As filed with the Securities and Exchange Commission on February 26, 1997
FORM N-1A
File No. 33-2430
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. -----
Post-Effective Amendment No. 18
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20
ROCKWOOD FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11 HANOVER SQUARE, NEW YORK, NEW YORK, 10005
(Address of Principal Executive Offices) (Zip Code)
(212) 785-0900
(Registrant's Telephone Number, including Area Code)
WILLIAM J. MAYNARD
11 HANOVER SQUARE, NEW YORK, NEW YORK, 10005
(Name and Address of Agent for Service)
Copy to:
R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of rule 485
X on March 1, 1997 pursuant to paragraph (b) of rule 485
60 days after filing pursuant to paragraph (a) of rule 485
on (specify date) pursuant to paragraph (a)of rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has elected to maintain registration of an indefinite number of
shares of common stock, $.01 par value, under the Securities Act of 1933,
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Registrant's most recent Rule 24f-2 Notice was filed on December 23, 1996.
*Effective as of the close of business on February 28, 1997 ("Effective Date"),
Rockwood Fund, Inc., an open-end management investment company organized as a
Maryland corporation ("Rockwood"), will succeed to all of the assets, rights,
obligations and liabilities of The Rockwood Growth Fund, Inc. Rockwood hereby
expressly adopts this Registration Statement of The Rockwood Growth Fund, Inc.
(No. 33-2430) as its own, effective as of the Effective Date, for all purposes
of the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940.
<PAGE>
ROCKWOOD FUND, INC.
TABLE OF CONTENTS
CROSS REFERENCE SHEET
PART A
PROSPECTUS
PART B
STATEMENT OF ADDITIONAL INFORMATION
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT
ITEM 26 NUMBER OF SECURITIES HOLDERS
ITEM 27 INDEMNIFICATION
ITEM 28 BUSINESS OR OTHER CONNECTIONS OF
INVESTMENT ADVISER
ITEM 29 PRINCIPAL UNDERWRITERS
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
ITEM 31 MANAGEMENT SERVICES
ITEM 32 UNDERTAKINGS
SIGNATURE PAGE
EXHIBITS
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ROCKWOOD FUND, INC.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
Item No.
of Form N-lA Caption in Prospectus
1 Cover Page
2 "Expense Tables"
3 "Financial Highlights"; "Performance Information"
4 "The Fund's Investment Program"
5 "Investment Manager and Subadviser"; "Custodian and Transfer
Agent"
5A "Performance Information"
6 Cover Page; "Investment Manager and Subadviser"; "Distributions and
Taxes"; "Determination of Net Asset Value"; "Shareholder Services";
"Capital Stock"
7 "How to Purchase Shares"; "Shareholder Services"; "Determination of
Net Asset Value"; "Distribution of Shares"
8 "How to Redeem Shares"; "Determination of Net Asset Value"
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 "Table of Contents"
12 Not Applicable
13 "The Fund's Investment Program"; "Investment Restrictions";
"Allocation of Brokerage"
14 "Officers and Directors"
15 "Officers and Directors"; "Investment Manager"
16 "Officers and Directors"; "Investment Manager"; "Subadviser and
Subadvisory Agreement"; "Distribution of Shares"; "Custodian,
Transfer and Dividend Disbursing Agent"; "Auditors"
17 "Allocation of Brokerage"
18 Not Applicable
19 "Purchase of Shares"
20 "Distributions and Taxes"
21 "Distribution of Shares"
22 "Calculation of Performance Data"
23 "Financial Statements"
<PAGE>
Rockwood Fund, Inc. ("Fund") seeks long term capital appreciation. This
objective will be pursued through investment in common stocks and securities
convertible into common stocks. There is no assurance that the Fund will achieve
its objective. Prior to March 1, 1997, the Fund was known as "The Rockwood
Growth Fund, Inc."
NEWSPAPER LISTING Shares of the Fund are sold at the net asset value per share
as shown daily in the mutual fund section of newspapers nationwide under the
heading "Rockwood."
This prospectus contains information you should know about the Fund before
you invest. Please keep it for future reference. The Fund's Statement of
Additional Information, dated March 1, 1997, has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference in this
prospectus. It is available at no charge by calling toll-free at 1-888-ROCKWOOD.
The SEC maintains a Web site (http://www.sec.gov) that contains the Fund's
Statement of Additional Information, material incorporated by reference, and
other information regarding registrants that file electronically with the SEC,
as does the Fund. The Fund is an open-end non-diversified no-load management
investment company. Shares of the Fund are not bank deposits or obligations of,
or guaranteed or endorsed by any bank or any affiliate of any bank, and are not
Federally insured by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSE TABLES. The tables and example below are designed to help you understand
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............ NONE
Sales Load Imposed on Reinvested Dividends. NONE
Deferred Sales Load........................ NONE
Redemption Fee within 30 days of purchase..1.00%
Redemption Fee after 30 days of purchase... NONE
Exchange Fees.............................. NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after reimbursement)........... .00%
12b-1 Fees...................................... .25%
Other Expenses (after reimbursement) ........... 2.50%
------
Total Fund Operating Expenses (after
reimbursement).................................. 2.75%
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period...........
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
$28 $85 $145 $308
The example set forth above assumes (i) reinvestment of all dividends and other
distributions and (ii) a 5% annual rate of return as required by the SEC. THE
EXAMPLE IS AN ILLUSTRATION ONLY AND SHOULD NOT BE CONSIDERED AN INDICATION OF
PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN. The percentages given for Annual Fund Operating
Expenses are based on an assumed level of average net assets of $1 million to $2
million, and have been restated to reflect current management and 12b-1 fees.
Without the reimbursement of management fees and other expenses, Management
Fees, Other Expenses and Total Fund Operating Expenses would have been 1.00%,
5.94% and 7.19%, respectively, of average net assets. Long term shareholders may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.'s ("NASD")
rules regarding investment companies. "Other Expenses" includes amounts payable
to the Fund's Custodian and Transfer Agent and reimbursable to the Investment
Manager and the Distributor for certain administrative and shareholder services,
and does not include interest expense from bank borrowing.
FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout each period. The following information is supplemental to
the Fund's financial statements and report thereon of Tait, Weller & Baker,
independent accountants, appearing in the October 31, 1996 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information. The Fund's financial statements for periods prior to 1996 were
audited by other auditors whose reports thereon expressed unqualified opinions
on those statements. This table should be read in conjunction with the Fund's
financial statements and the notes thereto.
2
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<TABLE>
YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value at beginning of period $16.61 $16.32 $12.42 $11.32 $ 9.56 $14.96 $13.05 $ 9.93 $11.25
------ ------ ------ ------ ------ ------ ------ ------ ------
$18.73
Income from investment operations:
Net investment income (loss) (.56) (.31) (.22) (.26) (.12) (.01) .03 (.01) .01 .12
Net realized and unrealized gain (loss) 2.43 .51 4.16 1.22 1.83 (4.93) 2.06 3.30 (.69)
---- ------ ---- ---- ---- ------ ---- ---- ------
on investments............ 6.07
----
Total from investment operations 2.12 .29 3.90 1.10 1.82 (4.90) 2.05 3.31 (.57)
---- ------ ---- ---- ----- ------ ---- ---- -----
5.51
Less distributions:
Distributions from net interest income .00 .00 .00 .00 (0.06) 0.00 0.00 (0.19) (0.37)
.00
Distributions from net realized gains .00 .00 .00 .00 0. 00 (0.50) (0.14) 0.00 (0.38)
---- ----- ---- ----- ------- ------ ------- ----- ------
.00
Total distributions....... .00 .00 .00 .00 .00 (0.06) (0.50) (0.14) (0.19) (0.75)
--- ---- ----- ------ ------ ------- ------- ------- -------- -------
Net asset value at end of period $24.2$18.73$16.61 $16.32 $12.42 $11.32 $9.56 $ 14.96 $13.05 $9.93
================== ====== ====== ====== ===== ======= ====== =====
TOTAL RETURN................... 29.42% 12.76% 1.78% 31.40% 9.72% 19.04%(32.75)% 15.71% 33.33% (5.07)%
====== ============= ====== ===== ============== ====== ====== =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period.... $1,199,$773,871$714,15$737,96$599,58$876,782$865,459$1,544,824$722,172 $410,461
====================================================================== ========
Ratio of expenses to average net assets(a) 2.30% 2.00% 2.81% 2.46% 2.15% 1.83 1.81% 2.01% 1.17%
===== ===== ===== ===== ===== ==== ===== ===== =====
2.55%
Ratio of net investment income to average (1.77)%(1.38)%(1.67)%(1.09)% (.15)% .25% (.09)% .07% 1.53%
============================ ====== ===== ====== ===== =====
net assets(b)........... (2.23%)
=======
Portfolio turnover rate........ 42.48%
30.04% 18.26% 19.28% 13.28% 14.35% 37.51% 55.83% 42.00% 30.00%
======== ====== ====== ====== ==== ====== ====== ====== ======
Average commission per share... $ .0562
=======
</TABLE>
(a) Ratio prior to reimbursement by the Investment Manager was 4.44%, 3.00%,
2.82%, 2.90%, 2.49%, 2.15%, 1.83%,1.81%, 2.01% and 1.17% for the periods ended
October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(b) Ratio prior to reimbursement by the Investment Manager was (4.12%), (2.47)%,
(2.20)%, (1.76)%, (1.12)%, (.15)%, .25%, (.09)%, .07% and 1.53% for the periods
ended October 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
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TABLE OF CONTENTS
Expense Tables.................... Distributions and Taxes..................
Financial Highlights.............. Determination of Net Asset Value.........
The Fund's Investment Program..... Investment Manager and Subadviser........
How to Purchase Shares............ Distribution of Shares...................
Shareholder Services.............. Performance Information..................
How to Redeem Shares.............. Capital Stock............................
Custodian and Transfer Agent.............
THE FUND'S INVESTMENT PROGRAM
The Fund's investment objective is long term capital appreciation. The Fund
seeks to achieve this objective by investing primarily in equity securities
that, in the opinion of the Investment Manager, are available at prices less
than their intrinsic value. Intrinsic value is a term reflecting an analyst's
subjective view of a company's worth. It may be based on such things as book
value, "hidden assets" (assets carried on the books of a corporation below
market value), the discounted present value of a natural resource (oil, gas,
timber, silver, etc.), or an earnings history/projection. The Investment Manager
believes that investing in such undervalued securities provides a greater
potential for overall investment return. Any income which the Fund earns is
incidental to its objective of capital appreciation. The risks associated with
an investment in the Fund are those related to fluctuations in the market value
of the Fund's portfolio. Also, at any time, the value of the Fund's shares may
be more or less than the investor's cost. The Fund is not intended for investors
who have as their primary objective conservation of capital.
The Fund will purchase common stocks, securities convertible into common
stocks and preferred stocks that are traded on domestic stock exchanges or in
the over-the-counter market. Common stocks and securities convertible into
common stocks are purchased primarily for their potential for long term capital
appreciation and not dividend yield or interest payments.
The Fund retains the flexibility to respond promptly to changes in market
and economic conditions and the Investment Manager may employ a temporary
defensive investment strategy if it determines such a strategy to be warranted.
Under a defensive strategy, the Fund may hold cash and/or invest any portion or
all of its assets in high quality money market instruments of U.S. or foreign
government or corporate issuers. To the extent the Fund adopts a temporary
defensive posture, it will not be invested so as to directly achieve its
investment objective. In addition, pending investment of proceeds from new sales
of Fund shares or in order to meet ordinary daily cash needs, the Fund may hold
cash and may invest in foreign or domestic high quality money market
instruments. Money market instruments in which the Fund may invest include U.S.
or foreign government securities, high grade commercial paper, bank certificates
of deposit, bankers' acceptances, and repurchase agreements relating to any of
the foregoing.
4
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EQUITY SECURITIES. Equity securities involve greater risk of loss of income than
debt securities because issuers are not obligated to pay dividends. In addition,
equity securities are subordinate to debt securities, and are more subject to
changes in economic and industry conditions and in the financial condition of
the issuers of such securities.
SMALL CAPITALIZATION COMPANIES. The Fund may invest in companies that are small
or thinly capitalized, and may have a limited operating history. As a result,
investment in these securities involves greater risks and may be considered
speculative. For example, such companies may have more limited product lines,
markets or financial resources than companies with larger capitalizations, and
may be more dependent on a small management group. In addition, the securities
of such companies may trade less frequently and in smaller volume, and may be
subject to more abrupt or erratic price movements, than securities of large
companies. The Fund's positions in securities of such companies may be
substantial in relation to the market of such securities. Accordingly, it may be
difficult for the Fund to dispose of securities of these companies at prevailing
market prices. Full development of these companies takes time, and for this
reason the Fund should be considered a long term investment and not a vehicle
for seeking short term profit. The securities of small or thinly capitalized
companies may also be more sensitive to market changes than the securities of
large companies. Such companies may not be well known to the investing public
and may not have institutional ownership. Such companies may also be more
vulnerable than larger companies to adverse business or economic developments.
OTHER INFORMATION. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), but intends to continue to
qualify as a regulated investment company for Federal income tax purposes. This
means, in general, that more than 5% of the Fund's total assets may be invested
in the securities of one issuer (including a foreign government), but only if at
the close of each quarter of the Fund's taxable year, the aggregate amount of
such holdings is less than 50% of the value of its total assets and no more than
25% of the value of its total assets is invested in the securities of a single
issuer. To the extent that the Fund's portfolio at times may include the
securities of a smaller number of issuers than if it were "diversified," as
defined in the 1940 Act, the Fund may at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return. The Fund may invest up to 15% of its net assets in illiquid
securities, including repurchase agreements with a maturity of more than seven
days. Illiquid securities may be more difficult to value than more widely traded
securities and the prices realized from the sales of illiquid securities may be
less than if such securities were more widely traded. The Fund may borrow money
from banks for temporary or emergency purposes (not for leveraging or
investment) and engage in reverse repurchase agreements, but not in excess of an
amount equal to one third of the Fund's total net assets. The Fund may not
purchase securities for investment while any bank borrowing equaling more than
5% of its total assets is outstanding.
In addition to the Fund's investment objective, the Fund has adopted certain
investment restrictions set forth in the Statement of Additional Information
that are fundamental and may not be changed without shareholder approval. The
Fund's other investment policies, including its
5
<PAGE>
investment objective, are not fundamental and may be changed by the Board
of Directors without shareholder approval.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $500 for regular and Uniform Gifts/Transfers to Minors Act custody
accounts, and $100 for retirement plans established with the Fund, which include
individual retirement accounts ("IRAs"), simplified employee pension plan IRAs
("SEP-IRAs"), rollover IRAs, profit sharing and money purchase plans, and 403(b)
plan accounts. The minimum subsequent investment is $50. The initial investment
minimums are waived if you elect to invest $50 or more each month in the Fund
through the Rockwood Automatic Investment Program (see "Additional Investments"
below).
INITIAL INVESTMENT. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Rockwood Fund, mailed to Investor Service Center, Box 419789, Kansas
City, MO 64141-6789. Initial investments also may be made by having your bank
wire money, as set forth below, in order to avoid mail delays.
ADDITIONAL INVESTMENTS. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o ROCKWOOD AUTOMATIC INVESTMENT PROGRAM. With the Rockwood Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the Plans explained below. Each
Plan is designed to facilitate an automatic monthly investment of $50 or
more into your Fund account.
The ROCKWOOD BANK TRANSFER PLAN lets you purchase Fund shares on a
certain day each month by transferring electronically a specified
dollar amount from your regular checking account, NOW account, or bank
money market deposit account.
In the ROCKWOOD SALARY INVESTING PLAN, part or all of your salary may
be invested electronically in shares of the Fund on each pay date,
depending upon your employer's direct deposit program.
The ROCKWOOD GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center toll-free at
1-888-ROCKWOOD. You may modify or terminate the Bank Transfer Plan at any
time by written notice received at least 10 days prior to the scheduled
investment date. To modify or terminate the Salary Investing Plan or
Government Direct Deposit Plan, you should contact, respectively, your
employer or the appropriate U.S.
6
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Government agency. The Fund reserves the right to redeem any account if
participation in the Program is terminated and the account's value is less
than $500. The Program and the Plans do not assure a profit or protect
against loss in a declining market, and you should consider your ability to
make purchases when prices are low.
o CHECK. Mail a check or other negotiable bank draft ($50 minimum), made
payable to Rockwood Fund, together with a Rockwood FastDeposit form to
Investor Service Center, Box 419789, Kansas City, MO 64141-6789. If you do
not use that form, please send a letter indicating the account number to
which the subsequent investment is to be credited, and name(s) of the
registered owner(s).
o ELECTRONIC FUNDS TRANSFER (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Investor Service
Center toll-free at 1-888- ROCKWOOD. The bank you designate on your Account
Application or Authorization Form will be contacted to arrange for the EFT,
which is done through the Automated Clearing House system, to your Fund
account. For requests received by 4 p.m., eastern time, the investment will
be credited to your Fund account ordinarily within two business days. There
is a $50 minimum for each EFT investment. Your designated bank must be an
Automated Clearing House member and any subsequent changes in bank account
information must be submitted in writing with a voided check.
o FEDERAL FUNDS WIRE. You may wire money, by following the procedures set
forth below, to receive that day's net asset value per share.
INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Investor Service Center toll-free at 1-888-ROCKWOOD, to give the name(s) under
which the account is to be registered, tax identification number, the name of
the bank sending the wire, and to be assigned a Rockwood Fund account number.
You may then purchase shares by requesting your bank to transmit immediately
available funds ("Federal funds") by wire to: United Missouri Bank NA, ABA
#10-10-00695; for Account 98-7052-724-3; Rockwood Fund. Your account number and
name(s) must be specified in the wire as they are to appear on the account
registration. You should then enter your account number on your completed
Account Application and promptly forward it to Investor Service Center, Box
419789, Kansas City, MO 64141-6789. This service is not available on days when
the Federal Reserve wire system is closed. Subsequent investments by wire may be
made at any time without having to call Investor Service Center by simply
following the same wiring procedures.
SHAREHOLDER ACCOUNTS. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). The Fund no longer issues stock certificates. For
joint tenant accounts, any account owner has the authority to act on the account
without notice to the other account owners. Investor Service Center in its sole
discretion and for its protection may, but is not obligated to, require the
written consent of all account owners of a joint tenant account prior to acting
upon the instructions of any account owner. You will receive transaction
confirmations upon purchasing or selling shares.
7
<PAGE>
WHEN ORDERS ARE EFFECTIVE. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be made
payable to Rockwood Fund and drawn in U.S. dollars on a U.S. bank. No third
party checks will be accepted and the Fund reserves the right to reject any
order for any reason. Accounts are charged $30 by the Transfer Agent for
submitting checks for investment which are not honored by the investor's bank.
The Fund may in its discretion waive or lower the invest ment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged retirement plan described below, however, without consulting a
tax adviser concerning possible adverse tax consequences. Additional information
regarding any of the following services is available from Investor Service
Center by calling toll-free at 1-888-ROCKWOOD.
ELECTRONIC FUNDS TRANSFER (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account with Rockwood's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated blank on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check.
SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed dollar, share, or percentage amounts, subject to a
minimum amount of $100. Under the Systematic Withdrawal Plan, all dividends and
other distributions, if any, are reinvested in the Fund.
ASSIGNMENT. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center by calling toll-free at 1-888-ROCKWOOD.
TAX-ADVANTAGED RETIREMENT PLANS. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible (or
non-deductible) for Federal income tax purposes as noted below. Information on
any of the plans described below is available from Investor Service Center by
calling toll-free at 1-888- ROCKWOOD.
The minimum investment to establish a Rockwood IRA or other retirement plan
is $100. Minimum subsequent investments are $50. The initial investment minimums
are waived if you elect to invest $50 or more each month in the Fund through the
Rockwood Automatic Investment Program. There are no set-up fees for any Rockwood
Retirement Plan. Subject to change on 30 days' notice, the
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plan custodian charges Rockwood Retirement Plans a $10 annual fiduciary fee, $10
for each distribution prior to age 59 1/2, and a $20 plan termination fee;
however, the annual fiduciary fee is waived if your Rockwood Retirement Plan has
assets of $10,000 or more or if you invest regularly through the Rockwood
Automatic Investment Program.
|X| IRA AND SEP-IRA ACCOUNTS. Anyone with earned income who is less than age 70
1/2at the end of the tax year, even if also participating in another type
of retirement plan, may establish an IRA and contribute each year up to
$2,000 or 100% of earned income, whichever is less, and an aggregate of up
to $2,250 when a non-working spouse is also covered in a separate spousal
account. If each spouse has at least $2,000 of earned income each year,
they may contribute up to $4,000 annually. Employers may also make
contributions to an IRA on behalf of an individual under a Simplified
Employee Pension Plan ("SEP") in any amount up to 15% of up to $150,000 of
compensation.
