to transmit funds by wire to: United Missouri Bank KC NA, ABA #10-10-00695,
For: Fund/Plan Services, Inc., Account #98-7037-0719; Further Credit
Capstone/Medical Research Investment Fund, Inc. The investor's name and account
number must be specified in the wire.
20
<PAGE> 22
Initial Purchases - Before making an initial investment by wire, an
investor must first telephone (800) 845-2340 to be assigned an account number.
The investor's name, account number, taxpayer identification or social security
number, and address must be specified in the wire. In addition, the investment
application which accompanies this Prospectus should be promptly forwarded to
Medical Research Investment Fund, Inc., c/o Fund/Plan Services, Inc., P.O. Box
874, 2 W. Elm Street, Conshohocken, Pennsylvania 19428.
Subsequent Purchases - Additional investments may be made at any time
through the wire procedures described above, which must include the investor's
name and account number. The investor's bank may impose a fee for investments
by wire.
REDUCED SALES CHARGES
Investors can utilize one of the programs described below to reduce the
sales charge on purchases of shares of the Fund alone or on purchases of shares
of the Fund and certain other Capstone Funds.
Quantity Discounts - Purchases of shares of the Fund and certain other
Capstone Funds made at the same time by a "Purchaser" may be combined to receive
a quantity discount. The term "Purchaser" is defined as:
- an individual, his/her spouse and children under the age of 21, trust
or custodial accounts established for their sole benefit(s) and any
corporation, partnership or sole proprietorship which is 100% owned,
either alone or in combination, with any of the foregoing;
- a trustee or other fiduciary purchasing for a single trust estate or a
single fiduciary account; and
- a "company" as defined in Section 2(a)(8) of the Investment Company
Act of 1940.
Rights of Accumulation - A Purchaser may also qualify for reduced sales
charges by combining the amount being invested in shares of the Fund and shares
of the Capstone Funds owned by the Purchaser calculated at the then current
offering price. To qualify for obtaining this discount on a particular
purchase, the Purchaser must send the Distributor a list of account numbers and
the names in which such accounts of the Purchaser are registered at the time the
purchase is made. If shares are being purchased through an authorized dealer,
such information must be communicated by the dealer to the Distributor at the
time of purchase.
Letter of Intent - A Letter of Intent provides an opportunity for a
Purchaser to obtain a reduced sales charge by aggregating the investments in the
Fund and the Capstone Funds over a thirteen-month period to determine the sales
charge applicable to the amount invested. An alternative is to compute the
thirteen-month period starting up to ninety days before the date of the
execution of the Letter of Intent. Each investment made during the period
receives the reduced sales commission applicable to the total amount of the
investment goal. If all shares are not purchased, a price adjustment is made,
depending upon the actual amount invested within the period covered by the
Letter of Intent, by the redemption of sufficient shares held in escrow for the
account of the Purchaser. During the period covered by the Letter of Intent the
Transfer Agent will hold a portion of the shares purchased in escrow. Those
shares will be released upon completion of the intended
21
<PAGE> 23
investment. Additional information regarding this procedure is contained in the
Appendix in the back of this Prospectus.
401(k) Plans - For information concerning reduced sales charges applicable
to 401(k) plans, reference is made to the caption "Reduced Sales Charges" in the
Fund's Statement of Additional Information.