For tax years beginning after December 31, 1996, a married couple may
contribute an aggregate amount of up to $4,000 to an IRA each year
regardless of whether each spouse has $2,000 of earned income, provided,
however, that their aggregate earned income is at least $4,000. Also,
although a Salary Reduction SEP ("SARSEP") may no longer be established
after that date, a small employer instead may establish a Savings Incentive
Match Plan for Employees ("SIMPLE"), which will allow certain employees to
make elective contributions of up to $6,000 per year and will require the
employer to make matching contributions up to 3% of each such employee's
salary.
Generally, taxpayers may contribute to an IRA during the tax year and
through the next year until the income tax return for that year is due,
without regard to extensions. Thus, most individuals may contribute for the
1996 tax year through April 15, 1997, and for the 1997 tax year from January
1, 1997 through April 15, 1998.
DEDUCTIBILITY. IRA contributions are fully deductible for many taxpayers.
For a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is), a portion of IRA contributions is
deductible if adjusted gross income (before the IRA deductions) is $40,000-
$50,000 (if married) and $25,000-$35,000 (if single). Only IRA contributions
by a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is) and has adjusted gross income of more
than $50,000 (if married) and $35,000 (if single) will not be deductible. An
eligible individual may establish a Rockwood IRA under the prototype plan
available through the Fund, even though such individual or spouse actively
participates in an employer-maintained retirement plan.
o IRA TRANSFER AND ROLLOVER ACCOUNTS. Special forms are available from
Investor Service Center by calling toll-free at 1-888-ROCKWOOD, which make
it easy to transfer or roll over IRA assets to a Rockwood IRA. An IRA may be
transferred from one financial institution to another without adverse tax
consequences. Similarly, no taxes need be paid on a lump-sum distribution
that you may receive as a payment from a qualified pension or profit sharing
plan due to retirement, job termination, or termination of the plan, so long
as the assets are put into an IRA Rollover account within 60 days of the
payment. Withholding for Federal income tax
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purposes is required at the rate of 20% for "eligible rollover
distributions" made from any retirement plan (other than an IRA) that are
not directly transferred to an "eligible retirement plan," such as a
Rockwood Rollover Account.
o PROFIT SHARING AND MONEY PURCHASE PLANS. These provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees
generally to contribute (and deduct) up to $30,000 annually or, if less,
25% (15% for profit sharing plans) of compensation or self-employment
earnings of up to $150,000. Corporations and partnerships, as well as all
self-employed persons, are eligible to establish these plans. In addition,
a person who is both salaried and self-employed, such as a college
professor who serves as a consultant, may adopt these retirement plans
based on self-employment earnings.
|X| SECTION 403(B) ACCOUNTS. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment of custodial accounts
on behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's
account pursuant to a salary reduction agreement, up to a maximum amount,
or "exclusion allowance." The exclusion allowance is generally computed by
multiplying the participant's years of service times 20% of the
participant's compensation included in gross income received from the
employer (reduced by any amount previously contributed by the employer to
any 403(b) account for the benefit of the participant and excluded from the
participant's gross income). However, the exclusion allowance may not
exceed the lesser of 25% of the partici pant's compensation (limited as
above) or $30,000. Contributions and subsequent earnings thereon are not
taxable until withdrawn, when they are received as ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
BY MAIL. You may request that the Fund redeem any amount by submitting a written
request to Investor Service Center, Box 419789, Kansas City, MO 64141-6789,
signed by the record owner(s). If the written request is sent to the Fund, it
will be forwarded to the above address.
BY TELEPHONE. You may telephone Investor Service Center toll-free at
1-888-ROCKWOOD, to expedite redemption of Fund shares.
You may redeem as little as $250 worth of shares by requesting Electronic
Funds Transfer (EFT) service. With EFT, you can redeem Fund shares quickly
and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for
the electronic transfer of your redemption proceeds (through the Automated
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Clearing House system) to your bank account. EFT proceeds are ordinarily
available in your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time
will be redeemed from your account that day, and if received after 4 p.m.
eastern time, on the next Fund business day. Any subsequent changes in bank
account information must be submitted in writing, signature guaranteed, with a
voided check. Redemptions by telephone may be difficult or impossible to
implement during periods of rapid changes in economic or market conditions.
REDEMPTION PRICE AND FEES. The redemption price is the net asset value per share
next determined after receipt of the redemption request in proper form. The Fund
is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund held for 30 days or less are redeemed or
exchanged, the Fund will deduct a redemption fee equal to one percent of the net
asset value of shares redeemed or exchanged. The fee will be retained by the
Fund and used to offset the transaction costs that short term trading imposes on
the Fund and its shareholders. If an account contains shares with different
holding periods (i.e. some shares held 30 days or less, some shares held 31 days
or more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. Shares acquired through the
reinvestment of dividends and other distributions or redeemed under the
Systematic Withdrawal Plan are exempt from the redemption fee. Registered
broker/dealers, investment advisers, banks, and insurance companies may open
accounts and redeem shares by telephone or wire and may impose a charge for
handling purchases and redemptions when acting on behalf of others.
REDEMPTION PAYMENT. Payment for shares redeemed will ordinarily be made within
seven days after receipt of the redemption request in proper form. The right of
redemption may not be suspended, or date of payment delayed more than seven
days, except for any period (i) when the New York Stock Exchange is closed or
trading thereon is restricted as determined by the SEC; (ii) under emergency
circumstances as determined by the SEC that make it not reasonably practicable
for the Fund to dispose of securities owned by it or fairly to determine the
value of its assets; or (iii) as the SEC may otherwise permit. The mailing of
proceeds on redemption requests involving any shares purchased by personal,
corporate, or government check or EFT transfer is generally subject to a fifteen
day delay to allow the check or transfer to clear. The fifteen day clearing
period does not affect the trade date on which a purchase or redemption order is
priced, or any dividends and other distributions to which you may be entitled
through the date of redemption. The clearing period does not apply to purchases
made by wire. Due to the relatively higher cost of maintaining smaller accounts,
the Fund reserves the right, upon 45 days' notice, to redeem any account, other
than IRA and Rockwood prototype retirement plan accounts, worth less than $500
except if solely from market action, unless an investment is made to restore the
minimum value.
TELEPHONE PRIVILEGES. You automatically have all telephone privileges to, among
other things, authorize purchases and redemptions with EFT or by other means,
unless declined on the Account Application or otherwise in writing. Neither the
Fund nor Investor Service Center shall be liable for
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any loss or damage for acting in good faith upon instructions received by
telephone and believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine and if it does
not, it may be liable for losses due to unauthorized or fraudulent transactions.
These procedures include requiring personal identification prior to acting upon
telephone instructions, providing written confirmation of such transactions, and
recording telephone conversations. The Fund may modify or terminate any
telephone privileges or shareholder services (except as noted) at any time
without notice.
SIGNATURE GUARANTEES. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the NASD. A notary public may not guarantee signatures. The
Transfer Agent may require further documentation, and may restrict the mailing
of redemption proceeds to your address of record within 60 days of such address
being changed unless you provide a signature guarantee as described above.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Investor
Service Center toll-free at 1-888- ROCKWOOD. For Federal income tax purposes,
dividends and other distributions are treated in the same manner whether
received in additional Fund shares or in cash. Any election will remain in
effect until you notify Investor Service Center to the contrary. Any dividend or
other distribution will have the effect of reducing the net asset value of the
Fund's shares on the payment date by the amount thereof. Furthermore, any such
dividend or other distribution, although similar in effect to a return of
capital, will be subject to taxes.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code ("RIC") so that it will be relieved of Federal
income tax on that part of its investment company taxable income (generally
consisting of net investment income, net short term capital gains, and net gains
from certain foreign currency transactions) and net capital gain (the excess of
net long term capital gain over net short term capital loss) that is distributed
to its shareholders. Dividends paid by the Fund from its investment company
taxable income (whether paid in cash or in additional Fund shares) generally are
taxable to its shareholders, other than shareholders that are not subject to tax
on their income, as ordinary income to the extent of the Fund's earnings and
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<PAGE>
profits; a portion of those dividends may be eligible for the corporate
dividends-received deduction. Distributions by the Fund of its net capital gain
(whether paid in cash or in additional Fund shares), when designated as such by
the Fund, are taxable to the shareholders as long term capital gains, regardless
of how long they have held their Fund shares. The Fund notifies its shareholders
following the end of each calendar year of the amounts of dividends and capital
gain distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction. Any
dividend or other distribution paid by the Fund will reduce the net asset value
of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes.
The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who are
otherwise subject to backup withholding.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of its investments and all other assets
minus any liabilities. The value of one share is determined by dividing the net
assets by the total number of shares outstanding. This is referred to as "net
asset value per share," and is determined as of the close of regular trading on
the New York Stock Exchange (currently, 4 p.m. eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing) each
business day of the Fund. A business day of the Fund is any day on which the New
York Stock Exchange is open for trading. The following are not Fund business
days: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other Fund assets are valued primarily on the basis
of market quotations, if readily available. Securities and other assets for
which quotations are not readily available will be valued at fair value as
determined in good faith by or under the direction of the Board of Directors.
INVESTMENT MANAGER AND SUBADVISER
Rockwood Advisers, Inc. ("Investment Manager") acts as general manager of
the Fund, being responsible for the various functions assumed by it, including
regularly furnishing advice with respect to portfolio transactions. The
Investment Manager also furnishes or obtains on behalf of the Fund all services
necessary for the proper conduct of the Fund's business and administration. The
Investment Manager retains final discretion in the investment and reinvestment
of the Fund's assets, subject to the control and oversight of the Board of
Directors. The Investment Manager is authorized to place portfolio transactions
with an affiliated broker/dealer, and may allocate brokerage transactions by
taking into account the sales of shares of the Fund and other affiliated
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<PAGE>
investment companies. The Investment Manager may allocate transactions to
broker/dealers that remit a portion of their commissions as a credit against the
Fund's expenses. For its services, the Investment Manager receives a fee based
on the average daily net assets of the Fund, at the annual rate of 1% on the
first $200 million and declining thereafter as a percentage of average daily net
assets. This fee is higher than fees paid by most other investment companies.
During the fiscal year ended October 31, 1996, investment management fees paid
by the Fund after reimbursement amounted to 0.00% of average daily net assets.
The Investment Manager provides certain administrative services to the Fund at
cost. Bassett S. Winmill may be deemed a controlling person of the Investment
Manager.
The Investment Manager has entered into a subadvisory agreement with Aspen
Securities and Advisory, Inc., an Idaho corporation ("Subadviser"), for certain
subadvisory services. The Subadviser advises and consults with the Investment
Manager regarding the selection, clearing and safekeeping of the Fund's
portfolio investments and assists in pricing and generally monitoring such
investments. The principal business address of the Subadviser is 545 Shoup
Avenue, No. 303, Idaho Falls, Idaho 83402. Ross H. Farmer may be deemed a
controlling person of the Subadviser as the term is defined in the Investment
Company Act of 1940. The Investment Manager, not the Fund, pays the Subadviser
monthly a percentage of the Investment Manager's net fees based upon the Fund's
performance and its total net assets ranging from ten to fifty percent of the
Investment Manager's net fees. The Subadviser had served as the investment
adviser to the Fund until August 19, 1996. Mr. Ross Farmer, the Subadviser's
President, has been the Fund's portfolio manager since the Fund's inception in
1986 and currently serves as the Fund's portfolio manager together with the
Investment Manager's Investment Policy Committee. Mr. Farmer has been President
of the Subadviser since 1986.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc.
("Distributor"), 11 Hanover Square, New York, NY 10005, acts as the Fund's
principal agent for the sale of its shares. The Investment Manager is an
affiliate of the Distributor. The Fund has also adopted a plan of distribution
("Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Plan, the
Fund pays the Distributor a fee in an amount of 0.25% per annum of the Fund's
average daily net assets for distribution and service activities. This fee may
be retained by the Distributor or passed through to brokers, banks and others
who provide services to their customers who are Fund shareholders or to the
Distributor. The Fund will pay the fee to the Distributor until either the Plan
is terminated or not renewed. In that event, the Distributor's expenses in
excess of fees received or accrued through the termination day will be the
Distributor's sole responsibility and not obligations of the Fund. During the
period they are in effect, the Distribution Agreement and Plan obligate the Fund
to pay a fee to the Distributor as compensation for its distribution and service
activities. If the Distributor's expenses exceeds the fee, the Fund will not be
obligated to pay any additional amount to the Distributor. If the Distributor's
expenses are less than the fee, it may realize a profit.
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PERFORMANCE INFORMATION
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that an investor's shares when
redeemed may be worth more or less than their original cost. In addition to
advertising average annual total return and cumulative total return, comparative
performance information may be used from time to time in advertising the Fund's
shares, including data from Morningstar, Inc., Lipper Analytical Services, Inc.
and other sources. "Average annual total return" is the average annual
compounded rate of return on a hypothetical $1,000 investment made at the
beginning of the advertised period. In calculating average annual total return,
all dividends and other distributions are assumed to be reinvested. "Cumulative
total return" is calculated by subtracting a hypothetical $1,000 payment to the
Fund from the ending redeemable value of such payment (at the end of the
relevant advertised period), dividing such difference by $1,000 and multiplying
the quotient by 100. In calculating ending redeemable value, all dividends and
other distributions are assumed to be reinvested in additional Fund shares.
Although the Fund imposes a 1% redemption fee on the redemption of shares held
for 30 days or less, all of the periods for which performance is quoted are
longer than 30 days, and therefore the 1% fee is not reflected in the
performance calculations. In addition, there is no sales charge upon
reinvestment of dividends or other distributions. For more information regarding
how the Fund's average annual total return and cumulative total return is
calculated, see "Calculation of Performance Data" in the Statement of Additional
Information. The Fund's annual report to shareholders contains further
information about the Fund's performance, and is available free of charge upon
request to Investor Service Center by calling toll-free at 1-888-ROCKWOOD.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as a Maryland corporation on December 11, 1996. Prior to March 1,
1997, the Fund operated under the name "The Rockwood Growth Fund, Inc.," an
Idaho corporation organized on March 7, 1985. The Fund is authorized to issue up
to 1,000,000,000 shares ($0.01 par value). The Board of Directors of the Fund
may establish additional series or classes of shares, although it has no current
intention of doing so.
The Fund's stock is freely assignable by way of pledge (as, for example,
for collateral purposes), gift, settlement of an estate and also by an investor
to another investor. Each share has equal dividend, voting, liquidation, and
redemption rights with every other share. The shares have no preemptive,
conversion, or cumulative voting rights and they are not subject to further call
or assessment.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters that would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 25% of the Fund's shares may call
a meeting at any time. There
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will normally be no meetings of shareholders for the purpose of electing
Directors unless fewer than a majority of the Directors holding office have been
elected by shareholders. Shareholder meetings will be held in years in which
shareholder vote on the Fund's investment management agreement, plan of
distribution, or fundamental investment objectives, policies or restrictions is
required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
custodian of the Fund's assets, performs certain accounting services for the
Fund, and may appoint one or more subcustodians provided such subcustodianship
is in compliance with the rules and regulations promulgated under the 1940 Act.
The Fund's transfer and dividend disbursing agent ("Transfer Agent") is DST
Systems, Inc., Box 419789, Kansas City, MO 64141-6789. The Distributor provides
certain shareholder administration services to the Fund and is reimbursed its
cost by the Fund. The Fund may also enter into agreements with brokers, banks
and others who may perform, on behalf of their customers, certain shareholder
services not otherwise provided by the Transfer Agent or the Distributor.
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ROCKWOOD
SEEKING LONG TERM CAPITAL APPRECIATION.
SHAREHOLDER SERVICES:
o Electronic Funds Transfers
o Automatic Investment Program
o Retirement Plans:
IRA, SEP-IRA, Qualified Profit Sharing/
Money Purchase, 403(b), Keogh
MINIMUM INVESTMENTS:
o Regular Accounts, $500
o IRAs, $100
o Automatic Investment Program, $50
o Subsequent Investments, $50
Prospectus
March 1, 1997
ROCKWOOD
11 Hanover Square
New York, NY 10005
Toll-Free 1-888-ROCKWOOD
Call toll-free 1-888-ROCKWOOD for Fund performance, telephone purchases, and to
obtain information concerning your account.
17
<PAGE>
ROCKWOOD ACCOUNT APPLICATION
Use this Account Application to open a regular Rockwood account. For a Rockwood
IRA Application, call 1-888-ROCKWOOD. Return this completed Account Application
in the enclosed envelope or mail to: Investor Service Center, Box 419789, Kansas
City, MO 64141-6789.
1. REGISTRATION. If you need assistance in completing this Account Application,
please call 1-888- ROCKWOOD.
INDIVIDUAL:
First Name:
Middle Initial:
Last Name:
Social Security Number:
JOINT OWNER (IF ANY):
First Name:
Middle Initial:
Last Name:
Social Security Number:
Note: Registration will be Joint Tenants with Right of Survivorship, unless
otherwise specified.
GIFT/TRANSFER TO A MINOR:
Name of Custodian (only one):
as Custodian for
Name of Minor:
under the (Custodian's State of Residence) Uniform Gifts/Transfers to Minors Act
Minor's Social Security Number:
Minor's Date of Birth:
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS:
Name of Corporation, Partnership, or other Organization:
Name of Individual(s) Authorized to Act for the Corporation, Partnership, or
other Organization:
Tax I.D. Number:
Name of Trustee(s):
Date of Trust Instrument:
2. MAILING ADDRESS, TELEPHONE NUMBER, AND CITIZENSHIP
Street:
City:
State/Zip:
Daytime Telephone:
E-Mail Address:
Owner:
Citizen of: U.S. Other:
Joint Owner
Citizen of: U.S. Other:
3. AMOUNT INVESTED ($500 MINIMUM)
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Note: The $500 minimum initial investment is waived if you elect to invest
through the Rockwood Bank Transfer Plan, the Rockwood Salary Investing Plan,
and/or the Rockwood Government Direct Deposit Plan (see Section 4).
Investment: $
By Check*
By Wire
Date**
Assigned Account Number***
*Please make your check(s) payable to Rockwood and enclose with this
Application.
**Indicate date on which money was wired.
***Please call 1-888-ROCKWOOD to be assigned an account number before making an
initial
investment by wire.
4. ROCKWOOD AUTOMATIC INVESTMENT PROGRAM
ROCKWOOD BANK TRANSFER PLAN Automatically purchase shares each month by
transferring the dollar amount you specify from your regular checking account,
NOW account, or bank money market account. Please attach a voided bank account
check.
Amount $ Day of month:
10th:
15th:
20th:
ROCKWOOD SALARY INVESTING PLAN The enrollment form will be sent to the above
address or call 1- 888-ROCKWOOD to have the form sent to your place of
employment.
ROCKWOOD GOVERNMENT DIRECT DEPOSIT PLAN Your request will be processed and you
will receive the enrollment form.
5. DISTRIBUTIONS If no circle is checked, the Automatic Compounding Option will
be assigned to reinvest all dividends and distributions in your account to
increase the shares you own.
AUTOMATIC COMPOUNDING OPTION Dividends and distributions reinvested in
additional shares.
PAYMENT OPTION Dividends in cash, distributions reinvested:
Dividends and distributions in cash:
6. INVESTMENTS AND REDEMPTIONS BY TELEPHONE
Shareholders automatically enjoy the privilege of calling 1-888-ROCKWOOD to
purchase additional shares of Rockwood or to expedite a redemption and have the
proceeds sent directly to their address or to their bank account, unless
declined by checking the following circle ( ). The Rockwood link with your bank
offers flexible access to your money. Transfers occur only when you initiate
them and may be made by either bank wire or bank clearinghouse transfer with
Rockwood's Electronic Funds Transfer service.
TO ESTABLISH THE ROCKWOOD LINK TO YOUR BANK, PLEASE ATTACH A VOIDED CHECK FROM
YOUR BANK ACCOUNT. One common name must appear on your Rockwood account and bank
account.
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7. SIGNATURE AND CERTIFICATION TO AVOID BACKUP WITHOLDING
"I certify that I have received and read the prospectus for Rockwood, agree to
its terms, and have the legal capacity to purchase its shares. I understand
telephone conversations with Investor Service Center, Inc. ("ISC")
representatives are recorded and hereby consent to such recording. I agree that
neither the Fund nor ISC will be liable for acting on instructions believed to
be genuine and under reasonable procedures designed to prevent unauthorized
transactions. I CERTIFY (1) THE SOCIAL SECURITY OR TAXPAYER IDENTIFICATION
NUMBER PROVIDED ABOVE IS CORRECT, AND (2) I AM NOT SUBJECT TO BACKUP WITHOLDING
BECAUSE (A) I AM EXEMPT FROM BACKUP WITHOLDING, OR (B) I HAVE NOT BEEN NOTIFIED
BY THE IRS THAT I AM SUBJECT TO BACKUP WITHOLDING, OR (C) I HAVE BEEN NOTIFIED
BY THE IRS THAT I AM NO LONGER SUBJECT TO BACKUP WITHOLDING." (PLEASE CROSS OUT
ITEM 2 IF IT DOES NOT APPLY TO YOU.) THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHOLDING.
Signature of:
Owner:
Trustee:
Custodian:
Date:
Signature of Joint Owner (if any):
Date:
Rockwood
11 Hanover Square
New York, NY 10005
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Statement of Additional Information March 1, 1997
ROCKWOOD FUND, INC.
11 Hanover Square
New York, NY 10005
Toll-free: 1-888-ROCKWOOD
This Statement of Additional Information regarding Rockwood Fund, Inc.
("Fund") is not a prospectus and should be read in conjunction with the Fund's
prospectus dated March 1, 1997. The prospectus is available to prospective
investors without charge upon request to Investor Service Center, Inc., the
Fund's distributor, by calling toll-free at 1-888-ROCKWOOD.
TABLE OF CONTENTS
THE FUND'S INVESTMENT PROGRAM.............................................2
INVESTMENT RESTRICTIONS...................................................5
OFFICERS AND DIRECTORS....................................................7
INVESTMENT MANAGER.......................................................11
SUBADVISER AND SUBADVISORY AGREEMENT.....................................13
CALCULATION OF PERFORMANCE DATA..........................................14
DISTRIBUTION OF SHARES...................................................19
DETERMINATION OF NET ASSET VALUE.........................................21
PURCHASE OF SHARES.......................................................21
ALLOCATION OF BROKERAGE..................................................22
DISTRIBUTIONS AND TAXES..................................................25
REPORTS TO SHAREHOLDERS..................................................26
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT........................26
AUDITORS.................................................................26
FINANCIAL STATEMENTS.....................................................26
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THE FUND'S INVESTMENT PROGRAM
The following information supplements the information concerning the
investment objective, policies and limitations of the Fund found in the
Prospectus. The Fund's investment objective of capital appreciation is
non-fundamental and may be changed by the Fund's Board of Directors without
shareholder approval. Fund shareholders will be notified at least thirty days in
advance of a change in the Fund's investment objective, and shareholders will
not be charged a redemption fee if they redeem after such notice and prior to
the change of investment objective.
U.S. GOVERNMENT SECURITIES. The U.S. Government securities in which the Fund
may invest include direct obligations of the U.S. Government (such as Treasury
bills, notes and bonds) and obligations issued by U.S. Government agencies and
instrumentalities backed by the full faith and credit of the U.S. Government,
such as those issued by the Government National Mortgage Association. In
addition, the U.S. Government securities in which the Fund may invest include
securities supported primarily or solely by the creditworthiness of the issuer,
such as securities issued by the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority. In
the case of obligations not backed by the full faith and credit of the U.S.
Government, the Fund must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the U.S. Government itself in the event the
agency or instrumentality does not meet its commitments. Accordingly, these
securities may involve more risk than securities backed by the U.S. Government's
full faith and credit.
BORROWING. The Fund may incur overdrafts at its custodian bank from time to
time in connection with redemptions and/or the purchase of portfolio securities.
In lieu of paying interest to the custodian bank, the Fund may maintain
equivalent cash balances prior or subsequent to incurring such overdrafts. If
cash balances exceed such overdrafts, the custodian bank may credit interest
thereon against fees.
ILLIQUID ASSETS. The Fund may not purchase or otherwise acquire any security
or invest in a repurchase agreement if, as a result, more than 15% of the Fund's
net assets would be invested in illiquid assets, including repurchase agreements
not entitling the holder to payment of principal within seven days. The term
"illiquid assets" for this purpose includes securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which the Fund has valued the securities.
Illiquid restricted securities may be sold by the Fund only in privately
negotiated transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933, as amended
("1933 Act"). Where registration is required, the Fund may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
2
<PAGE>
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt from
registration or sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional restricted securities markets may
provide both readily ascertainable values for restricted securities and the
ability to liquidate an investment in order to satisfy share redemption orders
on a timely basis. Such markets might include automated systems for the trading,
clearance and settlement of unregistered securities, such as the PORTAL System
sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing certain
restricted securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities, and the Fund might be unable to
dispose of such securities promptly or at favorable prices.
The Board of Directors of the Fund has delegated the function of making
day-to-day determinations of liquidity to Rockwood Advisers, Inc. ("Investment
Manager") pursuant to guidelines approved by the Board. The Investment Manager
takes into account a number of factors in reaching liquidity determinations,
including (1) the frequency of trades and quotes for the security, (2) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers, (3) dealer undertakings to make a market in the
security, and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The Investment Manager
monitors the liquidity of restricted securities in the Fund's portfolio and
reports periodically on liquidity determinations to the Board of Directors.
LENDING. The Fund may lend up to one-third of its total assets to other
parties, although it has no current intention of doing so. If the Fund engages
in lending transactions, it will enter into lending agreements that require that
the loans be continuously secured by cash, securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, or any combination of
cash and such securities, as collateral equal at all times to at least the
market value of the assets lent. To the extent of such activities, the custodian
will apply credits against its custodial charges. There are risks to the Fund of
delay in receiving additional collateral and risks of delay in recovery of, and
failure to recover, the assets lent should the borrower fail financially or
otherwise violate the terms of the lending agreement. Loans will be made only to
borrowers deemed by the Investment Manager to be of good standing and when, in
the Investment Manager's judgment, the consideration which can be earned
currently from such lending transactions justifies the attendant risk. Any loan
made
3
<PAGE>
by the Fund will provide that it may be terminated by either party upon
reasonable notice to the other party.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases securities from a bank or securities dealer and simultaneously
commits to resell the securities to the bank or dealer at an agreed-upon date
and price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. The Fund maintains custody of the
underlying securities prior to their repurchase; thus, the obligation of the
bank or dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such securities. If the value of these securities is less than the
repurchase price, plus any agreed-upon additional amount, the other party to the
agreement must provide additional collateral so that at all times the collateral
is at least equal to the repurchase price, plus any agreed-upon additional
amount. The difference between the total amount to be received upon repurchase
of the securities and the price that was paid by the Fund upon their acquisition
is accrued as interest and included in the Fund's net investment income.
Repurchase agreements carry certain risks not associated with direct investments
in securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent. The Fund intends to enter into repurchase
agreements only with banks and dealers in transactions believed by the
Investment Manager to present minimum credit risks in accordance with guidelines
established by the Fund's board of directors. The Investment Manager reviews and
monitors the creditworthiness of those institutions under the board's general
supervision.
CONVERTIBLE SECURITIES. The Fund may invest up to 5% of its net assets in
convertible securities which are bonds, debentures, notes, preferred stocks or
other securities that may be converted into or exchanged for a specified amount
of common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest generally paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Convertible securities have unique investment characteristics in
that they generally (i) have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are less subject to fluctuation
in value than the underlying stock since they have fixed income characteristics
and (iii) provide the potential for capital appreciation if the market price of
the underlying common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or
4
<PAGE>
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. In addition, a convertible
security will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the Investment
Manager's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund may hold or trade convertible securities. In selecting convertible
securities for the Fund, the Investment Manager evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Investment Manager considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
INVESTMENTS IN CLOSED-END INVESTMENT COMPANIES. The Fund may invest up to
10% of its total assets in shares of closed-end investment companies. In
addition to the Fund's expenses, as a shareholder in another investment company
the Fund would bear its pro rata portion of the other investment company's
expenses.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions that
may not be changed without the approval of the lesser of (a) 67% or more of the
voting securities of the Fund present at a meeting if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy or (b) more than 50% of the outstanding voting securities of the Fund.
Any investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. The Fund may not:
1. Borrow money, except to the extent permitted by the Investment Company Act
of 1940, as amended ("1940 Act");
2. Engage in the business of underwriting the securities of other issuers,
except to the extent that the Fund may be deemed to be an underwriter under
the Federal securities laws in connection with the disposition of the Fund's
authorized investments;
3. Purchase or sell real estate, provided that the Fund may invest in
securities (excluding limited partnership interests) secured by real estate
or interests therein or issued by companies which invest in real estate or
interests therein;
4. Purchase or sell physical commodities, although it may enter into (a)
commodity and other futures contracts and options thereon, (b) options on
commodities, including foreign currencies, (c) forward contracts on
commodities, including foreign currencies, and (d) other financial contracts
or derivative instruments;
5
<PAGE>
5. Lend its assets, provided however, that the following are not prohibited:
(a) the making of time or demand deposits with banks, (b) the purchase of
debt securities such as bonds, debentures, commercial paper, repurchase
agreements and short term obligations in accordance with the Fund's
investment objectives and policies, and (c) engaging in securities and other
asset loan transactions to the extent permitted by the 1940 Act;
6. Issue senior securities, except to the extent permitted by the 1940 Act; or
7. Purchase a security if, as a result, 25% or more of the value of the Fund's
total assets would be invested in the securities of issuers in a single
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The Fund's Board of Directors has established the following non-fundamental
investment limitations that may be changed by the Board without shareholder
approval:
1. The Fund may not purchase or otherwise acquire any security or invest in a
repurchase agreement if, as a result, more than 15% of the Fund's net assets
(taken at current value) would be invested in illiquid assets, including
repurchase agreements not entitling the holder to payment of principal
within seven days;
2. The Fund may not purchase the securities of any investment company (as
defined in the 1940 Act) except (a) by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase,
provided that immediately after such purchase no more than: 10% of the
Fund's total assets are invested in securities issued by investment
companies, 5% of the Fund's total assets are invested in securities issued
by any one investment company, or 3% of the voting securities of any one
such investment company are owned by the Fund, and (b) when such purchase
is part of a plan of merger, consolidation, reorganization or acquisition
of assets;
3. The aggregate value of securities underlying put options on securities
written by the Fund, determined as of the date the put options are written,
will not exceed 25% of the Fund's net assets, and the aggregate value of
securities underlying call options on securities written by the Fund,
determined as of the date the call options are written, will not exceed 25%
of the Fund's net assets;
4. The Fund may purchase a put or call option on a security or a security
index, including any straddles or spreads, only if the value of its premium,
when aggregated with the premiums on all other such instruments held by the
Fund, does not exceed 5% of the Fund's total assets;
5. To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a Commodity
Futures Trading Commission ("CFTC") regulated exchange, in each case that is
not for bona fide hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums required to establish these positions (excluding
the amount by which options are "in-the-money") may not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
6
<PAGE>
6. The Fund may not purchase securities on margin, except that the Fund may
obtain such short term credits as are necessary for the clearance of
transactions, and provided that margin payments and other deposits made in
connection with transactions in options, futures contracts, forward
contracts and other derivative instruments shall not be deemed to constitute
purchasing securities on margin;
7. The Fund may not mortgage, pledge or hypothecate any assets in excess of
one-third of the Fund's total assets;
8. The Fund may not make short sales of securities or maintain a short
position, except (a) the Fund may buy and sell options, futures contracts,
options on futures contracts, and forward contracts, and (b) the Fund may
sell "short against the box" where the Fund contemporaneously owns or has
the right to obtain at no added cost securities identical to those sold
short; and
9. The Fund may not borrow money, except (a) from a bank for temporary or
emergency purposes (not for leveraging or investment) or (b) by engaging in
reverse repurchase agreements, provided that immediately after all
borrowings pursuant to (a) and (b) there is asset coverage of at least 300
per centum for all borrowings; provided that in the event that such asset
coverage shall at any time fall below 300 per centum the Fund shall within
three days thereafter (not including Sundays and holidays) reduce the
amount of its borrowings such that the asset coverage of such borrowings
shall be at least 300 per centum. The Fund may not purchase securities for
investment while any bank borrowing equaling 5% or more of its total assets
is outstanding.
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices, date of
birth and principal occupations during the last five years are set forth below.
Unless otherwise noted, the address of each is 11 Hanover Square, New York, NY
10005.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of
Bull & Bear Group, Inc. ("Group"), the parent of the Investment Manager, and
seven other investment companies advised by subsidiaries of Group ("Investment
Company Complex"). He was born February 10, 1930. He is a member of the New York
Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.
ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman and a
Director of seven other investment companies in the Investment Company Complex
and of the Investment Manager and its affiliates. He was born December 7, 1929.
He is a member of the Board of Governors of the Mutual Fund Education Alliance,
and of its predecessor, the No-Load Mutual Fund Association. He has also been a
member of the District #12, District Business Conduct and Investment Companies
Committees of the NASD.
7
<PAGE>
RUSSELL E. BURKE III -- Director. 900 Park Avenue, New York, NY 10021. He was
born August 23, 1946. He is President of Russell E. Burke III, Inc. Fine Art,
New York, New York. From 1988 to 1991, he was President of Altman Burke Fine
Arts, Inc. From 1983 to 1988, he was Senior Vice President of Kennedy Galleries.
He is also a Director of five other investment companies in the Investment
Company Complex.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is Senior Consultant with The Berger Financial Group, LLC specializing in
financial, estate and insurance matters. From March 1995 to December 31, 1995,
he was President of Huber Hogan Knotts Consulting, Inc. From 1990 to March 1995,
he was President of Huber-Hogan Associates. From 1988 to 1990, he was Chairman
of Bruce Huber Associates. He was born February 7, 1930. He is also a Director
of eight other investment companies in the Investment Company Complex.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of eight other investment companies in the
Investment Company Complex.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of eight other investment companies in the Investment Company
Complex.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of eight other investment companies in the
Investment Company Complex.
MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
Chief Financial Officer. He is Chief Financial Officer of the Investment Manager
and its affiliates. He is also a Director of four other investment companies in
the Investment Company Complex. He received his M.B.A. from the Fuqua School of
Business at Duke University in 1987. From 1983 to 1985 he was Assistant Vice
President and Director of Marketing of E.P. Wilbur & Co., Inc., a real estate
development and syndication firm and Vice President of E.P.W. Securities, its
broker/dealer subsidiary. He is the brother of Thomas B. Winmill. He was born
November 26, 1957.
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is President of the Investment Manager and the Distributor,
and of their affiliates. He is also a Director of five other investment
companies in the Investment Company Complex. He was associated with the law firm
of Harris, Mericle & Orr from 1984 to 1987. He is a member of the New York State
Bar and the SEC Rules Committee of the Investment Company Institute. He is a
brother of Mark C. Winmill. He was born June 25, 1959.
8
<PAGE>
The executive officers of the Fund, each of whom serves at the pleasure of
the Board of Directors, are as follows:
MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief Financial
Officer. (see biographical information above).
THOMAS B. WINMILL -- Co-President, Co-Chief Executive Officer, and General
Counsel (see biographical information above).
ROBERT D. ANDERSON -- Vice Chairman (see biographical information above).
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. From 1993 to 1995, he was
Associate Director -- Proprietary Trading at Barclays De Zoete Wedd Securities
Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company,
and from 1989 to 1992 he was Vice President of Wilkinson Boyd Capital Markets.
He was born March 1, 1955.
JOSEPH LEUNG, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer and
Chief Accounting Officer of the Investment Manager and its affiliates. From 1992
to 1995 he held various positions with Coopers & Lybrand L.L.P., a public
accounting firm. From 1991 to 1992, he was the accounting supervisor at
Retirement Systems Group, a mutual fund company. From 1987 to 1991, he held
various positions with Ernst & Young L.L.P., a public accounting firm. He is a
member of the American Institute of Certified Public Accountants. He was born
September 15, 1965.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Investment Manager and its affiliates. From 1991 to 1994 he was
associated with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. He is
a member of the New York State Bar. He was born September 13, 1964.
* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B. Winmill
are "interested persons" of the Fund as defined by the 1940 Act, because of
their positions with the Investment Manager.
COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C>
NAME OF PERSON, Aggregate Pension or Estimated Annual Total Com
POSITION Compensa- Retirement Benefits Upon pensation From
tion From Benefits Accrued Retirement Registrant and
Registrant as Part of Fund Investment
Expenses Company Complex
Paid to Directors
Russell E. Burke None None None $9,000 from 6
III, Director Investment
Companies
9
<PAGE>
Bruce B. Huber, None None None $12,500 from 9
Director Investment
Companies
James E. Hunt, None None None $12,500 from 9
Director Investment
Companies
Frederick A. None None None $12,500 from 9
Parker, Director Investment
Companies
John B. Russell, None None None $12,500 from 9
Director Investment
Companies
</TABLE>
Information in the above table is based on fees paid during the Fund's
fiscal year ended October 31, 1996.
No officer, Director or employee of the Fund's Investment Manager receives
any compensation from the Fund for acting as an officer, Director or employee of
the Fund.
As of February 20, 1997, no person beneficially owned either directly or
through one or more controlled companies, more than 25% of the voting securities
of the Fund. As of the same date, the following persons owned of record and
beneficially, in amounts stated after their names, 5% or more of the Fund's
outstanding securities:
Name and Address Number of Shares Percentage
Pfendler Family 4,232.844 6.73%
Revocable Living Trust
2507 Harsh Avenue, S.E.
Massillon, OH 44646
As of February 20, 1997, the officers and directors of the Fund owned, as a
group, less than 2% of the outstanding voting securities of the Fund.
INVESTMENT MANAGER
The Investment Manager acts as general manager of the Fund, being
responsible for the various functions assumed by it, including the regular
furnishing of advice with respect to portfolio transactions. The Investment
Manager also furnishes or obtains on behalf of the Fund all services necessary
for the proper conduct of the Fund's business and administration. As
compensation for its services to the Fund, the Investment Manager is entitled to
a fee, payable monthly, based upon the Fund's average daily net assets. Under
the Fund's Investment Management Agreement, the Investment Manager receives a
fee at the annual rate of:
10
<PAGE>
1.00% of the first $200 million of the Fund's average daily net assets
.95% of average daily net assets over $200 million up to $400 million
.90% of average daily net assets over $400 million up to $600 million
.85% of average daily net assets over $600 million up to $800 million
.80% of average daily net assets over $800 million up to $1 billion
.75% of average daily net assets over $1 billion.
The percentage fee is calculated on the daily value of the Fund's net assets at
the close of each business day. The foregoing fees are higher than fees paid by
most other investment companies.
Under the Investment Management Agreement, the Fund assumes and shall pay
all the expenses required for the conduct of its business including, but not
limited to, (a) salaries of administrative and clerical personnel; (b) brokerage
commissions; (c) taxes and governmental fees; (d) costs of insurance and
fidelity bonds; (e) fees of the transfer agent, custodian, legal counsel and
auditors; (f) association fees; (g) costs of preparing, printing and mailing
proxy materials, reports and notices to shareholders; (h) costs of preparing,
printing and mailing the prospectus and statement of additional information and
supplements thereto; (i) payment of dividends and other distributions; (j) costs
of Board and shareholders meetings; (k) fees of the independent directors; (l)
necessary office space rental; (m) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
under applicable federal and state securities laws and maintaining such
registrations and qualifications; and (n) such non-recurring expenses as may
arise, including, without limitation, actions, suits or proceedings affecting
the Fund and the legal obligation which the Fund may have to indemnify its
officers and directors with respect thereto.
If requested by the Fund's Board of Directors, the Investment Manager may
provide other services to the Fund such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof.
The Fund's Investment Management Agreement continues from year to year only
if a majority of the Fund's directors (including a majority of disinterested
directors) or a majority of the holders of the Fund's outstanding voting
securities approve. The Investment Management Agreement may be terminated
without penalty at any time by vote of the Fund's directors or by vote of the
holders of a majority of the Fund's outstanding voting securities on 60 days'
written notice to the Investment Manager, or by the Investment Manager on 60
days' written notice to the Fund, and terminates automatically in the event of
its assignment. The Investment Management Agreement provides that the Investment
Manager shall not be liable to the Fund or any shareholder of the Fund for any
error of judgment or mistake of law or for any loss suffered by the Fund or the
Fund's shareholders in connection with the matters to which the Investment
Management Agreement relates. Nothing contained in the Investment Management
Agreement, however, shall be construed to protect the Investment Manager against
liability to the Fund by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under the Investment Management Agreement.
11
<PAGE>
The Investment Management Agreement provides that the Investment Manager
shall waive all or part of its fee or reimburse the Fund monthly if and to the
extent the Fund's aggregate operating expenses exceed the most restrictive limit
imposed by any state in which the Fund's shares are qualified for sale or such
lesser amount as may be agreed to by the Fund's Board of Directors and the
Investment Manager. Currently, the Fund is not subject to any such state-imposed
limitations. Certain expenses, such as brokerage commissions, taxes, interest,
distribution fees, certain expenses attributable to investing outside the United
States and extraordinary items, are excluded from this limitation.
The Investment Manager, a registered investment adviser, is a wholly-owned
subsidiary of Group. The other principal subsidiaries of Group include Investor
Service Center, Inc., a registered broker-dealer, Bull & Bear Advisers, Inc. and
Midas Management Corporation, registered investment advisers, and Bull & Bear
Securities, Inc., a registered broker-dealer providing discount brokerage
services.
Group is a publicly-owned company whose securities are listed on Nasdaq and
traded in the over-the-counter market. Bassett S. Winmill may be deemed a
controlling person of Group on the basis of his ownership of 100% of Group's
voting stock and, therefore, of the Investment Manager. The investment companies
in the Investment Company Complex, each of which is managed by an affiliate of
the Investment Manager, had net assets in excess of $400,000,000 as of February
21, 1997.