SALES AT NET ASSET VALUE
Purchases of the Fund's shares at net asset value without a sales charge
may be made by the following persons: (a) tax-exempt entities whose minimum
initial investment (or whose aggregate investment pursuant to a Letter of
Intent) is $1,000,000 or more, (b) purchases by a bank or trust company in a
single account where such bank or trust company is named as trustee and the
minimum initial investment (or whose investment pursuant to a Letter of Intent)
is $1,000,000 or more, (c) any current or retired officer, director or employee,
or any member of the immediate family of such person of the Fund, the Adviser,
Administrator, Distributor or their affiliates, (d) the Fund's Adviser,
Administrator, Distributor or any affiliated company thereof, (e) any employee
benefit plan established for employees of the Adviser, Administrator,
Distributor or its affiliates, (f) advisory clients of the Adviser or
Administrator, other than those persons participating in an asset allocation
plan established by the Adviser or Administrator, who do not qualify for net
asset value purchases under any other category, (g) registered representatives
and their spouses and minor children and employees of broker-dealers who have
entered into Selling Group Agreements with the Distributor, (h) separate
accounts of life insurance companies or commingled accounts of financial
institutions, (i) Tenneco Inc. and its affiliates, present, future and retired
employees and any employee benefit plan established for such employees, (j)
investors who are clients of recognized consulting firms which provide
consulting services to pension funds or corporations, state and local
governments, Taft-Hartley Plans and foundations and endowments which have
contacted the Fund, the Adviser, the Administrator or the Distributor with
respect to furnishing advice to such client of such consulting firm or with
respect to distribution of securities of the Fund by such client or purchase
of securities of the Fund by such client, and (k) in connection with the Fund's
merger with or acquisition of any investment company or trust. The Fund's
management believes that such sales will require less selling effort and
therefore less selling expense.
If purchases at net asset value by tax-exempt entities, bank or trust
companies, separate accounts or commingled accounts are made through dealers who
have executed dealer agreements with respect to the Capstone Funds, the
Distributor may make a payment out of its own resources to such dealers.
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DISTRIBUTIONS AND TAXES
PAYMENT OPTIONS
Distributions (whether treated for tax purposes as ordinary income or long-
term capital gains) to stockholders of the Fund are paid in additional shares of
the Fund, with no sales charge, based on the Fund's net asset value as of the
close of business on the record date for such distributions. However, a
stockholder may elect on the application form which accompanies this Prospectus
to receive distributions as follows:
Option 1. To receive income dividends in cash and capital gain
distributions in additional Fund shares, or
Option 2. To receive all income dividends and capital gain distributions in
cash.
The Fund intends to pay any dividends from investment company taxable
income and distributions representing capital gain at least annually, usually in
November. The Fund will advise each stockholder annually of the amounts of
dividends from investment company taxable income and of net capital gain
distributions reinvested or paid in cash to the stockholder during the calendar
year.
If you select Option 1 or Option 2 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, your
distribution checks will be reinvested in your account at the then current net
asset value and your election will be converted to the purchase of additional
shares.
TAXES
The Fund intends to continue to qualify and elect to be taxed as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). In any taxable year in which the Fund so
qualifies and distributes at least 90% of its investment company taxable income
(which includes, among other items, dividends, interest, and the excess of
realized net short-term capital gain over realized net long-term capital loss),
the Fund generally will be relieved of Federal income tax on its investment
company taxable income and net capital gain (the excess of realized net
long-term capital gain over realized net short-term capital loss) distributed to
stockholders. Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are also subject to a nondeductible 4%
excise tax. To prevent application of the excise tax, the Fund intends to make
its distributions in accordance with the calendar year distribution requirement.
A distribution will be treated as paid on December 31 of the calendar year if it
is declared by the Fund in October, November or December of that year to
stockholders of record on a date in such a month and paid by the Fund during
January of the following calendar year. Such distributions will be taxable to
stockholders in the calendar year the distributions are declared, rather than
the calendar year in which the distributions are received.
Distributions from investment company taxable income are taxable to
stockholders as ordinary income. Distributions of net capital gain designated
by the Fund as capital gain dividends are taxable as long-term capital gains
regardless of the length of time a stockholder may have held shares of the
Fund. The tax treatment of distributions treated as ordinary income or capital
gain will be the same whether the stockholder reinvests the distributions in
additional shares or elects to receive them in cash.
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Stockholders will be notified each year of the amounts and nature of
dividends and distributions, including the amounts (if any) for that year which
have been designated as capital gain distributions. Investors should consult
their tax advisers for specific information on the tax consequences of
particular types of distributions.
Special tax rules may apply to the Fund's purchase of put and call options
and its acquisition of stock index futures and foreign currency futures. Such
rules, among other things: (i) may affect whether gains and losses from such
transactions are considered to be short-term or long-term; (ii) may have the
effect of converting capital gains and losses into ordinary income and losses;
(iii) may have the effect of deferring losses and/or accelerating the
recognition of gains or losses; and (iv) for purposes of qualifying as a
regulated investment company, may limit the extent to which the Fund may be able
to engage in such transactions.
Upon the sale, redemption, or other disposition of shares of the Fund, a
stockholder generally will realize a taxable gain or loss depending upon his
basis in the shares. Such gain or loss will be treated as capital gain or loss
if the shares are capital assets in the stockholder's hands and generally will
be long-term or short-term, depending upon the stockholder's holding period for
the shares. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced (including shares acquired pursuant
to the reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any
loss realized by a stockholder on a disposition of Fund shares held by the
stockholder for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends received by the stockholder with
respect to such shares.
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including gross proceeds from the redemption of
Fund shares) payable to stockholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
where the Fund or the stockholder has been notified by the Internal Revenue
Service that the stockholder is subject to backup withholding. Corporate stock-
holders and certain other stockholders specified in the Code generally are
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the stockholder's Federal
income tax liability.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Adviser will manage the Fund with the intention of
minimizing foreign taxation in cases where it is deemed prudent to do so. If
more than 50% of the value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible to elect to "pass-through" to the Fund's stockholders the amount of
foreign income and similar taxes paid by the Fund. If this election is made, a
stockholder will be required to include in gross income (in addition to taxable
dividends actually received) his pro rata share of the foreign income and
similar taxes paid by the Fund, and generally will be entitled either to deduct
(as an itemized deduction) his pro rata share of such foreign taxes in computing
his taxable income or to use it (subject to limitations) as a foreign tax credit
against his or her U.S. Federal income tax liability. No deduction for
foreign taxes may be claimed by a stockholder who does not itemize deductions.
Each stockholder will be notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund will
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<PAGE> 26
"pass-through" for that year and, if so, such notification will designate (a)
the stockholder's portion of the foreign taxes paid to foreign countries and (b)
the portion of the dividend which represents income derived from sources outside
the U.S. Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the stockholder's U.S. Federal income tax attributable to
his total foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the Fund's income flows through to its
stockholders. With respect to the Fund, gains from the sale of securities will
be treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, such as dividends received from the Fund. Stockholders may be
unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. In addition, the foreign tax credit may offset
only 90% of the alternative minimum tax (prior to reduction for the "regular"
tax liability for the year) imposed on corporations and individuals. In
addition, foreign taxes may not be deducted by a stockholder that is an
individual in computing alternative minimum taxable income.
The foregoing is a general description of the foreign tax credit under
current law. Because application of the credit depends on the particular
circumstances of each stockholder, stockholders are advised to consult their own
tax advisers. Distributions also may be subject to additional state, local, and
foreign taxes, depending upon each stockholder's particular situation. In
addition, foreign stockholders may be subject to Federal income tax rules that
differ significantly from those described above. Stockholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in the Fund.
REDEMPTION AND REPURCHASE OF SHARES
GENERAL
Generally, stockholders may require the Fund to redeem their shares by
sending a written request, signed by the record owner(s), to Medical Research
Investment Fund, Inc., c/o Fund/Plan Services, Inc., P.O. Box 874, 2 W. Elm
Street, Conshohocken, Pennsylvania 19428. In addition, certain expedited
redemption methods described below are available. If stock certificates have
been issued for shares being redeemed, such certificates must accompany the
written request with the stockholder's signature guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. No
signature guarantees for shares for which no certificates have been issued are
required when an application is on file at the Transfer Agent and payment is to
be made to the stockholder of record at the stockholder's address of record.