SUBADVISER AND SUBADVISORY AGREEMENT
The Investment Manager has entered into a subadvisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
such investments.
In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, pays to the Subadviser a percentage of the Investment Manager's
Net Fees. "Net Fees" are defined as the actual amounts received by the
Investment Manager as compensation less reimbursements, if any, pursuant to the
guaranty of the Investment Management Agreement and waivers of such compensation
by the Investment Manager. The amount of the percentage is determined by the
grid and accompanying definitions set forth as follows:
SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
<TABLE>
RELATIVE PERFORMANCEA
<S> <C> <C> <C>
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50 basis
points better than ATR points of ATR points below ATR
Less than or equal to $15,000,000 30% 20% 10%
Greater than $15,000,000 and 40% 30% 20%
Less than or equal to $50,000,000
Greater than $50,000,000 50% 40% 30%
- ----------------------------------- -------------------------------- -------------------------- ---------------------------
</TABLE>
A. "Relative Performance" shall be determined from comparing the Fund's total
return with the average total return ("ATR") of funds with the investment
objective of "growth" as compiled by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The Relative
Performance shall be determined as of the last calendar day of each month
("Performance Determination Date") and shall measure the Relative Performance
for the most recent 3 year period ("Measurement Period"), except that (A) for
the first 12 months of this Subadvisory Agreement, Relative Performance shall be
based upon annualized returns, the first three Performance Determination Dates
shall be the next three calendar quarter ends after the effective date of this
Subadvisory Agreement, and the Measurement Periods shall be the most recent
three months and the fourth Performance Determination Date shall be the next
calendar quarter end and the Measurement Period shall be the most recent 1 year
period, and (B) for the 13th through the 24th month of this Subadvisory
Agreement, Relative Performance shall be determined as of the last calendar day
of each month and shall measure the Relative Performance for the most recent 1
year period.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
Under the Subadvisory Agreement's fee structure, the Investment Manager
retains more of its fee (and therefore passes on a lower portion of its fee to
the Subadviser) when the Fund underperforms the ATR by more than 50 basis points
than when the Fund outperforms the ATR by more than 50 basis points.
The Subadvisory Agreement is not assignable and automatically terminates in
the event of its assignment, or in the event of the termination of the
Investment Management Agreement. The Subadvisory Agreement may also be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the Fund, by the Board of Directors or by a vote of Fund
shareholders. The Subadvisory Agreement provides that the Subadviser shall not
be liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which the
Subadvisory Agreement relates. Nothing contained in the Subadvisory Agreement,
however, shall be construed to protect the Subadviser against liability to the
Fund by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of obligations
and duties under the Subadvisory Agreement. The Subadviser is controlled by Ross
H. Farmer, who owns 79% of the Subadviser's outstanding stock, and who is a
controlling person of the Subadviser as the term is defined in the 1940 Act.
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CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation assumes all dividends and other distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory and
Rule 12b-1 fees, charged to all shareholder accounts.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED OCTOBER 31, 1996
Ten Years 9.46%
Five Years 16.45%
One Year 29.42%
CUMULATIVE TOTAL RETURN
Cumulative total return is calculated by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR=( ERV-P )100
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P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical $1,000
payment made at the beginning of such period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and other distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts.
The cumulative return for the Fund for the ten year, five year and one year
periods ending October 31, 1996 is 151.07%, 114.14%, and 29.42%, respectively.
SOURCE MATERIAL From time to time, in marketing pieces and other Fund
literature, the Fund's performance may be compared to the performance of broad
groups of comparable mutual funds or unmanaged indexes of comparable securities.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for Fund performance information may
include, but are not limited to, the following:
Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.
Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Bond Index (20 year), an index of municipal bonds provided
by a national periodical reporting on municipal securities.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
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Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.
Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.
IBC's Money Fund Report, a weekly publication of money market fund total net
assets, yield, and portfolio composition.
Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.
Investment Advisor, a monthly publication reviewing performance of mutual funds.
Investor's Business Daily, a nationally distributed newspaper which regularly
covers financial news.
Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.
Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.
Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.
Lehman Long Term Treasury Bond -- is composed of all bonds covered by the Lehman
Treasury Bond Index with maturities of 10 years or greater.
Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.
Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morningstar, Mutual Fund Values, publications of Morningstar, Inc., periodically
reviewing mutual funds industry-wide by means of various methods of analysis and
textual commentary.
Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.
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Nasdaq Industrial Index -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indexes, and
portfolio holdings.
Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded stocks in the U.S.
Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
Salomon Brothers Broad Investment-Grade Bond Index -- is a market-weighted index
that contains approximately 4,700 individually priced investment-grade corporate
bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass-through securities.
Salomon Brothers Market Performance tracks the Salomon Brothers bond index.
Standard & Poor's 500 Composite Stock Price Index -- is an index of 500
companies representing the U.S. stock market.
Standard & Poor's 100 Composite Stock Price Index -- is an index of 100
companies representing the U.S. stock market.
Standard & Poor's Preferred Index is an index of preferred securities.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.
USA Today, a national newspaper that periodically reports mutual fund
performance data.
U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.
The Wall Street Journal, a nationally distributed newspaper which regularly
covers financial news.
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The Wall Street Transcript, a periodical reporting on financial markets and
securities.
Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard & Poor's 500 Index.
Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bear
Stearns & Co., Inc., and Ibbotson Associates may be used, as well as information
provided by the Federal Reserve Board.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc.
("Distributor") acts as principal distributor of the Fund's shares. Under the
Distribution Agreement, the Distributor shall use its best efforts, consistent
with its other businesses, to sell shares of the Fund. Fund shares are sold
continuously. Pursuant to a Plan of Distribution ("Plan") adopted pursuant to
Rule 12b-1 under the 1940 Act, the Fund pays the Distributor monthly a fee in
the amount of one-quarter of one percent per annum of the Fund's average daily
net assets as compensation for its distribution and service activities.
In performing distribution and service activities pursuant to the Plan, the
Distributor may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor and allocated by the Distributor to its efforts to distribute shares
of the Fund or service shareholder accounts such as office rent and equipment,
employee salaries, employee bonuses and other overhead expenses.
Among other things, the Plan provides that (1) the Distributor will submit
to the Fund's Board of Directors at least quarterly, and the Directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment or
agreement related thereto is approved, by the Fund's Board of Directors,
including those Directors who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related to the Plan ("Plan Directors"), acting in person at a
meeting called for that purpose, unless terminated by vote of a majority of the
Plan Directors, or by vote of a majority of the outstanding voting securities of
the Fund, (3) payments by the Fund under the Plan shall not be materially
increased without the affirmative vote of the holders of a majority of the
outstanding voting securities of the Fund and (4) while the Plan remains in
effect, the selection and nomination of Directors
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<PAGE>
who are not "interested persons" of the Fund shall be committed to the
discretion of the Directors who are not interested persons of the Fund.
With the approval of the vote of a majority of the entire Board of Directors
and of the Plan Directors of the Fund, the Distributor has entered into a
related agreement with Hanover Direct Advertising Company, Inc. ("Hanover
Direct"), a wholly-owned subsidiary of Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
services to the Distributor on behalf of the Fund at standard industry rates,
which includes commissions. The amount of Hanover Direct's commissions over its
cost of providing Fund marketing will be credited to the Fund's distribution
expenses and represent a saving on marketing, to the benefit of the Fund. To the
extent Hanover Direct's costs exceed such commissions, Hanover Direct will
absorb any of such costs.
It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. The offsetting of
redemptions through sales efforts benefits shareholders by maintaining the
viability of a fund. In periods where net sales are achieved, additional
benefits may accrue relative to portfolio management and increased shareholder
servicing capability. Increased assets enable the Fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. In addition, increased assets enable the establishment and
maintenance of a better shareholder servicing staff which can respond more
effectively and promptly to shareholder inquiries and needs. While net increases
in total assets are desirable, the primary goal of the Plan is to prevent a
decline in assets serious enough to cause disruption of portfolio management and
to impair the Fund's ability to maintain a high level of quality shareholder
services.
The Plan increases the overall expense ratio of the Fund; however, a
substantial increase in Fund assets would be expected to reduce the portion of
the expense ratio comprised of management fees (reflecting a larger portion of
the assets falling within fee scale-down levels), as well as of fixed costs.
Nevertheless, the net effect of the Plan is to increase overall expenses. To the
extent the Plan maintains a flow of subscriptions to the Fund, there results an
immediate and direct benefit to the Investment Manager by maintaining or
increasing its fee revenue base, diminishing the obligation, if any, of the
Investment Manager to make an expense reimbursement to the Fund, and eliminating
or reducing any contribution made by the Investment Manager to marketing
expenses. Other than as described herein, no Director or interested person of
the Fund has any direct or indirect financial interest in the operation of the
Plan or any related agreement.
The Glass-Steagall Act prohibits certain banks from engaging in the business
of underwriting, selling, or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being paid for administrative and accounting services under the Plan.
If, because of changes in law or regulation, or because of new interpretations
of existing law, a bank or the Fund were prevented from continuing these
arrangements, it is expected that other arrangements for these services will be
made. In addition, state securities laws on this issue may differ from the
interpretations of Federal law
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expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading for equity securities on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. eastern time) each business day of the Fund. The following
are not Fund business days: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Securities owned by the Fund are valued by various methods depending on the
market or exchange on which they trade. Securities traded on the NYSE, the
American Stock Exchange and the Nasdaq National Market System are valued at the
last sales price, or if no sale has occurred, at the mean between the current
bid and asked prices. Securities traded on other exchanges are valued as nearly
as possible in the same manner. Securities traded only OTC are valued at the
mean between the last available bid and ask quotations, if available, or at
their fair value as determined in good faith by or under the general supervision
of the Board of Directors. Short term securities are valued either at amortized
cost or at original cost plus accrued interest, both of which approximate
current value.
Price quotations generally are furnished by pricing services, which may also
use a matrix system to determine valuations. This system considers such factors
as security prices, yields, maturities, call features, ratings, and developments
relating to specific securities in arriving at valuations.
PURCHASE OF SHARES
The Fund will only issue shares upon payment of the purchase price by check
made drawn to the Fund's order in U.S. dollars on a U.S. bank, or by Federal
Reserve wire transfer. Third party checks, credit cards, and cash will not be
accepted. The Fund reserves the right to reject any order, to cancel any order
due to nonpayment, to accept initial orders by telephone or telegram, and to
waive the limit on subsequent orders by telephone, with respect to any person or
class of persons. Orders to purchase shares are not binding on the Fund until
they are confirmed by the Fund's transfer agent. If an order is canceled because
of non-payment or because the purchaser's check does not clear, the purchaser
will be responsible for any loss the Fund incurs. If the purchaser is already a
shareholder, the Fund can redeem shares from the purchaser's account to
reimburse the Fund for any loss. In addition, the purchaser may be prohibited or
restricted from placing future purchase orders in the Fund or any of the other
Funds in the Investment Company Complex. In order to permit the Fund's
shareholder base to expand, to avoid certain shareholder hardships, to correct
transactional errors, and to address similar exceptional situations, the Fund
may waive or lower the investment minimums with respect to any person or class
of persons.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. Transactions are directed to brokers and dealers qualified to
execute orders or provide research, statistical or other services, and who may
sell shares of the Fund or other affiliated investment companies. The Investment
Manager may also allocate portfolio transactions to broker/dealers that remit a
portion of their commissions as a credit against the Custodian's charges. No
formula exists and no arrangement is
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made with or promised to any broker/dealer which commits either a stated volume
or percentage of brokerage business based on research, statistical or other
services furnished to the Investment Manager or upon sale of Fund shares. Fund
transactions in debt and over-the-counter securities generally are with dealers
acting as principals at net prices with little or no brokerage costs. In certain
circumstances, however, the Fund may engage a broker as agent for a commission
to effect transactions for such securities. Purchases of securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid and
asked price. While the Investment Manager generally seeks competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available.
The Investment Manager directs portfolio transactions to broker/dealers for
execution on terms and at rates which it believes, in good faith, to be
reasonable in view of the overall nature and quality of services provided by a
particular broker/dealer, including brokerage and research services, sales of
Fund shares, and allocation of commissions to the Fund's Custodian. With respect
to brokerage and research services, consideration may be given in the selection
of broker/dealers to brokerage or research provided and payment may be made for
a fee higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act"), or other applicable
law are met. Section 28(e) of the 1934 Act specifies that a person with
investment discretion shall not be "deemed to have acted unlawfully or to have
breached a fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest available under certain circumstances.
To obtain the benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided ... viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion." Thus, although the Investment Manager may direct
portfolio transactions without necessarily obtaining the lowest price at which
such broker/dealer, or another, may be willing to do business, the Investment
Manager seeks the best value to the Fund on each trade that circumstances in the
market place permit, including the value inherent in on-going relationships with
quality brokers.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for brokerage or research services might exceed
commissions that would be payable for execution alone, nor generally can the
value of such services to the Fund be measured, except to the extent such
services have a readily ascertainable market value. There is no certainty that
services so purchased, or the sale of Fund shares, if any, will be beneficial to
the Fund. Such services being largely intangible, no dollar amount can be
attributed to benefits realized by the Fund or to collateral benefits, if any,
conferred on affiliated entities. These services may include "brokerage and
research services" as defined in Section 28(e)(3) of the 1934 Act, which
presently include (1) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities and the
availability of securities or purchasers or sellers of securities, (2)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts, and (3) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody). Pursuant to
arrangements with certain broker/dealers, such
21
<PAGE>
broker/dealers provide and pay for various computer hardware, software and
services, market pricing information, investment subscriptions and memberships,
and other third party and internal research of assistance to the Investment
Manager in the performance of its investment decision-making responsibilities
for transactions effected by such broker/dealers for the Fund. Commission "soft
dollars" may be used only for "brokerage and research services" provided
directly or indirectly by the bro ker/dealer and under no circumstances will
cash payments be made by such broker/dealers to the Investment Manager. To the
extent that commission "soft dollars" do not result in the provision of any
"brokerage and research services" by a broker/dealer to whom such commissions
are paid, the commissions, nevertheless, are the property of such broker/dealer.
To the extent any such services are utilized by the Investment Manager for other
than the performance of its investment decision-making responsibilities, the
Investment Manager makes an appropriate allocation of the cost of such services
according to their use.
Bull & Bear Securities, Inc. ("BBSI"), a wholly owned subsidiary of Group
and the Investment Manager's affiliate, provides discount brokerage services to
the public as an introducing broker clearing through unaffiliated firms on a
fully disclosed basis. The Investment Manager is authorized to place Fund
brokerage through BBSI at its posted discount rates and indirectly through a
BBSI clearing firm. The Fund will not deal with BBSI in any transaction in which
BBSI acts as principal. The clearing firm will execute trades in accordance with
the fully disclosed clearing agreement between BBSI and the clearing firm. BBSI
will be financially responsible to the clearing firm for all trades of the Fund
until complete payment has been received by the Fund or the clearing firm. BBSI
will provide order entry services or order entry facilities to the Investment
Manager, arrange for execution and clearing of portfolio transactions through
executing and clearing brokers, monitor trades and settlements and perform
limited back-office functions including the maintenance of all records required
of it by the National Association of Securities Dealers, Inc.
In order for BBSI to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by BBSI must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. The Fund's Board of Directors has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid to
BBSI are reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than some
other discount brokers and certain brokers may be willing to do business at a
lower commission rate on certain trades. The Board has determined that portfolio
transactions may be executed through BBSI if, in the judgment of the Investment
Manager, the use of BBSI is likely to result in price and execution at least as
favorable as those of other qualified broker/dealers and if, in particular
transactions, BBSI charges the Fund a rate consistent with that charged to
comparable unaffiliated customers in similar transactions. Brokerage
transactions with BBSI are also subject to such fiduciary standards as may be
imposed by applicable law. The Investment Manager's fees under its agreement
with the Fund are not reduced by reason of any brokerage commissions paid to
BBSI.
Brokerage commissions paid in fiscal years ended October 31, 1994, 1995 and
1996 were $2,902.15, $7,349.79, and $9,410.74 respectively. $9,288 of such
commissions paid during the fiscal year ended
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<PAGE>
October 31, 1996 (representing approximately $1,008,621 in portfolio
transactions) was allocated to broker/dealers that provided research services.
No transactions were directed to broker/dealers during such periods for selling
shares of the Fund or any affiliated funds. During the Fund's fiscal years ended
October 31, 1994, and 1995, the Fund paid no brokerage commissions to BBSI, and
in 1996, the Fund paid $122, which represented approximately 1.30% of total
brokerage commissions paid by the Fund and 1.13% of the aggregate dollar amount
of transactions involving the payment of commissions.
Investment decisions for the Fund and for the other Funds managed by the
Investment Manager or its affiliates are made independently based on each Fund's
investment objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the Investment
Manager may combine orders for two or more Funds for a particular security if it
appears that a combined order would reduce brokerage commissions and/or result
in a more favorable transaction price. Combined purchase or sale orders are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each Fund. While in some cases this practice could have a
detrimental effect upon the price or quantity available of the security with
respect to the Fund, the Investment Manager believes that the larger volume of
combined orders can generally result in better execution and prices.
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Fund does business with may, from
time to time, own more than 5% of the publicly traded Class A non-voting Common
Stock of Group, the parent of the Investment Manager, and may provide clearing
services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and will not
be a limiting factor when the Investment Manager deems portfolio changes
appropriate. The portfolio turnover rate is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities in the
portfolio during the year. For the fiscal years ended October 31, 1996 and 1995,
the Fund's portfolio turnover rate was 42.48% and 30.04%, respectively. A higher
portfolio turnover rate involves correspondingly greater transaction costs and
increases the potential for short-term capital gains and taxes.
From time to time, certain brokers may be paid a fee for record keeping,
shareholder communications and other services provided by them to investors
purchasing shares of the Fund through the "no transaction fee" programs offered
by such brokers. This fee is based on the value of the investments in the Fund
made by such brokers on behalf of investors participating in their "no
transaction fee" programs. The Fund's Directors have further authorized the
Investment Manager to place a portion of the Fund's brokerage transactions with
any such brokers, if the Investment Manager reasonably believes that, in
effecting the Fund's transactions in portfolio securities, such broker or
brokers are able to provide the best execution of orders at the most favorable
prices. Commissions earned by such brokers from executing portfolio transactions
on behalf of the Fund may be credited by them against the fee they charge the
Fund, on a basis which has resulted from negotiations between the Investment
Manager and such brokers.
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DISTRIBUTIONS AND TAXES
If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional Fund shares at the then
current net asset value in lieu of the cash payment and to thereafter issue such
shareholder's distributions in additional Fund shares.
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for that treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions
("Distribution Requirement")) and must meet several additional requirements.
Among these requirements are the following: (1) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months - options, futures, or forward contracts (other than
those on foreign currencies), or foreign currencies (or options, futures, or
forward contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect
thereto) ("Short-Short Limitation"); and (3) the Fund's investments must satisfy
certain diversification requirements. In any year during which the applicable
provisions of the Code are satisfied, the Fund will not be liable for Federal
income tax on net income and gains that are distributed to its shareholders. If
for any taxable year the Fund does not qualify for treatment as a RIC, all of
its taxable income would be taxed at corporate rates.
A portion of the dividends from the Fund's investment company taxable income
(whether paid in cash or in additional Fund shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
A loss on the sale of Fund shares that were held for six months or less will
be treated as a long term (rather than a short term) capital loss to the extent
the shareholder received any capital gain distributions attributable to those
shares.
Dividends and other distributions may also be subject to state and local
taxes.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year an amount
equal to the sum of (1) 98% of its ordinary income, (2) 98% of its capital gain
net income (determined on an October 31 fiscal year basis), plus (3) general ly,
all income and gain not distributed or subject to corporate tax in the prior
calendar year. The Fund intends to avoid imposition of this excise tax by making
adequate distributions.
24
<PAGE>
The foregoing discussion of Federal tax consequences is based on the tax law
in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial, or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.
REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets of the Fund. The Fund's fiscal
year ends on October 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, Box 2197, Boston, MA 02111 ("Custodian") has
been retained by the Fund to act as Custodian of the Fund's investments and may
appoint one or more subcustodians. The Custodian also performs certain
accounting services for the Fund. As part of its agreement with the Fund, the
Custodian may apply credits or charges for its services to the Fund for,
respectively, positive or deficit cash balances maintained by the Fund with the
Custodian. DST Systems, Inc., Box 419789, Kansas City, Missouri 64141-6789, is
the Fund's Transfer and Dividend Disbursing Agent. The Distributor provides
certain shareholder administration services to the Fund and is reimbursed by the
Fund the actual costs incurred with respect thereto. Among other such services,
the Distributor currently receives and responds to shareholder inquiries
concerning their accounts and processes shareholder telephone requests such as
telephone transfers, purchases and redemptions, changes of address and similar
matters.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19102-1707, are the independent accountants for the Fund. Financial statements
of the Fund are audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended October 31, 1996,
together with the Report of the Fund's independent accountants thereon, appear
in the Fund's Annual Report to Shareholders and are incorporated herein by
reference.