However, if the proceeds of the redemption are to be paid to someone other than
the registered holder, or to other than the stockholder's address of record, or
if the shares are to be
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<PAGE> 27
transferred, the owner's signature must be guaranteed as specified above. The
redemption price shall be the net asset value per share next computed after
receipt of the redemption request. See "Determination of Net Asset Value".
In addition, the Distributor is authorized as agent for the Fund to offer
to repurchase shares which are presented by telephone or telegraph to the
Distributor by authorized investment dealers. The repurchase price is the net
asset value per share next determined after the request is received. See
"Determination of Net Asset Value". Broker-dealers may charge for their
services in connection with the repurchase, but the Distributor and its
affiliates will not charge any fee for such repurchase. Payment for shares
presented for repurchase or redemption by authorized investment dealers will be
made within seven days after receipt by the Transfer Agent of a written notice
and/or certificate in proper order.
The Fund reserves the right to pay any portion of redemption requests in
excess of $1 million in readily marketable securities from the Fund's portfolio.
In this case, the stockholders may incur brokerage charges on the sale of the
securities.
The right of redemption and payment of redemption proceeds are subject to
suspension for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or when trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission; during any period when an emergency as defined by the rules and
regulations of the Securities and Exchange Commission exists; or during any
period when the Securities and Exchange Commission has by order permitted such
suspension. The Fund will not mail redemption proceeds until checks (including
certified checks or cashier's checks) received for the shares purchased have
cleared, which can be as long as 15 days.
The value of shares on repurchase or redemption may be more or less than
the investor's cost depending upon the market value of the Fund's portfolio
securities at the time of redemption. No redemption fee is charged for the
redemption of shares.
EXPEDITED TELEPHONE REDEMPTION
A stockholder redeeming at least $1,000 of shares (for which certificates
have not been issued), and who has authorized expedited redemption on the
application form filed with the Fund's Transfer Agent may at the time of such
redemption request that funds be mailed or wired to the commercial bank or
registered broker-dealer he has previously designated on the application form by
telephoning the Transfer Agent at (800) 845-2340. Redemption proceeds will be
sent on the next business day following receipt of the telephone redemption
request. If a stockholder seeks to use an expedited method of redemption of
shares recently purchased by check, the Fund may withhold the redemption
proceeds until it is reasonably assured of the collection of the check
representing the purchase. The Fund, Distributor and Transfer Agent reserve the
right at any time to suspend or terminate the expedited redemption procedure or
to impose a fee for this service. At the present time there is no fee charged
for this service. During periods of unusual economic or market changes,
stockholders may experience difficulties or delays in effecting telephone
redemptions.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share s computed daily, Monday through Friday, as
of the close of regular trading on the New York Stock Exchange, which is
currently 4:00 p.m., Eastern time, except that the net asset value will not be
computed on the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Fund's net asset value also will be determined on any day in
which there is sufficient trading in its portfolio securities that the net asset
value might be affected materially, but only if on any such day the Fund is
required to sell or redeem shares. The net asset value per share is computed by
dividing the value of the securities held by the Fund plus any cash or other
assets (including any accrued interest and dividends receivable but not yet
received) minus all liabilities (including accrued expenses) by the total number
of Fund shares outstanding at such time. The net asset value so computed will
be used for all purchase orders and redemption requests received between such
computation and the preceding computation.
To the extent sales prices are available, securities that are traded on a
recognized stock exchange, whether U.S. or foreign, are valued at the last sale
price on that exchange prior to the time when assets are valued or prior to the
close of trading on the New York Stock Exchange. In the event that there are
no sales, the last available sale price will be used. If a security is traded
on more than one exchange, the Administrator uses the latest price on the
exchange where the stock is primarily traded. If there is no sale that day or
if the security is not listed, the security is valued at its last sale
quotation. The calculation of the Fund's net asset value per share may not take
place contemporaneously with the times noted above for determining the prices of
certain of the Fund's portfolio securities, including foreign securities. If
events materially effecting the value of such securities occur between the time
when their prices are determined and the time the Fund's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by the directors. Also, for any security for which application of the
preceding methods of valuation results in a price for a security that is deemed
not to be representative of the market value of such security, the security will
be valued at fair value in the best judgment of the Administrator under the
supervision and responsibility of the Board of Directors.
Futures contracts and call options written on portfolio securities will be
priced at the latest sales price on the principal exchange on which such options
are normally traded or, if there have been no sales on such exchange on that
day, at the closing asked price. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. All other assets and
securities held by the Fund (including restricted securities) are valued at fair
value as determined in good faith by the Administrator under the supervision and
responsibility of the Board of Directors. Any assets that are denominated in a
foreign currency are translated into U.S. dollars at the last quoted spot rate
of exchange prevailing on each valuation date.
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STOCKHOLDER SERVICES
Medical Research Investment Fund, Inc. provides its stockholders with a
number of services and conveniences designed to assist investors in the
management of their investments. These stockholder services include the
following:
TAX-DEFERRED RETIREMENT PLANS
Shares may be purchased by virtually all types of tax-deferred retirement
plans. The Distributor or its affiliates make available plan forms and/or
custody agreements for the following:
o Individual Retirement Accounts (for individuals who wish to make
limited contributions (which may be tax deductible in certain
circumstances) to a tax-deferred account for retirement);
o Simplified Employee Pension Plans;
o Self-employed Retirement Plans (Keogh);
o Corporate Defined Contribution Plans.
Dividends and distributions will be automatically reinvested without a
sales charge. For further details, including fees charged, tax consequences and
redemption information, see the specific plan documents which can be obtained
from the Fund.
Investors should consult with their tax adviser before establishing any of
the tax-deferred retirement plans described above.
EXCHANGE PRIVILEGE
Shares of the Fund which have been outstanding for 15 days or more may be
exchanged for shares of other Capstone Funds with no administrative charge. The
exchange of shares held 15 days or more will be effected at net asset value,
plus an amount equal to the difference, if any, between the sales charges
previously paid or deemed applicable with respect to the shares being exchanged,
and the sales charge payable on shares of the Capstone Fund for which those
shares are being exchanged, determined in accordance with applicable legal
requirements. A stockholder requesting such an exchange will be sent a current
prospectus for the fund into which the exchange is requested. Shares held less
than 15 days cannot be exchanged. In such instances, the shares will be
redeemed at the next computed net asset value and the entire sales commission
paid on the purchase will be refunded to the investor.
Purchases, redemptions and exchanges should be made for investment purposes
only. A pattern of frequent exchanges, purchases and sales may be deemed
abusive by the Adviser and, at the discretion of the Adviser, can be limited by
the Fund's refusal to accept further purchase and/or exchange orders from the
investor. Although the Adviser will consider all factors it deems relevant in
determining whether a pattern of frequent purchases, redemptions and/or
exchanges by a particular investor is abusive and not in the best interests of
the Fund or its other stockholders, as a general policy investors should be
aware that engaging in more than one exchange or purchase-sale transaction
during any thirty-day period with respect to a particular fund may be deemed
abusive and therefore subject to the above restrictions.
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<PAGE> 30
An exchange of shares is treated for Federal income tax purposes as a sale
of shares given in exchange and the stockholders may, therefore, realize a
taxable gain or loss. The exchange privilege may be exercised only in those
states where shares of the fund for which shares held are being exchanged may be
legally sold, and the privilege may be amended or terminated upon 60 days'
notice to stockholders.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of a
Capstone Fund or another regulated investment company are acquired without a
sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of having incurred a sales charge initially. The portion of the sales
charge affected by this rule will be treated as a sales charge paid for new
shares.
The stockholder may exercise the following exchange privilege options:
Exchange by Mail - Stockholders may mail a written notice requesting
an exchange to the Fund's Transfer Agent.