25
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a)Financial Statements to be included in Part A of this Registration Statement:
Financial Highlights
Financial Statements to be included in Part B of this Registration
Statement:
The financial statements contained in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1996, filed with the
Securities and Exchange Commission on December 31, 1996, are
incorporated into Part B by reference, except that the letter to
shareholders and other information contained on pages one, two and
three of said Annual Report is not so incorporated by reference and is
not part of this Registration Statement.
(b) Exhibits:
(1) Charter as now in effect: Filed with the Securities and Exchange Commission
on February 26, 1997.
(2) By-Laws as now in effect: Filed with the Securities and Exchange Commission
on February 26, 1997.
(3) Copy of Voting Trust Agreement: Not Applicable.
(4) Specimens or copies of each security of the Registrant, including
copies of all constituent instruments, defining the rights of the
holders of such securities, and copies of each security being
registered: A specimen security is contained in the Fund's registration
statement dated April 30, 1986 and incorporated herein by reference.
(5) (a) Investment Management Agreement, filed with the Securities and Exchange
Commission on February 26, 1997.
(b) Subadvisory Agreement, filed with the Securities and Exchange Commission on
February 26, 1997.
(6) Distribution Agreement, filed with the Securities and Exchange
Commission on February 26, 1997.
(7) Not applicable.
(8) (a) Form of Custodian Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(b) Form of Service and Agency Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
Part C, P. 1
<PAGE>
(c) Form of Custodial Account and IRA Disclosure
Statement, filed with the Securities and Exchange
Commission on August 16, 1996.
(d) Form of IRA Agreement, filed with the Securities and Exchange Commission on
August 16, 1996.
(9) (a) A copy of the Registrant's Agency Agreement is contained
in the Fund's registration statement dated April 30, 1986 and
incorporated herein by reference.
(b) A facsimile of the Registrant's Share Purchase Application is contained in
Post-Effective Amendment No. 15 and incorporated herein by reference.
(c) A copy of the Registrant's Pre-Authorized Check Plan is contained in
Post-Effective Amendment No. 7 and incorporated herein by reference.
(d) Form of Transfer Agency Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(e) Form of Agency Agreement, filed with the Securities and Exchange Commission
on August 16, 1996.
(f) Shareholder Administration Agreement, filed with the Securities and
Exchange Commission on February 26, 1997.
(g) Form of Credit Agreement, filed with the Securities and Exchange Commission
on August 16, 1996.
(10) Opinion and Consent of Counsel as to Legality of Securities: A
copy of the opinion and consent of the Fund's Counsel is
contained in the Fund's registration statement dated April 30,
1986 and incorporated herein by reference.
(11) Other opinions, appraisals, rulings and consents - Accountants' consent.
Filed herewith.
(12) Not Applicable.
(13) Not Applicable.
(14) (a) Standardized Profit Sharing Adoption Agreement, filed with
the Securities and Exchange Commission on August 16, 1996.
(b) Defined Contribution Basic Plan Document, filed with the Securities and
Exchange Commission on August 16, 1996.
(c) Standardized Money Purchase Adoption Agreement, filed with the Securities
and Exchange Commission on August 16, 1996.
(d) Simplified Profit Sharing Adoption Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
Part C, P. 2
<PAGE>
(e) Simplified Money Purchase Adoption Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
(15) (a) Plan of Distribution, filed with the Securities and Exchange Commission
on February 26, 1997.
(b) Related Agreement to Plan of Distribution between Investor Service Center,
Inc. and Hanover Direct Advertising Company, Inc., filed with the
Securities and Exchange Commission on February 26, 1997.
(16) Schedule for Computation of Performance Quotations, filed with
the Securities and Exchange Commission on August 16, 1996.
(17) Financial Data Schedule (filed herewith)
(18) Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable.
ITEM 26. NUMBER OF RECORD HOLDERS OF SECURITIES AS OF FEBRUARY 21, 1997
TITLE OF CLASS NUMBER OF RECORD HOLDERS
$.01 par value 2,032
common stock
ITEM 27. INDEMNIFICATION
Registrant's Investment Management Agreement between the Registrant and
Rockwood Advisers, Inc. ("Investment Manager") provides that the Investment
Manager shall not be liable to the Registrant or any shareholder of the
Registrant for any error of judgment or mistake of law or for any loss suffered
by the Registrant in connection with the matters to which the Investment
Management Agreement relates. However, the Investment Manager is not protected
against any liability to the Registrant by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under the Investment Management
Agreement.
Section 9 of the Distribution Agreement between the Registrant and Investor
Service Center, Inc. ("Service Center") provides that the Registrant will
indemnify Service Center and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Service Center to the Registrant for use in the Registration
Statement; and provided that this indemnity
Part C, P. 3
<PAGE>
agreement shall not protect any such persons against liabilities arising by
reason of their bad faith, gross negligence or willful misfeasance; and shall
not inure to the benefit of any such persons unless a court of competent
jurisdiction or controlling precedent determines that such result is not against
public policy as expressed in the Securities Act of 1933. Section 9 of the
Distribution Agreement also provides that Service Center agrees to indemnify,
defend and hold the Registrant, its officers and Directors free and harmless of
any claims arising out of any alleged untrue statement or any alleged omission
of material fact contained in information furnished by Service Center for use in
the Registration Statement or arising out of any agreement between Service
Center and any retail dealer, or arising out of supplementary literature or
advertising used by Service Center in connection with the Distribution
Agreement.
The Registrant undertakes to carry out all indemnification provisions of its
Articles of Incorporation and By-Laws and the above-described contract in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser is
described in the section of the Statement of Additional Information entitled
"Investment Manager" filed as part of this Registration Statement.
The directors and officers of the Investment Manager are also directors and
officers of other Funds managed by Bull & Bear Advisers, Inc. and Midas
Management Corporation, both of which are wholly-owned subsidiaries of Bull &
Bear Group, Inc. ("Funds"). In addition, such officers are officers and
directors of Bull & Bear Group, Inc. and its other subsidiaries; Service Center,
the distributor of the Registrant and the Funds and a registered broker/dealer,
and Bull & Bear Securities, Inc., a discount brokerage firm. Bull & Bear Group,
Inc.'s predecessor was organized in 1976. In 1978, it acquired control of and
subsequently merged with Investors Counsel, Inc., a registered investment
adviser organized in 1959. The principal business of both companies since their
founding has been to serve as investment manager to registered investment
companies. Bull & Bear Advisers, Inc. serves as investment manager of Bull &
Bear Dollar Reserves, a series of shares issued by Bull & Bear Funds
Part C, P. 4
<PAGE>
II, Inc.; Bull & Bear U.S. Government Securities Fund, Inc., Bull & Bear Global
Income Fund, Inc.; Bull & Bear Municipal Income Fund, Inc.; Bull & Bear Gold
Investors Ltd.; Bull & Bear U.S. and Overseas Fund, a series of Bull & Bear
Funds I, Inc.; and Bull & Bear Special Equities Fund, Inc. Midas Management
Corporation serves as investment manager of Midas Fund, Inc.
Item 29. Principal Underwriters
a) In addition to the Registrant, Service Center serves as principal
underwriter of Bull & Bear Funds II, Inc., Bull & Bear Special Equities Fund,
Inc., Bull & Bear Funds I, Inc., Bull & Bear Gold Investors Ltd., and Midas
Fund, Inc.
b) Service Center serves as the Registrant's principal underwriter. The
directors and officers of Service Center, their principal business addresses,
their positions and offices with Service Center and their positions and offices
with the Registrant (if any) are set forth below.
<TABLE>
Name and Principal Position and Offices
Business Address Position and Offices with with Registrant
Service Center
- ----------------------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Robert D. Anderson Vice Chairman and Director N/A
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Mark C. Winmill Chairman, Director and Chief Co-President and Co-Chief
11 Hanover Square Financial Officer Executive Officer
New York, NY 10005
Thomas B. Winmill President, Director, General Co-President, Director, and
11 Hanover Square Counsel Co-Chief Executive Officer
New York, NY 10005
Kathleen B. Fliegauf Vice President and Assistant None
11 Hanover Square Treasurer
New York, NY 10005
William J. Maynard Vice President, Secretary, Vice President, Secretary,
11 Hanover Square Compliance Officer Compliance Officer
New York, NY 10005
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
Joseph Leung Treasurer, Chief Accounting Treasurer, Chief Accounting
11 Hanover Square Officer Officer
New York, NY 10005
Part C, P. 5
<PAGE>
Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005
H. Matthew Kelly Vice President None
11 Hanover Square
New York, NY 10005
</TABLE>
Item 30. Location of Accounts and Records
The minute books of the Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and its Investment Manager). All other records required by Section
31(a) of the Investment Company Act of 1940 are located at Investors Bank &
Trust Company, 89 South Street, Boston, MA 02111 (the offices of Registrant's
custodian) and DST Systems, Inc., 1055 Broadway, Kansas City, MO 64105-1594 (the
offices of the Registrant's Transfer and Dividend Disbursing Agent). Copies of
certain of the records located at Investors Bank & Trust Company & DST Systems,
Inc. are kept at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and the Investment Manager).
ITEM 31. MANAGEMENT SERVICES
There are no management related service contracts not discussed in Part A
or Part B of this Registration Statement.
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's annual report to shareholders upon
request and without charge.
Part C, P. 6
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City, County and State of New York on this 26th day of
February, 1997.
ROCKWOOD FUND, INC.
By: /s/ THOMAS B. WINMILL
----------------------------------------
Thomas B. Winmill, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<S> <C> <C>
Mark C. Winmill Director, Co-President and Co-Chief February 26, 1997
- ---------------
Mark C. Winmill Executive Officer
Thomas B. Winmill Director, Co-President and Co-Chief February 26, 1997
- -----------------
Thomas B. Winmill Executive Officer
Bassett S. Winmill Director, Chairman of the February 26, 1997
- ------------------
Bassett S. Winmill Board of Directors
Joseph Leung Treasurer, Principal February 26, 1997
Joseph Leung Accounting Officer
Robert D. Anderson Director, Vice Chairman February 26, 1997
- ------------------
Robert D. Anderson
Bruce B. Huber Director February 26, 1997
Bruce B. Huber
James E. Hunt Director February 26, 1997
James E. Hunt
Frederick A. Parker, Jr. Director February 26, 1997
- ------------------------
Frederick A. Parker, Jr.
John B. Russell Director February 26, 1997
John B. Russell
Russell E. Burke III Director February 26, 1997
- --------------------
Russell E. Burke III
</TABLE>
Part C, P. 7
<PAGE>
Exhibit Index
Exhibit
(1) Charter
(2) By-Laws
(5)(a) Investment Management Agreement
(5)(b) Subadvisory Agreement
(6) Distribution Agreement
(9)(f) Shareholder Administration Agreement
(11) Accountant's Consent
(15)(a) Plan of Distribution
(15)(b) Related Agreement to Plan of Distribution between Investor Service
Center, Inc. and Hanover Direct Advertising Company, Inc.
(17) Financial Data Schedule
Part C, P. 8
<PAGE>
ARTICLES OF INCORPORATION
OF
ROCKWOOD FUND, INC.
FIRST: (1) The name and address of the incorporator of the Corporation is
as follows:
R. Darrell Mounts
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036
(2) Said incorporator is over eighteen years of age.
(3) Said incorporator is forming a corporation under the general laws of
the State of Maryland.
SECOND: The name of the Corporation is:
ROCKWOOD FUND, INC.
THIRD: (1) The Corporation is formed for the following purpose or purposes:
(a) To conduct, operate and carry on the business of an open-end management
investment company registered as such with the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940, as amended; and
(b) To exercise and enjoy all powers, rights and privileges granted to and
conferred upon corporations by the Maryland General Corporation Law, now or
hereafter in force.
(2) The foregoing clauses shall be construed as powers as well as objects
and purposes.
FOURTH: The address of the principal office of the Corporation within
the State of Maryland is 11 East Chase Street, Baltimore, Maryland 21202, and
the resident agent of the Corporation in the State of Maryland at this address
is Prentice-Hall Corporation System.
FIFTH: (1) The total number of shares of capital stock which the
Corporation has authority to issue is one billion (1,000,000,000) ($.01) par
value per share ("Shares"), having an aggregate par value of $10,000,000.
The Board of Directors of the Corporation shall have full power and
authority to create and establish and to classify or to reclassify, as the case
- 1 -
DC-196619.1
<PAGE>
may be, any Shares of the Corporation in separate and distinct series ("Series")
and classes of Series ("Classes"). The Shares of said Series or Classes of stock
shall have such preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption as shall be
fixed and determined from time to time by the Board of Directors. The
establishment of any Series or Class shall be effective upon the adoption of a
resolution by the Board of Directors setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Directors may abolish
that Series or Class and the establishment and designation thereof.
The Board of Directors is hereby expressly granted authority to
increase or decrease the number of Shares of any Series or Class, but the number
of Shares of any Series or Class shall not be decreased by the Board of
Directors below the number of Shares thereof then outstanding, and, from time to
time to designate or redesignate the name of any Class or Series whether or not
Shares of such Class or Series are outstanding. The Corporation may hold as
treasury shares, reissue for such consideration and on such terms as the Board
of Directors may determine, or cancel, at their discretion from time to time,
any Shares reacquired by the Corporation. No holder of any of the Shares shall
be entitled as of right to subscribe for, purchase, or otherwise acquire any
Shares of the Corporation which the Corporation proposes to issue or reissue.
The Corporation shall have authority to issue any additional Shares
hereafter authorized by resolution of the Board of Directors and any Shares
redeemed or repurchased by the Corporation. All Shares of any Series or Class
when properly issued in accordance with these Articles of Incorporation shall be
fully paid and nonassessable.
(2) The Board of Directors is hereby authorized to issue and sell from time
to time Shares of the Corporation for cash or securities or other property as
the Board of Directors may deem advisable in the manner and to the extent now or
hereafter permitted by the laws of the State of Maryland; provided, however,
that the consideration per share (exclusive of any selling commission) to be
received by the Corporation upon the issuance or sale of any Shares of its
capital stock shall not be less than the par value per share and shall not be
less than the net asset value per share of such capital stock determined as
hereinafter provided. No such Shares, whether now or hereafter authorized, shall
be required to be first offered to the then existing stockholders and no
stockholder shall have any preemptive right to purchase or subscribe to any
unissued shares of the Corporation's capital stock or for any additional shares
whether now or hereafter authorized. (3) At all meetings of stockholders, each
holder of Shares shall
be entitled to one vote for each Share standing in the holder's name on the
books of the Corporation on the date fixed in accordance with the By-Laws for
determination of stockholders entitled to vote thereat; provided, however, that
when required by the Investment Company Act of 1940 or rules thereunder or when
the Board of Directors has determined that the matter affects only the interest
- 2 -
<PAGE>
of one Series or Class, matters may be submitted to a vote of the holders of
Shares of a particular Series or Class, and each holder of Shares thereof shall
be entitled to votes equal to the Shares of the Series or Class standing in the
holder's name on the books of the Corporation. The presence in person or by
proxy of the holders of one-third (1/3) of the Shares outstanding and entitled
to vote shall constitute a quorum at any meeting of the stockholders except
where a matter is to be voted on by a Series or Class, one-third of the Shares
of that Series or Class outstanding and entitled to vote shall constitute a
quorum for the transaction of business by that Series or Class.
(4) Each holder of Shares shall be entitled at such times as may be
permitted by the Corporation to require the Corporation to redeem any or all of
the holder's Shares at a redemption price per share equal to the net asset value
per share less such charges as are determined by the Board of Directors, at such
time as the Board of Directors shall have prescribed by resolution. The Board of
Directors may specify conditions, prices, places and manner and form of payment
of redemption, and may specify requirements for the proper form or forms of
requests for redemption. The Board of Directors may postpone payment of the
redemption price and may suspend the right of the holders of Shares to require
the Corporation to redeem Shares during any period or at any time when and to
the extent permissible under the Investment Company Act of 1940.
(5) The Board of Directors may cause the Corporation to redeem at current
net asset value all Shares owned or held by any one stockholder having an
aggregate current net asset value of any amount. Such redemptions shall be
effected in accordance with such procedures as the Board of Directors may adopt.
Upon redemption of Shares pursuant to this Section, the Corporation shall
promptly cause payment of the full redemption price to be made to the holder of
Shares so redeemed. (6) Dividends and distributions on Shares may be declared,
calculated and paid with such frequency and in such form, manner and amount as
the Board of Directors may from time to time determine.
(7) Net asset value, as used herein, shall be determined on such days and
at such times and by such methods as the Board of Directors shall determine,
subject to the Investment Company Act of 1940 and the applicable rules and
regulations promulgated thereunder. Such determination may be made on a
Series-by-Series basis or made or adjusted on a Class-by-Class basis, as
appropriate. SIXTH: Notwithstanding any provision of law requiring a greater
proportion than a majority of the votes of all Shares of the Corporation to take
or authorize any action, any action (including amendment of these Articles of
Incorporation) may be taken or authorized by the Corporation upon the
affirmative vote of a majority of the Shares entitled to vote thereon.
SEVENTH: (1) To the maximum extent permitted by applicable law (including
Maryland law and the Investment Company Act of 1940) as currently in effect or
as may hereafter be amended:
- 3 -
<PAGE>
(a) No director or officer of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages; and
(b) The Corporation shall indemnify and advance expenses as provided in the
By-Laws to its present and past directors, officers, employees and agents, and
persons who are serving or have served at the request of the Corporation as a
director, officer, employee or agent in similar capacities for other entities.
(2) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
(3) Any repeal or modification of this Article SEVENTH, by the stockholders
of the Corporation, or adoption or modification of any other provision of the
Articles of Incorporation or By-Laws inconsistent with this Section, shall be
prospective only, to the extent that such repeal or modification would, if
applied retrospectively, adversely affect any limitation on the liability of any
director or officer of the Corporation or indemnification available to any
person covered by these provisions with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
EIGHTH: (1) All corporate powers and authority of the Corporation shall
be vested in and exercised by the Board of Directors except as otherwise
provided by statute, these Articles, or the By-Laws of the Corporation. The
Corporation shall have at least three directors; provided that if there is no
stock outstanding, the number of directors may be less than three but not less
than one. The number of directors shall never be less than the number prescribed
by the General Corporation Law of the State of Maryland.
(2) Thomas B. Winmill shall act as sole director of the Corporation until
the first annual meeting or until his successor is duly chosen and qualified.
(3) Subject to the provisions of these Articles of Incorporation and the
provisions of the Investment Company Act of 1940, any director, officer or
employee, individually, or any partnership of which any director, officer or
employee may be a member, or any corporation or association of which any
director, officer or employee of this Corporation may be an officer, director,
trustee, employee or stockholder may be a party to or may be pecuniarily
interested in any contract or transaction of the Corporation, and in the absence
of fraud, no contract or other transaction shall be thereby affected or
invalidated, provided that the facts shall be disclosed or shall have been known
to the Board of Directors or a majority thereof and any director of the
Corporation who is so interested or who is also a director, officer, trustee,
- 4 -
<PAGE>
employee or stockholder of such corporation or association or a member of such
partnership which is so interested may be counted in determining the existence
of a quorum at any meeting of the Directors of the Corporation which shall
authorize any such contract or transaction and may vote thereat on any such
contract or transaction with like force and effect as if he were not such
director, officer, trustee, employee or stockholder of such corporation or
association so interested or not a member of a partnership so interested, or so
interested individually.
IN WITNESS WHEREOF, the undersigned has adopted and signed these
Articles of Incorporation on this 11th day of December, 1996 and hereby
acknowledges the same to be his act and that to the best of his knowledge,
information and belief, all matters and facts stated herein are true in all
material respects and that he is making this statement under the penalties of
perjury.
/s/ R. Darrell Mounts
R. Darrell Mounts
- 5 -
<PAGE>
BY-LAWS
OF
ROCKWOOD FUND, INC.
A MARYLAND CORPORATION
DECEMBER 12, 1996
<PAGE>
BY-LAWS
TABLE OF CONTENTS
ARTICLE I - NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL........... 1
Section 1.01. Name............................................ 1
Section 1.02. Principal Offices............................... 1
Section 1.03. Seal............................................ 1
ARTICLE II - STOCKHOLDERS............................................... 1
Section 2.01. Annual Meetings................................. 1
Section 2.02. Special Meetings................................ 1
Section 2.03. Notice of Meetings.............................. 1
Section 2.04. Quorum and Adjournment of Meetings.............. 1
Section 2.05. Voting and Inspectors........................... 1
Section 2.06. Validity of Proxies............................. 2
Section 2.07. Stock Ledger and List of Stockholders........... 2
Section 2.08. Action Without Meeting.......................... 2
ARTICLE III - BOARD OF DIRECTORS........................................ 2
Section 3.01. General Powers.................................. 2
Section 3.02. Power to Issue and Sell Stock................... 2
Section 3.03. Power to Declare Dividends...................... 2
Section 3.04. Number and Term of Directors.................... 3
Section 3.05. Vacancies and Newly Created Directorships....... 3
Section 3.06. Removal......................................... 3
Section 3.07. Regular Meetings................................ 3
Section 3.08. Special Meetings................................ 3
Section 3.09. Waiver of Notice................................ 3
Section 3.10. Quorum and Voting............................... 3
Section 3.11. Action Without a Meeting........................ 4
Section 3.12. Compensation of Directors....................... 4
ARTICLE IV - COMMITTEES................................................. 4
Section 4.01. Organization.................................... 4
Section 4.02. Powers of the Executive Committee............... 4
Section 4.03. Powers of Other Committees of the Board of Directors. 4
Section 4.04. Proceedings and Quorum............................... 4
Section 4.05. Other Committees..................................... 4
ARTICLE V - OFFICERS......................................................... 4
Section 5.01. Officers............................................. 4
Section 5.02. Election, Tenure and Qualifications.................. 4
Section 5.03. Vacancies and Newly Created Offices.................. 4
Section 5.04. Removal and Resignation.............................. 5
Section 5.05. Chairman of the Board................................ 5
Section 5.06. Vice Chairman of the Board........................... 5
Section 5.07. President, Co-President.............................. 5
Section 5.08. Vice President....................................... 5
Section 5.09. Treasurer and Assistant Treasurers................... 5
Section 5.10. Secretary and Assistant Secretaries.................. 5
Section 5.11. Subordinate Officers................................. 5
Section 5.12. Remuneration......................................... 5
Section 5.13. Surety Bonds......................................... 6
ARTICLE VI - EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES.................. 6
Section 6.01. General.............................................. 6
Section 6.02. Checks, Notes, Drafts, Etc........................... 6
Section 6.03. Voting of Securities................................. 6
ARTICLE VII - CAPITAL STOCK.................................................. 6
Section 7.01. Certificates of Stock................................ 6
Section 7.02. Transfer of Shares................................... 6
Section 7.03. Transfer Agents and Registrars....................... 6
Section 7.04. Fixing of Record Date................................ 7
Section 7.05. Lost, Stolen or Destroyed Certificates............... 7
ARTICLE VIII - CONFLICT OF INTEREST TRANSACTIONS............................. 7
Section 8.01. Validity of Contract or Transactions................. 7
Section 8.02. Dealings............................................. 7
ARTICLE IX - FISCAL YEAR AND ACCOUNTANT...................................... 7
Section 9.01. Fiscal Year.......................................... 7
Section 9.02. Accountant........................................... 7
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ARTICLE X - CUSTODY OF SECURITIES.............................................8
Section 10.01. Employment of a Custodian.................................. 8
Section 10.02. Termination of Custodian Agreement......................... 8
Section 10.03. Provisions of Custodian Contract........................... 8
Section 10.04. Other Arrangements......................................... 8
ARTICLE XI - INDEMNIFICATION AND INSURANCE................................... 8
Section 11.01. Indemnification of Officers, Directors, Employees and Agents8
Section 11.02. Insurance of Officers, Directors, Employees and Agents......9
Section 11.03. Non-exclusivity.............................................9
Section 11.04. Amendment...................................................9
ARTICLE XII - AMENDMENTS......................................................9
Section 12.01. General.................................................... 9
Section 12.02. By Stockholders Only....................................... 9
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BY-LAWS
OF
ROCKWOOD FUND,INC.
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF
OFFICES AND SEAL
Section 1.01. Name. The name of the Corporation is Rockwood Fund, Inc.
Section 1.02. Principal Offices. The principal office of the Corporation in the
State of Maryland shall be located in Baltimore, Maryland. The Corporation may,
in addition, establish and maintain such other offices and places of business as
the board of directors may, from time to time, determine.
Section 1.03. Seal. The corporate seal of the Corporation shall consist of two
(2) concentric circles, between which shall be the name of the Corporation, and
in the center shall be inscribed the year of its incorporation, and the words
"Corporate Seal." The form of the seal shall be subject to alteration by the
board of directors and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any officer or director
of the Corporation shall have authority to affix the corporate seal of the
Corporation to any document requiring the same.
ARTICLE II
STOCKHOLDERS
Section 2.01. Annual Meetings. There shall be no stockholders' meetings for the
election of directors and the transaction of other proper business except as
required by law or as hereinafter provided.
Section 2.02. Special Meetings. Special meetings of stockholders may be called
at any time by the chairman of the board or the president or a co-president and
shall be held at such time and place as may be stated in the notice of the
meeting.
Unless otherwise required by law, special meetings of the stockholders shall be
called by the secretary upon the written request of the holders of shares
entitled to not less than 25 percent of all the votes entitled to be cast at
such meeting, provided that (a) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (b) the stockholders
requesting such meeting shall have paid to the Corporation the reasonably
estimated cost of preparing and mailing the notice thereof, which the secretary
shall determine and specify to such stockholders. No special meeting need be
called upon the request of stockholders to consider any matter which is
substantially the same as a matter voted upon at any special meeting of the
stockholders held during the preceding twelve months, unless requested by the
holders of a majority of all shares entitled to be voted at such meeting.
Section 2.03. Notice of Meetings. The secretary shall cause notice of the place,
date and hour and, in the case of a special meeting or as otherwise required by
law, the purpose or purposes for which the meeting is called, to be served
personally or to be mailed, postage prepaid, not less than 10 nor more than 90
days before the date of the meeting, to each stockholder entitled to vote at
such meeting at his address as it appears on the records of the Corporation at
the time of such mailing. Notice shall be deemed to be given when deposited in
the United States mail addressed to the stockholders as aforesaid.
Notice of any stockholders' meeting need not be given to any stockholder who
shall sign a written waiver of such notice whether before or after the time of
such meeting, which waiver shall be filed with the records of such meeting, or
to any stockholder who is present at such meeting in person or by proxy. Notice
of adjournment of a stockholders' meeting to another time or place need not be
given if such time and place are announced at the meeting.
Irregularities in the notice of any meeting to, or the nonreceipt of any such
notice by, any of the stockholders shall not invalidate any action otherwise
properly taken by or at any such meeting.
Section 2.04. Quorum and Adjournment of Meetings. The presence at any
stockholders' meeting, in person or by proxy, of stockholders entitled to cast
one-third of all votes entitled to be cast thereat shall be necessary and
sufficient to constitute a quorum for the transaction of business, provided that
with respect to any matter to be voted upon separately by any Series (as defined
in the Articles of Incorporation) or class of shares, a quorum shall consist of
the holders of one-third of the shares of that Series or class outstanding and
entitled to vote on the matter. In the absence of a quorum, the stockholders
present in person or by proxy or, if no stockholder entitled to vote is present
in person or by proxy, any officer present entitled to preside or act as
secretary of such meeting may adjourn the meeting without determining the date
of the new meeting or from time to time without further notice to a date not
more than 120 days after the original record date. Any business that might have
been transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present.
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Section 2.05. Voting and Inspectors. At every stockholders' meeting, each
stockholder shall be entitled to one vote for each share and a fractional vote
for each fraction of a share of stock of the Corporation validly issued and
outstanding and standing in his name on the books of the Corporation on the
record date fixed in accordance with Section 7.04 hereof, either in person or by
proxy appointed by instrument in writing subscribed by such stockholder or his
duly authorized attorney, except that no shares held by the Corporation shall be
entitled to a vote; provided, however, that (a) as to any matter with respect to
which a separate vote of any series is required by the Investment Company Act of
1940, as amended, or by the Maryland General Corporation Law, such requirement
as to a separate vote by that series shall apply; (b) in the event that the
separate vote requirements referred to in (a) above apply with respect to one or
more series, then, subject to (c) below, the shares of all other such one or
more series shall vote as a single series; and (c) as to any matter which
affects the interest of only a particular series, only the holders of shares of
the one or more affected series shall be entitled to vote.
If no record date has been fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the 30th day before the meeting, or, if notice is waived by all
stockholders, at the close of business on the 11th day preceding the day on
which the meeting is held.
Except as otherwise specifically provided in the Articles of Incorporation or
these By-laws or as required by provisions of the Investment Company Act of
1940, as amended, all matters shall be decided by a vote of the majority of the
votes validly cast at a meeting at which a quorum is present. The vote upon any
question shall be by ballot whenever requested by any person entitled to vote,
but, unless such a request is made, voting may be conducted in any way approved
by the meeting.
At any meeting at which there is an election of directors, the chairman of the
meeting may appoint two inspectors of election who shall first subscribe an oath
or affirmation to execute faithfully the duties of inspectors at such election
with strict impartiality and according to the best of their ability, and shall,
after the election, make a certificate of the result of the vote taken. No
candidate for the office of director shall be appointed as an inspector.
Section 2.06. Validity of Proxies. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been signed by the
stockholder or by his duly authorized attorney. Unless a proxy provides
otherwise, it shall not be valid more than 11 months after its date. All proxies
shall be delivered to the secretary of the Corporation or to the person acting
as secretary of the meeting before being voted, who shall decide all questions
concerning qualification of voters, the validity of proxies, and the acceptance
or rejection of votes. If inspectors of election have been appointed by the
chairman of the meeting, such inspectors shall decide all such questions. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Corporation receives from any one of them a specific written notice to the
contrary and a copy of the instrument or order which so provides. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed valid
unless challenged at or prior to its exercise.
Section 2.07. Stock Ledger and List of Stockholders. It shall be the duty of the
secretary or assistant secretary of the Corporation to cause an original or
duplicate stock ledger containing the names and addresses of all the
stockholders and the number of shares held by them, respectively, to be
maintained at the office of the Corporation's transfer agent. Such stock ledger
may be in written form or any other form capable of being converted into written
form within a reasonable time for visual inspection. Any one or more persons,
each of whom has been a stockholder of record of the Corporation for more than
six months next preceding such request, who owns in the aggregate five percent
or more of the outstanding capital stock of the Corporation, may submit (unless
the Corporation at the time of the request maintains a duplicate stock ledger at
its principal office in Maryland) a written request to any officer of the
Corporation or its resident agent in Maryland for a list of the stockholders of
the Corporation. Within 20 days after such a request, there shall be prepared
and filed at the Corporation's principal office in Maryland a list containing
the names and addresses of all stockholders of the Corporation and the number of
shares of each class held by each stockholder, certified as correct by an
officer of the Corporation, by its stock transfer agent, or by its registrar.
Section 2.08. Action Without Meeting. Any action required or permitted to be
taken by stockholders at a meeting of stockholders may be taken without a
meeting if (a) all stockholders entitled to vote on the matter consent to the
action in writing, (b) all stockholders entitled to notice of the meeting but
not entitled to vote at it sign a written waiver of any right to dissent, and
(c) the consents and waivers are filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at the
meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. General Powers. Except as otherwise provided by operation of law,
by the Articles of Incorporation, or by these By-laws, the property, business
and affairs of the Corporation shall be managed under the direction of and all
the powers of the Corporation shall be exercised by or under authority of its
board of directors.
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Section 3.02. Power to Issue and Sell Stock. The board of directors may from
time to time issue and sell or cause to be issued and sold any of the
Corporation's authorized shares to such persons and for such consideration as
the board of directors shall deem advisable, subject to the provisions of the
Articles of Incorporation.
Section 3.03. Power to Declare Dividends. The board of directors, from time to
time as they may deem advisable, may declare and pay dividends in stock, cash or
other property of the Corporation, out of any source available for dividends, to
the stockholders according to their respective rights and interests in
accordance with the provisions of the Articles of Incorporation. The board of
directors may prescribe from time to time that dividends declared may be payable
at the election of any of the stockholders (exercisable before or after the
declaration of the dividend), either in cash or in shares of the Corporation,
provided that the sum of the cash dividend actually paid to any stockholder and
the asset value of the shares received (determined as of such time as the board
of directors shall have prescribed, pursuant to the Articles of Incorporation,
with respect to shares sold on the date of such election) shall not exceed the
full amount of cash to which the stockholder would be entitled if he elected to
receive only cash. The board of directors shall cause to be accompanied by a
written statement any dividend payment wholly or partly from any source other
than:
(a) the Corporation's accumulated undistributed net income (determined
in accordance with good accounting practice and the rules and
regulations of the Securities and Exchange Commission then in effect)
and not including profits or losses realized upon the sale of
securities or other properties; or
(b) the Corporation's net income so determined for the current or preceding
fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation, and shall be in such form as the Securities and
Exchange Commission may prescribe.
Section 3.04. Number and Term of Directors. Except for the initial board of
directors, the board of directors shall consist of not fewer than three nor more
than fifteen directors, as specified by a resolution of a majority of the entire
board of directors and at least one member of the board of directors shall be a
person who is not an "interested person" of the Corporation, as that term is
defined in the Investment Company Act of 1940, as amended. All other directors
may be interested persons of the Corporation if the requirements of Section
10(d) of the Investment Company Act of 1940, as amended, are met by the
Corporation and its investment manager. Each director shall hold office until
his successor is elected and qualified or until his earlier death, resignation
or removal.
All acts done at any meeting of the directors or by any person acting as a
director, so long as his successor shall not have been duly elected or
appointed, shall, notwithstanding that it be afterwards discovered that there
was some defect in the election of the directors or of such person acting as a
director or that they or any of them were disqualified, be as valid as if the
directors or such other person, as the case may be, had been duly elected and
were or was qualified to be directors or a director of the Corporation.
Directors need not be stockholders of the Corporation.
Section 3.05. Vacancies and Newly Created Directorships. If any vacancies shall
occur in the board of directors by reason of death, resignation, removal or
otherwise, or if the authorized number of directors shall be increased, the
directors then in office shall continue to act, and such vacancies (if not
previously filled by the stockholders) may be filled by a majority of the
directors then in office, although less than a quorum, except that a newly
created directorship may be filled only by a majority vote of the entire board
of directors; provided, however, that immediately after filling such vacancy, at
least two-thirds (2/3) of the directors then holding office shall have been
elected to such office by the stockholders of the Corporation. In the event that
at any time, other than the time preceding the first annual stockholders'
meeting, less than a majority of the directors of the Corporation holding office
at that time were elected by the stockholders, a meeting of the stockholders
shall be held promptly and in any event within 60 days for the purpose of
electing directors to fill any existing vacancies in the board of directors,
unless the Securities and Exchange Commission shall by order extend such period.
Section 3.06. Removal. At any stockholders' meeting duly called, provided a
quorum is present, the stockholders may remove any director from office (either
with or without cause) by the affirmative vote of a majority of all votes
represented at the meeting, and at the same meeting a duly qualified successor
or successors may be elected to fill any resulting vacancies by a plurality of
the votes validly cast.
Section 3.07. Regular Meetings. The meeting of the board of directors for
choosing officers and transacting other proper business, and all other meetings,
shall be held at such time and place, within or outside the state of Maryland,
as the board may determine and as provided by resolution. Except as otherwise
provided in the Investment Company Act of 1940, as amended, notice of such
meetings need not be given, following the annual meeting of stockholders, if
any, provided that notice of any change in the time or place of such meetings
shall be sent promptly to each director not present at the meeting at which such
change was made, in the manner provided for notice of special meetings. Except
as otherwise provided under the Investment Company Act of 1940, as amended,
members of the board of directors or any committee designated thereby may
participate in a meeting of such board or committee by means of a conference
telephone or similar communications equipment that allows all persons
participating in the meeting to hear each other at the same time; and
participation by such means shall constitute presence in person at a meeting.
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Section 3.08. Special Meetings. Special meetings of the board of directors shall
be held whenever called by the chairman of the board or the president or a
co-president (or, in the absence or disability of the chairman of the board or
the president or a co-president, by any officer or director, as they so
designate) at the time and place (within or outside of the State of Maryland)
specified in the respective notice or waivers of notice of such meetings. At
least three days before the day on which a special meeting is to be held, notice
of special meetings, stating the time and place, shall be (a) mailed to each
director at his residence or regular place of business or (b) delivered to him
personally or transmitted to him by telegraph, telefax, telex, cable or
wireless.
Section 3.09. Waiver of Notice. No notice of any meeting need be given to any
director who is present at the meeting or who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting), either
before or after the time of the meeting.
Section 3.10. Quorum and Voting. At all meetings of the board of directors, the
presence of one-half of the number of directors then in office shall constitute
a quorum for the transaction of business, provided that there shall be present
at least two directors. In the absence of a quorum, a majority of the directors
present may adjourn the meeting, from time to time, until a quorum shall be
present. The action of a majority of the directors present at a meeting at which
a quorum is present shall be the action of the board of directors, unless
concurrence of a greater proportion is required for such action by law, by the
Articles of Incorporation or by these By-laws.
Section 3.11. Action Without a Meeting. Except as otherwise provided in the
Investment Company Act of 1940, as amended, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if a written consent to such action is signed by
all members of the board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or
committee.
Section 3.12. Compensation of Directors. Directors may receive such compensation
for their services as may from time to time be determined by resolution of the
board of directors.
ARTICLE IV
COMMITTEES
Section 4.01. Organization. By resolution adopted by the board of directors, the
board may designate one or more committees of the board of directors, including
an Executive Committee, each consisting of at least two directors. Each member
of a committee shall be a director and shall hold committee membership at the
pleasure of the board. The chairman of the board, if any, shall be a member of
the Executive Committee. The board of directors shall have the power at any time
to change the members of such committees and to fill vacancies in the
committees.
Section 4.02. Powers of the Executive Committee. Unless otherwise provided by
resolution of the board of directors, when the board of directors is not in
session the Executive Committee shall have and may exercise all powers of the
board of directors in the management of the business and affairs of the
Corporation that may lawfully be exercised by an Executive Committee except the
power to declare a dividend or distribution on stock, authorize the issuance of
stock, recommend to stockholders any action requiring stockholders' approval,
amend these By-laws, approve any merger or share exchange which does not require
stockholder approval or approve or terminate any contract with an "investment
adviser" or "principal underwriter," as those terms are defined in the
Investment Company Act of 1940, as amended, or to take any other action required
by the Investment Company Act of 1940, as amended, to be taken by the board of
directors. Notwithstanding the above, such Executive Committee may make such
dividend calculations and payments as are consistent with applicable law,
including Maryland corporate law.
Section 4.03. Powers of Other Committees of the Board of Directors. To the
extent provided by resolution of the board, other committees of the board of
directors shall have and may exercise any of the powers that may lawfully be
granted to the Executive Committee.
Section 4.04. Proceedings and Quorum. In the absence of an appropriate
resolution of the board of directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that a quorum shall not be less than two
directors. In the event any member of any committee is absent from any meeting,
the members thereof present at the meeting, whether or not they constitute a
quorum, may appoint a member of the board of directors to act in the place of
such absent member.
Section 4.05. Other Committees. The board of directors may appoint other
committees, each consisting of one or more persons, who need not be directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the board of directors, but shall not
exercise any power which may lawfully be exercised only by the board of
directors or a committee thereof.
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ARTICLE V
OFFICERS
Section 5.01. Officers. The officers of the Corporation shall be a president or
co-presidents, a secretary, and a treasurer, and may include one or more vice
presidents (including executive and senior vice presidents), assistant
secretaries or assistant treasurers, and such other officers as may be appointed
in accordance with the provisions of Section 5.11 hereof. The board of directors
may, but shall not be required to, elect a chairman and vice chairman of the
board.
Section 5.02. Election, Tenure and Qualifications. The officers of the
Corporation (except those appointed pursuant to Section 5.11 hereof) shall be
elected by the board of directors at its first meeting or such subsequent
meetings as shall be held prior to its first annual meeting, and thereafter at
regular board meetings, as required by applicable law. If any officers are not
elected at any annual meeting, such officers may be elected at any subsequent
meetings of the board. Except as otherwise provided in this Article V, each
officer elected by the board of directors shall hold office until his or her
successor shall have been elected and qualified. Any person may hold one or more
offices of the Corporation except that no one person may serve concurrently as
both the president or a co-president and vice president. A person who holds more
than one office in the Corporation may not act in more than one capacity to
execute, acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. The chairman of the board
shall be chosen from among the directors of the Corporation and may hold such
office only so long as he continues to be a director. No other officer need be a
director.
Section 5.03. Vacancies and Newly Created Offices. If any vacancy shall occur in
any office by reason of death, resignation, removal, disqualification or other
cause, or if any new office shall be created, such vacancies or newly created
offices may be filled by the chairman of the board at any meeting or, in the
case of any office created pursuant to Section 5.11 hereof, by any officer upon
whom such power shall have been conferred by the board of directors.
Section 5.04. Removal and Resignation. At any meeting called for such purpose,
the Executive Committee may remove any officer from office (either with or
without cause) by the affirmative vote, given at the meeting, of a majority of
the members of the Committee. Any officer may resign from office at any time by
delivering a written resignation to the board of directors, the president or a
co-president, the secretary, or any assistant secretary. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 5.05. Chairman of the Board. The chairman of the board, if there be such
an officer, shall be the senior officer of the Corporation, shall preside at all
stockholders' meetings and at all meetings of the board of directors and shall
be ex officio a member of all committees of the board of directors. He shall
have such other powers and perform such other duties as may be assigned to him
from time to time by the board of directors.