Exchange by Telephone - Stockholders must authorize telephone exchange
on the application form filed with the Fund's Transfer Agent to
exchange shares by telephone. Telephone exchanges may be made from
9:30 a.m. to 4:00 p.m. Eastern time, Monday through Friday, except
holidays. If certificates have been issued to the investor, this
procedure may be utilized only if he delivers his certificates, duly
endorsed for transfer, to the Transfer Agent prior to giving telephone
instructions. During periods of unusual economic or market changes,
stockholders may experience difficulties or delays in effecting
telephone exchanges.
When exchange or redemption requests are made by telephone, the Fund has
procedures in place designed to give reasonable assurance that such telephone
instructions are genuine, including recording telephone calls and sending
written confirmations of transactions. The Fund will not be liable for losses
due to unauthorized or fraudulent telephone transactions unless it does not
follow such procedures, in which case it may be liable for such losses.
PRE-AUTHORIZED PAYMENT
A stockholder may arrange to make regular monthly investments of $25 or
more automatically from his checking account by authorizing the Fund's Transfer
Agent to withdraw the payment from his checking account. Pre-Authorized Payment
Forms can be obtained by contacting the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN
Investors may open a withdrawal plan providing for withdrawals of $50 or
more monthly, quarterly, semi-annually or annually if they have made a minimum
investment in the shares of the Fund of $5,000. The minimum periodic amount
which may be withdrawn pursuant to this plan is $50.
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These payments may constitute return of initial capital and do not
represent a yield or return on investment. In addition, such payments may
deplete or eliminate the investment. Stockholders cannot be assured that they
will receive payment for any specific period because payments will terminate
when all shares have been redeemed. The number of such payments will depend
primarily upon the amount and frequency of payments and the yield on the
remaining shares. Under this plan, any distributions must be reinvested in
additional shares at net asset value.
The Systematic Withdrawal Plan is voluntary, flexible, and under the
stockholder's control and direction at all times, and does not limit or alter
the stockholder's right to redeem shares. Such Plan may be terminated in
writing at any time by either the stockholder or the Fund. The cost of
operating the Systematic Withdrawal Plan is borne by the Fund. Due to the sales
charges described above, it would not be advisable for investors to purchase
shares while participating in the Systematic Withdrawal Plan.
GENERAL INFORMATION
Medical Research Investment Fund, Inc. was incorporated in Maryland in
November, 1984 as an open-end diversified management investment company, as
defined in the Investment Company Act of 1940, as amended. Its authorized
capitalization currently consists of one billion full and fractional shares of
Common Stock, $.001 par value per share. The Articles of Incorporation of the
Fund authorize the Board of Directors to classify or reclassify any unissued
shares of the Fund into one or more additional classes by setting or changing in
any one or more respects, from time to time before the issuance thereof, their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption. All Fund shares are of the same class, with equal rights and
privileges. The Articles of Incorporation further authorize the directors to
classify or reclassify in a similar manner any particular class of Fund shares
into one or more series.
Stockholders are entitled to one vote for each full Fund share held and
fractional votes for fractional Fund shares held. Each Fund share is entitled
to participate equally in any dividend or distribution declared by the Fund's
Board of Directors and in the net distributable assets of the Fund on
liquidation. Fund shares have no preemptive, conversion or exchange rights.
When issued for payment as described in this Prospectus, Fund shares will be
fully paid and nonassessable. Fund shares have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding shares may
elect all of the directors. The Fund is not required to hold regular annual
meetings, and will do so only when required by law. Stockholders may, in
accordance with the By-Laws of the Fund, cause a meeting of stockholders to be
held for the purpose of voting on the removal of directors.
The Fund's securities are held by The Fifth Third Bank, Cincinnati, Ohio,
under a Custodian Agreement with the Fund. Fund/Plan Services, Inc. acts as
both transfer agent and dividend paying agent for the Fund.
Inquiries by stockholders of the Fund should be addressed to the Fund at
the address stated on the cover page of this Prospectus.
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APPENDIX
INFORMATION PERTAINING TO LETTER OF INTENT
Subject to conditions specified below, each purchase during the thirteen-
month period ubsequent to the effective date of a Letter of Intent (the
"Letter") will be made at the public offering price applicable to a single
transaction of the dollar amount indicated, as described in the then effective
prospectus. The offering price may be further reduced under the Rights of
Accumulation if the Transfer Agent is advised of any shares previously purchased
and still owned. At any time during the period the Purchaser may revise upward
his stated intention by submitting a written request to that effect. Such
revision shall provide for the escrowing of additional shares. The original
period of the Letter, however, shall remain unchanged. Each separate purchase
made pursuant to the Letter is subject to the terms and conditions contained in
the prospectus in effect at the time of that particular purchase. The Letter
does not constitute a commitment to purchase shares, but if purchases so made
within thirteen months from the effective date of a Letter do not aggregate the
amount specified, the Purchaser must pay the increased amount of sales charge
prescribed in the terms of escrow. The Purchaser or his dealer must refer to
his Letter in placing each order for shares while his Letter is in effect. When
remitting funds directly to the Transfer Agent for investment in an account,
specific reference must be made to the Letter.
TERMS OF ESCROW
1. To assure compliance with provisions of the Investment Company Act of
1940, out of the initial purchase (or subsequent purchase if necessary) 5% of
the dollar amount indicated on the application form will be held in escrow in
the form of shares (computed to the nearest full share at the applicable public
offering price) registered in the Purchaser's name. these shares will be held
at the Fund's Transfer Agent and be subject to the terms of escrow.
2. If total purchases pursuant to the Letter equal the amount specified
as he expected aggregate purchases, escrow shares will be released from
restriction.
3. If the total purchases pursuant to the Letter are less than the amount
specified, the Purchaser shall remit to the Distributor an amount equal to the
difference between the dollar amount of sales charge actually paid and the
amount of sales charge which would have been paid on the total purchases if all
such purchases had been made at a single time. If the Distributor, within 10
business days after request, does not receive said difference in sales charge,
it will instruct the Fund's Transfer Agent to redeem an appropriate number of
escrow shares to realize such difference. If the proceeds from this redemption
are inadequate, the Purchaser will be liable to the Distributor for the
difference. The remaining shares after the redemption will be deposited to his
account unless otherwise instructed.
4. The Purchaser irrevocably constitutes and appoints the Fund's Transfer
Agent as attorney to surrender for redemption any or all shares on the books of
the Fund, under the conditions previously outlined, with full power of
substitution in the premises.
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
As all income dividends and/or capital gain distributions are reinvested at
net asset value without sales commissions, shares acquired through reinvestment
are not applied to the Letter of Intent.
PROVISIONS FOR PRICE ADJUSTMENT
If total purchases made under a Letter of Intent and the Rights of
Accumulation are large enough to qualify for a lower sales charge than that
applicable to the amount initially specified, or if trades not initially made
under the Letter subsequently qualify for a lower sales charge through the
90-day back-dating provisions (see "Reduced Sales Charges--Letter of Intent" in
the Prospectus), an adjustment will be made at the expiration of the Letter to
give effect to the lower charge. Such adjustment in sales charge will be used
to purchase additional shares for the Purchaser.
CANCELLATION OR LIQUIDATION
If at any time prior to or after completion of the Letter of Intent a
Purchaser wishes to cancel the Letter, he must notify the Distributor in
writing. If at any time prior to the completion of the Letter the Purchaser
requests the Fund's Transfer Agent to liquidate his total shares, a cancellation
of the Letter will automatically be effected. Under either of the above
conditions the total purchased pursuant to the Letter may be less than the
amount specified as the expected aggregate purchases. If so, the Fund's
Transfer Agent will redeem an appropriate number of escrowed shares and remit to
the Distributor an amount equal to the difference between the dollar amount of
sales charge actually paid and the amount of sales charge which would have been
paid on the total purchases if all such purchases had been made at a single
time.