Section 5.06. Vice Chairman of the Board. The board of directors may from time
to time elect a vice chairman who shall have such powers and perform such duties
as from time to time may be assigned to him by the board of directors, chairman
of the board or the president or a co-president. At the request of, or in the
absence or in the event of the disability of the chairman of the board, the vice
chairman may perform all the duties of the chairman of the board or the
president or a co-president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon such respective officers.
Section 5.07. President, Co-President. The president or co-presidents shall be
the chief executive officer or co-chief executive officers, as the case may be,
of the Corporation and, in the absence of the chairman of the board or vice
chairman or if no chairman of the board or vice chairman has been chosen, shall
preside at all stockholders' meetings and at all meetings of the board of
directors and shall in general exercise the powers and perform the duties of the
chairman of the board. Subject to the supervision of the board of directors, the
president or the co-presidents shall have general charge of the business,
affairs and property of the Corporation and general supervision over its
officers, employees and agents. Except as the board of directors may otherwise
order, the president or a co-president may sign in the name and on behalf of the
Corporation all deeds, bonds, contracts, or agreements. The president or a
co-president shall exercise such other powers and perform such other duties as
from time to time may be assigned by the board of directors.
Section 5.08. Vice President. The board of directors may from time to time elect
one or more vice presidents (including executive and senior vice presidents) who
shall have such powers and perform such duties as from time to time may be
assigned to them by the board of directors or the president or a co-president.
At the request of, or in the absence or in the event of the disability of, the
president or both co-presidents, the vice president (or, if there are two or
more vice presidents, then the senior of the vice presidents present and able to
act) may perform all the duties of the president or co-presidents and, when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president or co-presidents.
Section 5.09. Treasurer and Assistant Treasurers. The treasurer shall be the
chief accounting officer of the Corporation and shall have general charge of the
finances and books of account of the Corporation. The treasurer shall render to
the board of directors, whenever directed by the board, an account of the
financial condition of the Corporation and of all transactions as treasurer; and
as soon as possible after the close of each financial year he shall make and
submit to the board of directors a like report for such financial year. The
treasurer shall cause to be prepared annually a full and complete statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which shall be submitted
at the annual meeting of stockholders (when, and if, such meeting is held) and
filed
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within 20 days thereafter at the principal office of the Corporation in the
state of Maryland, except that for any year when an annual meeting of
stockholders is not held, such statement of affairs shall be filed at the
Corporation's principal office within 120 days after the end of the fiscal year.
The treasurer shall perform all acts incidental to the office of treasurer,
subject to the control of the board of directors.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the board of directors may assign, and, in the absence of the
treasurer, may perform all the duties of the treasurer.
Section 5.10. Secretary and Assistant Secretaries. The secretary shall attend to
the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and directors in books to be
kept for that purpose. The secretary shall keep in safe custody the seal of the
Corporation, and shall have responsibility for the records of the Corporation,
including the stock books and such other books and papers as the board of
directors may direct and such books, reports, certificates and other documents
required by law to be kept, all of which shall at all reasonable times be open
to inspection by any director. The secretary shall perform such other duties
which appertain to this office or as may be required by the board of directors.
Any assistant secretary may perform such duties of the secretary as the
secretary or the board of directors may assign, and, in the absence of the
secretary, may perform all the duties of the secretary.
Section 5.11. Subordinate Officers. The chairman of the board from time to time
may appoint such other officers or agents as he may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the board of directors may determine. The chairman of the
board from time to time may delegate to one or more officers or agents the power
to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any officer or agent
appointed in accordance with the provisions of this Section 5.11 may be removed,
either with or without cause, by any officer upon whom such power of removal
shall have been conferred by the board of directors.
Section 5.12. Remuneration. The salaries or other compensation of the officers
of the Corporation shall be fixed from time to time by resolution of the board
of directors, except that the board of directors may by resolution delegate to
any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 5.11 hereof.
Section 5.13. Surety Bonds. The board of directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder) to the Corporation in such sum and with such surety or sureties as
the board of directors may determine, conditioned upon the faithful performance
of his or her duties to the Corporation, including responsibility for negligence
and for the accounting of any of the Corporation's property, funds or securities
that may come into his hands.
ARTICLE VI
EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 6.01. General. Subject to the provisions of Sections 5.07, 6.02, and
7.03 hereof, all deeds, documents, transfers, contracts, agreements and other
instruments requiring execution by the Corporation shall be signed by the
president or a co-president, a vice president (including executive and senior
vice presidents), chairman or vice chairman and by the treasurer or secretary or
an assistant treasurer or an assistant secretary, or as the board of directors
may otherwise, from time to time, authorize. Any such authorization may be
general or confined to specific instances.
Section 6.02. Checks, Notes, Drafts, Etc. So long as the Corporation shall
employ a custodian to keep custody of the cash and securities of the
Corporation, all checks and drafts for the payment of money by the Corporation
may be signed in the name of the Corporation by the custodian. Except as
otherwise authorized by the board of directors, all requisitions or orders for
the assignment of securities standing in the name of the custodian or its
nominee, or for the execution of powers to transfer the same, shall be signed in
the name of the Corporation by any two of the following: the president or a
co-president, vice president (including executive and senior vice presidents),
treasurer or an assistant treasurer, provided that no one person may sign in the
capacity of two such officers. Promissory notes, checks or drafts payable to the
Corporation may be endorsed only to the order of the custodian or its nominee
and only by any two of the following: the treasurer, the president or a
co-president, a vice president (including executive and senior vice presidents)
or by such other person or persons as shall be authorized by the board of
directors, provided that no one person may sign in the capacity of two such
officers.
Section 6.03. Voting of Securities. Unless otherwise ordered by the board of
directors, the president or a co-president, or any vice president (including
executive and senior vice presidents) shall have full power and authority on
behalf of the Corporation to attend and to act and to vote, or in the name of
the Corporation to execute proxies to vote, at any meeting of stockholders of
any company in which the Corporation may hold stock. At any such meeting such
officer shall possess and may exercise (in person or by proxy) any and all
rights, powers and privileges incident to the ownership of such stock. The board
of directors may by resolution from time to time confer like powers upon any
other person or persons in accordance with the laws of the State of Maryland.
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ARTICLE VII
CAPITAL STOCK
Section 7.01. Certificates of Stock. The interest of each stockholder of the
Corporation may be, but shall not be required to be, evidenced by certificates
for shares of stock in such form not inconsistent with the Articles of
Incorporation as the board of directors may from time to time authorize. No
certificate shall be valid unless it is signed in the name of the Corporation by
a president or a co-president or a vice president and countersigned by the
secretary or an assistant secretary or the treasurer or an assistant treasurer
of the Corporation and sealed with the seal of the Corporation, or bears the
facsimile signatures of such officers and a facsimile of such seal. In case any
officer who shall have signed any such certificate, or whose facsimile signature
has been placed thereon, shall cease to be such an officer (because of death,
resignation or otherwise) before such certificate is issued, such certificate
may be issued and delivered by the Corporation with the same effect as if he
were such officer at the date of issue.
The number of each certificate issued, the name and address of the person owning
the shares represented thereby, the number of such shares and the date of
issuance shall be entered upon the stock ledger of the Corporation at the time
of issuance.
Every certificate exchanged, surrendered for redemption or otherwise returned to
the Corporation shall be marked "canceled" with the date of cancellation.
Section 7.02. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder of record thereof (in
person or by his duly authorized attorney or legal representative) (a) if a
certificate or certificates have been issued, upon surrender duly endorsed or
accompanied by proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require, or (b) as otherwise prescribed by the board of directors.
Except as otherwise provided in the Articles of Incorporation, the shares of
stock of the Corporation may be freely transferred, subject to the charging of
customary transfer fees, and the board of directors may, from time to time,
adopt rules and regulations with reference to the method of transfer of the
shares of stock of the Corporation. The Corporation shall be entitled to treat
the holder of record of any share of stock as the absolute owner thereof for all
purposes, and accordingly shall not be bound to recognize any legal, equitable
or other claim or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law or the statutes of the State of Maryland.
Section 7.03. Transfer Agents and Registrars. The board of directors may from
time to time appoint or remove transfer agents or registrars of transfers for
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 7.04. Fixing of Record Date. The board of directors may fix in advance a
date as a record date for the determination of the stockholders entitled to
notice of or to vote at any stockholders' meeting or any adjournment thereof, or
to express consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, provided that
(a) such record date shall be within 90 days prior to the date on which the
particular action requiring such determination will be taken, except that a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time without further notice to a date not more than 120
days after the original record date; (b) the transfer books shall not be closed
for a period longer than 20 days; and (c) in the case of a meeting of
stockholders, the record date shall be at least 10 days before the date of the
meeting.
Section 7.05. Lost, Stolen or Destroyed Certificates. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the board of directors or any officer authorized by the board may, in
its discretion, require the owner of the lost, stolen or destroyed certificate
(or his legal representative) to give the Corporation a bond or other indemnity,
in such form and in such amount as the board or any such officer may direct and
with such surety or sureties as may be satisfactory to the board or any such
officer, sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VIII
CONFLICT OF INTEREST TRANSACTIONS
Section 8.01. Validity of Contract or Transactions. In the event that any
officer or director of the Corporation shall have any interest, direct or
indirect, in any other firm, association or corporation as officer, employee,
director or stockholder, no transaction or contract made by the Corporation with
any such other firm, association or corporation shall be valid unless such
interest shall have been disclosed or made known to all of the directors or to a
majority of the directors and such transaction or contract shall have been
approved by a majority of a quorum of directors, which majority shall consist of
directors not having any such interest or a majority of the directors in office,
including directors having such an interest.
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Section 8.02. Dealings. No officer, director or employee of the Corporation
shall deal for or on behalf of the Corporation with himself, as principal or
agent, or with any corporation or partnership in which he has a financial
interest, except that:
(a) Such prohibition shall not prevent officers, directors or employees
of the Corporation from having a financial interest in the Corporation,
or the sponsor, or a distributor of the shares of the Corporation, or
the investment manager or counsel of the Corporation;
(b) Such prohibition shall not prevent the purchase of securities for
the portfolio of the Corporation or the sale of securities owned by the
Corporation through a securities broker, one or more of whose partners,
officers or directors is an officer, director or employee of the
Corporation, provided such transactions are handled in the capacity of
broker, only, and provided they are performed in accordance with
applicable law;
(c) Such prohibition shall not prevent the employment of legal counsel,
registrar, transfer agent, dividend disbursing agent, or custodian or
trustee having a partner, officer or director who is an officer,
director or employee of the Corporation, provided only customary fees
are charged for services rendered for the benefit of the Corporation;
(d) Such prohibition shall not prevent the purchase for the portfolio
of the Corporation of securities issued by an issuer having an officer,
director or security holder who is an officer, director or employee of
the Corporation or of the manager or investment counsel of the
Corporation, unless at the time of such purchase one or more of such
officers, directors or employees owns beneficially more than one-half
of one per cent (1/2%) of the shares or securities, or both, of such
issuer and such officers, directors and employees owning more than
one-half of one per cent (1/2%) of such shares or securities together
own beneficially more than five per cent (5%) of such shares or
securities.
ARTICLE IX
FISCAL YEAR AND ACCOUNTANT
Section 9.01. Fiscal Year. The fiscal year of the Corporation shall, unless
otherwise ordered by the board of directors, be twelve calendar months ending on
the 31st day of December.
Section 9.02. Accountant. The Corporation shall employ an independent public
accountant or a firm of independent public accountants as its accountant to
examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The accountant's certificates and reports
shall be addressed both to the board of directors and to the stockholders. The
employment of the accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by vote of
a majority of the outstanding voting securities at any stockholders' meeting
called for that purpose.
A majority of the members of the board of directors who are not "interested
persons" (as defined in the Investment Company Act of 1940, as amended) of the
Corporation shall select the accountant at any meeting held within 90 days
before or after the beginning of the fiscal year of the Corporation or before
the annual stockholders' meeting (if any) in that year. The selection shall be
submitted for ratification or rejection at the next succeeding annual
stockholders' meeting, if any, when and if such meeting is held. If the
selection is rejected at that meeting, the accountant shall be selected by
majority vote of the Corporation's outstanding voting securities, either at the
meeting at which the rejection occurred or at a subsequent meeting of
stockholders called for the purpose of selecting an accountant.
Any vacancy occurring between annual meetings, if any, due to the death or
resignation of the accountant may be filled by the vote of a majority of the
members of the board of directors who are not interested persons.
ARTICLE X
CUSTODY OF SECURITIES
Section 10.01. Employment of a Custodian. Unless otherwise required by law or
the Articles of Incorporation, all securities and cash owned by the Corporation
from time to time shall be deposited with and held by a custodian or
subcustodian qualified to act as such in accordance with the requirements of the
Investment Company Act of 1940, as amended.
Section 10.02. Termination of Custodian Agreement. Upon termination of the
agreement for services with the custodian or inability of the custodian to
continue to serve, the board of directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has the
required qualifications and is willing to serve, the board of directors shall
call as promptly as possible a special meeting of the stockholders to determine
whether the Corporation shall function without a custodian or shall be
liquidated. If so directed by resolution of the board of directors or by vote of
the holders of a majority of the outstanding shares of stock of the Corporation,
the custodian shall deliver and pay over all property of the Corporation held by
it as specified in such vote.
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Section 10.03. Provisions of Custodian Contract. The board of directors shall
cause to be delivered to the custodian all securities owned by the Corporation
or to which it may become entitled, and shall order the same to be delivered by
the custodian only in completion of a sale, exchange, transfer, pledge, or other
disposition thereof, all as the board of directors may generally or from time to
time require to approve or to a successor custodian; and the board of directors
shall cause all funds owned by the Corporation or to which it may become
entitled to be paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the Corporation,
including distributions to shareholders, or to a successor custodian.
Section 10.04. Other Arrangements. The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
Section 11.01. Indemnification of Officers, Directors, Employees and Agents. In
accordance with applicable law, including the Investment Company Act of 1940, as
amended, and Maryland Corporate law, the Corporation shall indemnify each person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), by reason of the fact that he or
she is or was a director, officer, employee, or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee, partner, trustee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against all reasonable expenses (including
attorneys' fees) actually incurred, and judgments, fines, penalties and amounts
paid in settlement in connection with such Proceeding to the maximum extent
permitted by law, now existing or hereafter adopted. Notwithstanding the
foregoing, the following provisions shall apply with respect to indemnification
of the Corporation's directors, officers, and investment manager (as defined in
the Investment Company Act of 1940, as amended):
(a) Whether or not there is an adjudication of liability in such
Proceeding, the Corporation shall not indemnify any such person for any
liability arising by reason of such person's willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved
in the conduct of his or her office or under any contract or agreement
with the Corporation ("disabling conduct").
(b) The Corporation shall not indemnify any such person unless:
(1) the court or other body before which the Proceeding was
brought (a) dismisses the Proceeding for insufficiency of
evidence of any disabling conduct, or (b) reaches a final
decision on the merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable determination is
made, based upon a review of the facts, by (a) the vote of a
majority of a quorum of the directors of the Corporation who
are neither interested persons of the Corporation as defined
in the Investment Company Act of 1940, as amended, nor parties
to the Proceeding, or (b) if such quorum is not obtainable, or
even if obtainable, if a majority of a quorum of directors
described above so directs, based upon a written opinion by
independent legal counsel, that such person was not liable by
reason of disabling conduct.
(c) Reasonable expenses (including attorneys' fees) incurred in
defending a Proceeding involving any such person will be paid by the
Corporation in advance of the final disposition thereof upon an
undertaking by such person to repay such expenses unless it is
ultimately determined that he or she is entitled to indemnification,
if:
(1) such person shall provide adequate security for his or her undertaking;
(2) the Corporation shall be insured against losses arising by reason of such
advance; or
(3) a majority of a quorum of the directors of the Corporation
who are neither interested persons of the Corporation as
defined in the Investment Company Act of 1940, as amended, nor
parties to the Proceeding, or independent legal counsel in a
written opinion, shall determine, based on a review of readily
available facts, that there is reason to believe that such
person will be found to be entitled to indemnification.
Section 11.02. Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance or other sources of
reimbursement to the extent permitted by law on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
partner, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her and
incurred by him or her in or arising out of his position.
Section 11.03. Non-exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article XI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Articles of Incorporation,
these By-Laws, agreement, vote of stockholders or directors, or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
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Section 11.04. Amendment. No amendment, alteration or repeal of this Article or
the adoption, alteration or amendment of any other provisions to the Articles of
Incorporation or By-laws inconsistent with this Article shall adversely affect
any right or protection of any person under this Article with respect to any act
or failure to act which occurred prior to such amendment, alteration, repeal or
adoption.
ARTICLE XII
AMENDMENTS
Section 12.01. General. Except as provided in Section 12.02 of this Article XII
and subject to the provisions concerning stockholder voting in Article II
hereof, all By-laws of the Corporation, whether adopted by the board of
directors or the stockholders, shall be subject to amendment, alteration or
repeal, and new By-laws may be made by the affirmative vote of either: (a) the
holders of record of a majority of the outstanding shares of stock of the
Corporation entitled to vote, at any meeting, the notice or waiver of notice of
which shall have specified or summarized the proposed amendment, alteration,
repeal or new By-law; or (b) a majority of directors, at any meeting the notice
or waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal or new By-law.
Section 12.02. By Stockholders Only. No amendment of any section of these
By-laws shall be made except by the stockholders of the Corporation if the
By-laws provide that such section may not be amended, altered or repealed except
by the stockholders. From and after the issuance of any shares of the capital
stock of the Corporation no amendment, alteration or repeal of this Article XII
shall be made except by the stockholders of the Corporation.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, by and between
ROCKWOOD FUND, INC. a Maryland corporation (the "Fund") and ROCKWOOD ADVISERS,
INC., a Delaware corporation (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and offers for public sale shares of common stock; and
WHEREAS the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services to the Fund, and
the Investment Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Fund hereby employs the Investment Manager to manage the investment and
reinvestment of the assets of the Fund thereof, including the regular furnishing
of advice with respect to the Fund's portfolio transactions subject at all times
to the control and oversight of the Fund's Board of Directors, for the period
and on the terms set forth in this Agreement. The Investment Manager hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth, for the compensation herein
provided. The Investment Manager shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way, or
otherwise be deemed an agent of the Fund.
2. The Fund assumes and shall pay all the expenses required for the conduct of
its business including, but not limited to, (a) salaries of administrative and
clerical personnel; (b) brokerage commissions; (c) taxes and governmental fees;
(d) costs of insurance and fidelity bonds; (e) fees of the transfer agent,
custodian, legal counsel and auditors; (f) association fees; (g) costs of
preparing, printing and mailing proxy materials, reports and notices to
shareholders; (h) costs of preparing, printing and mailing the prospectus and
statement of additional information and supplements thereto; (i) payment of
dividends and other distributions; (j) costs of stock certificates; (k) costs of
Board and shareholders meetings; (l) fees of the independent directors; (m)
necessary office space rental; (n) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
under applicable federal and state securities laws and maintaining such
registrations and qualifications; and (o) such non-recurring expenses as may
arise, including, without limitation, actions, suits or proceedings affecting
the Fund and the legal obligation which the Fund may have to indemnify its
officers and directors with respect thereto.
3. The Investment Manager may, but shall not be obligated to, pay or provide for
the payment of expenses which are primarily intended to result in the sale of
the Fund's shares or the servicing and maintenance of shareholder accounts,
including, without limitation, payments for: advertising, direct mail and
promotional expenses; compensation to and expenses, including overhead and
telephone and
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other communication expenses, of the Investment Manager and its affiliates, the
Fund, and selected dealers and their affiliates who engage in or support the
distribution of shares or who service shareholder accounts; fulfillment expenses
including the costs of printing and distributing prospectuses, statements of
additional information, and reports for other than existing shareholders; the
costs of preparing, printing and distributing sales literature and advertising
materials; and, internal costs incurred by the Investment Manager and its
affiliates and allocated to efforts to distribute shares of the Fund such as
office rent and equipment, employee salaries, employee bonuses and other
overhead expenses. Such payments may be for the Investment Manager's own account
or may be made on behalf of the Fund pursuant to a written agreement relating to
a plan of distribution adopted pursuant to Rule 12b-1 under the 1940 Act.
4. If requested by the Fund's Board of Directors, the Investment Manager may
provide other services to the Fund such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof.
5. The services of the Investment Manager are not to be deemed exclusive, and
the Investment Manager shall be free to render similar services to others in
addition to the Fund so long as its services hereunder are not impaired thereby.
6. The Investment Manager shall create and maintain all necessary books and
records in accordance with all applicable laws, rules and regulations, including
but not limited to records required by Section 31(a) of the 1940 Act and the
rules thereunder, as the same may be amended from time to time, pertaining to
the investment management services performed by it hereunder and not otherwise
created and maintained by another party pursuant to a written contract with the
Fund. Where applicable, such records shall be maintained by the Investment
Manager for the periods and in the places required by Rule 31a-2 under the 1940
Act. The books and records pertaining to the Fund which are in the possession of
the Investment Manager shall be the property of the Fund. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
at all times during the Investment Manager's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
7. As compensation for its services, with respect to the Fund the Investment
Manager will be paid by the Fund a fee payable monthly and computed at the
annual rate of 1% of the first $200 million of average daily net assets of the
Fund, .95% of such net assets over $200 million up to $400 million, .90% of such
net assets over $400 million up to $600 million, .85% of such net assets over
$600 million up to $800 million, .80% of such net assets over $800 million up to
$1 billion, and .75% of such net assets over $1 billion. The aggregate net
assets for each day shall be computed by subtracting the liabilities of the Fund
from the value of its assets, such amount to be computed as of the calculation
of the net asset value per share on each business day.
8. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and
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quality of services provided by a particular broker/dealer, including brokerage
and research services and sales of Fund shares and shares of other investment
companies or series thereof for which the Investment Manager or an affiliate
thereof serves as investment adviser. The Investment Manager may also allocate
portfolio transactions to broker/dealers that remit a portion of their
commissions as a credit against Fund expenses. With respect to brokerage and
research services, the Investment Manager may consider in the selection of
broker/dealers brokerage or research provided and payment may be made of a fee
higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended, or other applicable law are met.
Although the Investment Manager may direct portfolio transactions without
necessarily obtaining the lowest price at which such broker/dealer, or another,
may be willing to do business, the Investment Manager shall seek the best value
for the Fund on each trade that circumstances in the market place permit,
including the value inherent in on-going relationships with quality brokers. To
the extent any such brokerage or research services may be deemed to be
additional compensation to the Investment Manager from the Fund, it is
authorized by this Agreement. The Investment Manager may place Fund brokerage
through an affiliate of the Investment Manager, provided that: the Fund not deal
with such affiliate in any transaction in which such affiliate acts as
principal; the commissions, fees or other remuneration received by such
affiliate be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on a securities exchange
during a comparable period of time; and such brokerage be undertaken in
compliance with applicable law. The Investment Manager's fees under this
Agreement shall not be reduced by reason of any commissions, fees or other
remuneration received by such affiliate from the Fund.
9. The Investment Manager shall waive all or part of its fee or reimburse the
Fund monthly if and to the extent the aggregate operating expenses of the Fund
exceed the most restrictive limit imposed by any state in which shares of the
Fund are qualified for sale or such lesser amount as may be agreed to by the
Fund's Board of Directors and the Investment Manager. In calculating the limit
of operating expenses, all expenses excludable under state regulation or
otherwise shall be excluded. If this Agreement is in effect for less than all of
a fiscal year, any such limit will be applied proportionately.
10. Subject to and in accordance with the Articles of Incorporation and By-laws
of the Fund and of the Investment Manager, it is understood that directors,
officers, agents and shareholders of the Fund are or may be interested in the
Fund as directors, officers, shareholders or otherwise, that the Investment
Manager is or may be interested in the Fund as a shareholder or otherwise and
that the effect and nature of any such interests shall be governed by law and by
the provisions, if any, of said Articles of Incorporation or By-laws.
11. This Agreement shall become effective upon the date hereinabove written and,
unless sooner terminated as provided herein, this Agreement shall continue in
effect for two years from the above written date. Thereafter, if not terminated,
this Agreement shall continue automatically for successive periods of twelve
months each, provided that such continuance is specifically approved at least
annually (a) by the Board of Directors of the Fund or by the holders of a
majority of the outstanding voting securities of the Fund as defined in the 1940
Act and (b) by a vote of a majority of the Directors of the Fund who are not
parties to this Agreement, or interested persons of any such party. This
Agreement may be terminated without penalty at any time either by vote of the
Board of Directors of the Fund or
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by vote of the holders of a majority of the outstanding voting securities of the
Fund on 60 days' written notice to the Investment Manager, or by the Investment
Manager on 60 days' written notice to the Fund. This Agreement shall immediately
terminate in the event of its assignment.
12. The Investment Manager shall not be liable to the Fund or any shareholder of
the Fund for any error of judgment or mistake of law or for any loss suffered by
the Fund or the Fund's shareholders in connection with the matters to which this
Agreement relates, but nothing herein contained shall be construed to protect
the Investment Manager against any liability to the Fund or the Fund's
shareholders by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties or by reason of its reckless disregard of
obligations and duties under this Agreement.
13. As used in this Agreement, the terms "interested person," "assignment," and
"majority of the outstanding voting securities" shall have the meanings provided
therefor in the 1940 Act, and the rules and regulations thereunder.
14. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
15. This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, provided, however, that nothing herein shall be
construed in a manner inconsistent with the 1940 Act or any rule or regulation
promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
ROCKWOOD FUND, INC.
By /s/ Thomas B. Winmill
ROCKWOOD ADVISERS, INC.
By: /s/ Robert D. Anderson
SUBADVISORY AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, by and between
ROCKWOOD ADVISERS, INC., a Delaware corporation (the "Investment Manager") and
ASPEN SECURITIES AND ADVISORY, INC., an Idaho corporation (the "Subadviser").
WHEREAS the Investment Manager intends to enter into an investment
management agreement (the "Management Agreement") with Rockwood Fund, Inc. (the
"Fund") pursuant to which the Investment Manager will furnish the Fund with
investment management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager
may, at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment Advisers Act of
1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to
provide subadvisory and research services in connection with the Fund and the
Subadviser is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Investment Manager will manage the investment and reinvestment of the
assets of Fund including the regular furnishing of advice with respect to the
Fund's portfolio transactions subject at all times to the control and oversight
of the Board of Directors of the Fund, for the period and on the terms set forth
in its Management Agreement with the Fund. The Investment Manager retains
responsibility for selecting brokers, monitoring trade executions, communicating
instructions to the Fund's custodian and other Fund agents, and all other
functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The Subadviser agrees to permit the use of its name and the names
of its personnel and other information about the Subadviser in the marketing and
other literature in connection with the Fund.
3. In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, shall pay to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are hereby defined as the actual amounts received
by the Investment Manager as compensation pursuant to paragraph 7 of the
Management Agreement less reimbursements, if any, pursuant to the guaranty set
forth in paragraph 9 of the Management Agreement and waivers of such
compensation by the Investment Manager. The amount of the percentage and the
timing of the payment shall be determined by the schedule and accompanying
definitions set forth in Appendix A hereto.
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4. The Subadviser will pay all expenses incurred by it in connection with
this Subadvisory Agreement.
5. The services of the Subadviser hereunder are not to be deemed exclusive, and
the Subadviser shall be free to render similar services to others in addition to
the Investment Manager and the Fund so long as its services hereunder are not
impaired thereby. The Subadviser shall not render, however, similar services to
any investment company either directly or indirectly as an adviser, subadviser,
portfolio manager, consultant, or otherwise, other than to the Fund and other
investment companies for which the Investment Manager or its affiliates provide
investment management services. In the event of termination of this Subadvisory
Agreement, the Subadviser agrees that until the later of (A) two years from the
date of this Subadvisory Agreement or (B) one year from the date of such
termination, the Subadviser shall not, and shall use its best efforts to assure
that its directors, officers, employees, agents, and similar personnel shall
not, render similar services to any investment company either directly or
indirectly as an adviser, subadviser, portfolio manager, consultant, or
otherwise, and this agreement shall survive the termination of this Subadvisory
Agreement.
6. This Subadvisory Agreement shall become effective upon approval by the
directors and shareholders of the Fund as required by the Investment Company Act
of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. The Subadviser shall not be liable to the Fund or any shareholder of the Fund
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Subadvisory Agreement relates, but
nothing herein contained shall be construed to protect the Subadviser against
any liability to the Fund by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Subadvisory Agreement.
8. Subject to and in accordance with the Articles of Incorporation and Bylaws of
the Fund, the Investment Manager, and the Subadviser, it is understood that
directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall be governed by law
and by the provisions, if any, of said Articles of Incorporation or Bylaws.
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<PAGE>
9. All notices hereunder shall be in writing and shall be delivered in person or
sent by facsimile transmission that is confirmed by regular, registered, or
certified mail to the following address for the respective parties:
Rockwood Advisers, Inc.
11 Hanover Square
New York, NY 10005
Fax: (212) 785-0400
Aspen Securities and Advisory, Inc.
545 Shoup Avenue,
Suite 303 Idaho Falls, ID
83405 Fax: (208) 528-0017
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
ROCKWOOD ADVISERS, INC.
By: /s/ Thomas B. Winmill
ASPEN SECURITIES AND ADVISORY, INC.
By: /s/ Ross H. Farmer
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APPENDIX A
ROCKWOOD FUND, INC.
SUBADVISORY FEE
The Investment Manager shall pay to the Subadviser within 30 days of
each Performance Determination Date, as defined in paragraph A below, a
percentage of the Net Fees, as defined in paragraph 3 of this Subadvisory
Agreement, earned since the later of the effective date of this Subadvisory
Agreement or the prior Performance Determination Date, as defined in paragraph A
below. The amount of the percentage shall be determined by reference to the grid
set forth below.
SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
<TABLE>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50 basis
points better than ATR points of ATR points below ATR
<S> <C> <C> <C> <C>
Less than or equal to $15,000,000 30% 20% 10%
Greater than $15,000,000 and 40% 30% 20%
Less than or equal to $50,000,000
Greater than $50,000,000 50% 40% 30%
- ---------------------------------- ------------------------------ ------------------------- -------------------------
</TABLE>
A. "Relative Performance" shall be determined from comparing the Fund's total
return with the average total return ("ATR") of funds with the investment
objective of "growth" as compiled by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The Relative
Performance shall be determined as of the last calendar day of each month
("Performance Determination Date") and shall measure the Relative Performance
for the most recent 3 year period ("Measurement Period"), except that (A) for
the first 12 months of this Subadvisory Agreement, Relative Performance shall be
based upon annualized returns, the first three Performance Determination Dates
shall be the next three calendar quarter ends after the effective date of this
Subadvisory Agreement, and the Measurement Periods shall be the most recent
three months and the fourth Performance Determination Date shall be the next
calendar quarter end and the Measurement Period shall be the most recent 1 year
period, and (B) for the 13th through the 24th month of this Subadvisory
Agreement, Relative Performance shall be determined as of the last calendar day
of each month and shall measure the Relative Performance for the most recent 1
year period.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
A-1
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DISTRIBUTION AGREEMENT
AGREEMENT made as of February 28, 1997, between ROCKWOOD FUND, INC.
("Fund"), a corporation organized and existing under the laws of the State of
Maryland, and Investor Service Center, Inc. ("Distributor"), a corporation
organized and existing under the laws of the State of Delaware.
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund desires to retain the Distributor as principal
distributor in connection with the offering and sale of the shares of common
stock ("Shares") and of such other series as may hereafter be designated
("Series") by the Fund's Board of Directors ("Board"); and
WHEREAS the Distributor is willing to act as principal distributor for
such Shares and for each such Series on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Distributor as its exclusive agent
to be the principal distributor to sell and to arrange for the sale of the
Shares on the terms and for the period set forth in this Agreement. The
Distributor hereby accepts such appointment and agrees to act hereunder..
2. Services and Duties of the Distributor.
(a) The Distributor agrees to sell the Shares on a best efforts basis
from time to time during the term of this Agreement as agent for the Fund and
upon the terms described in the Registration Statement. As used in this
Agreement, the term "Registration Statement" shall mean the currently effective
registration statement of the Fund, and any supplements thereto, under the
Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
(b) Upon the later of the date of this Agreement or the initial
offering of the Shares to the public by a Series, the Distributor will hold
itself available to receive purchase orders, satisfactory to the Distributor for
Shares of that Series and will accept such orders on behalf of the Fund as of
the time of receipt of such orders and promptly transmit such orders as are
accepted to the Fund's transfer agent. Purchase orders shall be deemed effective
at the time and in the manner set forth in the Registration Statement.
(c) The Distributor in its discretion may enter into agreements to sell
Shares to such registered and qualified retail dealers, as it may select. In
making agreements with such dealers, the Distributor shall act only as principal
and not as agent for the Fund.
(d) The offering price of the Shares of each Series shall be the net
asset value per Share as next determined by the Fund following receipt of an
order at the Distributor's principal office. The Fund shall promptly furnish the
Distributor with a statement of each computation of net asset value.
(e) The Distributor shall not be obligated to sell any certain number of Shares.
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<PAGE>
(f) The Distributor shall provide ongoing shareholder services, which
include responding to shareholder inquiries, providing shareholders with
information on their investments in the Series and any other services now or
hereafter deemed to be appropriate subjects for the payments of "service fees"
under Rule 2830 of the National Association of Securities Dealers, Inc.'s
Conduct Rules (collectively, "service activities").
(g) The Distributor shall have the right to use any lists of
shareholders of the Fund or any other lists of investors which it obtains in
connection with its provision of services under this Agreement; provided,
however, that the Distributor shall not sell or knowingly provide such lists of
shareholders to any unaffiliated person unless reasonable payment is made to the
Fund.
3. Authorization to Enter into Dealer Agreements and to Delegate Duties as
Distributor. With respect to any or all Series, the Distributor may enter into a
dealer agreement with respect to sales of the Shares or the provision of service
activities with any registered and qualified dealer. In a separate contract or
as part of any such dealer agreement, the Distributor also may delegate to
another registered and qualified dealer ("sub-distributor") any or all of its
duties specified in this Agreement, provided that such separate contract or
dealer agreement imposes on the sub-distributor bound thereby all applicable
duties and conditions to which the Distributor is subject under this Agreement,
and further provided that such separate contract meets all requirements of the
1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by the Distributor hereunder
are not to be deemed exclusive and the Distributor shall be free to furnish
similar services to others so long as its services under this Agreement are not
impaired thereby. Nothing in this Agreement shall limit or restrict the right of
any director, officer or employee of the Distributor, who may also be a
director, officer or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar or a dissimilar nature.
5. Compensation for Distribution and Service Activities.
(a) As compensation for its distribution and service activities under
this Agreement with respect to each Series and its shareholders, the Distributor
shall receive from the Fund a fee (or fees) at the rate and under the terms and
conditions of the Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
("Plan") adopted by the Fund with respect to the Series, as such Plan is amended
from time to time, and subject to any further limitations on such fee as the
Board may impose.
(b) The Distributor may reallow any or all of the fees it is paid to such
dealers as the Distributor may from time to time determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw offering Shares
of any or all Series by written notice to the Distributor at its principal
office.
(b) The Fund shall determine in its sole discretion whether
certificates shall be issued with respect to the Shares. If the Fund has
determined that certificates shall be issued, the Fund will not cause
certificates representing Shares to be issued unless so requested by
shareholders. If such request is transmitted by the
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<PAGE>
Distributor, the Fund will cause certificates evidencing Shares to be issued in
such names and denominations as the Distributor shall from time to time direct.
(c) The Fund shall keep the Distributor fully informed of its affairs
and shall make available to the Distributor copies of all information, financial
statements, and other papers which the Distributor may reasonably request for
use in connection with the distribution of Shares, including, without
limitation, certified copies of any financial statements prepared for the Fund
by its independent public accountant and such reasonable number of copies of the
most current prospectus, statement of additional information, and annual and
interim reports of any Series as the Distributor may request, and the Fund shall
cooperate fully in the efforts of the Distributor to sell and arrange for the
sale of the Shares of the Series and in the performance of the Distributor's
duties under this Agreement.
(d) The Fund shall take, from time to time, all necessary action,
including payment of the related filing fee, as may be necessary to register
Shares of each Series under the 1933 Act to the end that there will be available
for sale such number of Shares as the Distributor may be expected to sell. The
Fund agrees to file, from time to time, such amendments, reports, and other
documents as may be necessary in order that there will be no untrue statement of
a material fact in the Registration Statement, nor any omission of a material
fact which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each Series for sale under
the securities laws of such states or other jurisdictions as the Distributor and
the Fund may approve, and, if necessary or appropriate in connection therewith,
to qualify and maintain the qualification of the Fund as a broker or dealer in
such jurisdictions; provided that the Fund shall not be required to amend its
Articles of Incorporation or By-Laws to comply with the laws of any
jurisdiction, to maintain an office in any jurisdiction, to change the terms of
the offering of the Shares in any jurisdiction from the terms set forth in its
Registration Statement, to qualify as a foreign corporation in any jurisdiction,
or to consent to service of process in any jurisdiction other than with respect
to claims arising out of the offering of the Shares. The Distributor shall
furnish such information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the Securities and Exchange Commission and state and
other regulatory bodies, and shall assume expenses related to communications
with shareholders of each Series, including (i) fees and disbursements of its
counsel and independent public accountant; (ii) the preparation, filing and
printing of registration statements and/or prospectuses or statements of
additional information required under the federal securities laws; (iii) the
preparation and mailing of annual and interim reports, prospectuses, statements
of additional information and proxy materials to shareholders; and (iv) the
qualifications of Shares for sale and of the Fund as a broker or dealer under
the securities laws of such jurisdictions as shall be selected by the Fund and
the Distributor pursuant to Paragraph 6(e) hereof, and the costs and expenses
payable to each such jurisdiction for con tinuing qualification therein.
8. Expenses of the Distributor. Distributor shall bear all costs and expenses of
(i) preparing, printing and distributing any materials not prepared by the Fund
and other materials used by the Distributor in connection with the sale of
Shares under this Agreement, including the additional cost of printing copies of
prospectuses, statements of additional information, and annual and interim
shareholder reports other than copies thereof required for distribution to
existing shareholders or for filing with any Federal or state securities
authorities; (ii) any expenses of advertising incurred by the Distributor in
connection with such
3
<PAGE>
offering; (iii) the expenses of registration or qualification of the Distributor
as a broker or dealer under federal or state laws and the expenses of continuing
such registration or qualification; and (iv) all compensa tion paid to the
Distributor's employees and others for selling Shares, and all expenses of the
Distributor, its employees and others who engage in or support the sale of
Shares as may be incurred in connection with their sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors, and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or arising
out of or based upon any alleged omission to state a material fact required to
be stated in the Registration Statement or necessary to make the statements
therein not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by the Distributor to the Fund for use in
the Registration Statement; provided, however, that this indemnity agreement
shall not inure to the benefit of any person who is also an officer or director
of the Fund or who controls the Fund within the meaning of Section 15 of the
1933 Act, unless a court of competent jurisdiction shall determine, or it shall
have been determined by controlling precedent, that such result would not be
against public policy as expressed in the 1933 Act; and further provided, that
in no event shall anything contained herein be so construed as to protect the
Distributor against any liability to the Fund or to the shareholders of any
Series to which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Agreement. The
Fund shall not be liable to the Distributor under this indemnity agreement with
respect to any claim made against the Distributor or any person indemnified
unless the Distributor or other such person shall have notified the Fund in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or such other person (or after the Distributor
or the person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from
any liability which it may have to the Distributor or any person against whom
such action is brought otherwise than on account of this indemnity agreement.
The Fund shall be entitled to participate at its own expense in the defense or,
if it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity agreement. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to indemnified defendants in the suit whose approval shall not be
unreasonably withheld. In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Fund does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to notify the Distributor promptly of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of its
Shares.
(b) The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates (including any loss
4
<PAGE>
arising out of the receipt by the Distributor of inadequate consideration in
connection with an order to purchase Shares whether in the form of fraudulent
check, draft or wire; a check returned for insufficient funds; or any other
inadequate consideration (hereinafter "Check Loss")), except a loss resulting
from the willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement; provided, however, that the Fund shall not be
liable for Check Loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Distributor.
(c) The Distributor agrees to indemnify, defend, and hold the Fund, its
officers and directors and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending against such claims, demands or liabilities and any counsel fees
incurred in connection there with) which the Fund, its directors or officers, or
any such controlling person may incur under the 1933 Act or under common law or
otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by the Distributor
to the Fund for use in the Registration Statement, arising out of or based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement necessary to
make such information not misleading, or arising out of any agreement between
the Distributor and any retail dealer, or arising out of any supplemental sales
literature or advertising used by the Distributor in connection with its duties
under this Agreement. The Distributor shall be entitled to participate, at its
own expense, in the defense or, if it so elects, to assume the defense of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by the Distributor and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it will reimburse
the indemnified defendants in the suit for the reasonable fees and expenses of
any counsel retained by them.
10. Services Provided to the Fund by Employees of the Distributor. Any person,
even though also an officer, director, employee or agent of the Distributor who
may be or become an officer, director, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting in any business of the
Fund, to be rendering such services to or acting for solely the Fund and not as
an officer, director, employee or agent or one under the control or direction of
the Distributor even though paid by the Distributor.
11. Duration and Termination.
(a) This Agreement shall become effective as of the date first written
above, provided that, with respect to any Series, this Agreement shall not take
effect unless such action has first been approved by vote of a majority of the
Board and by vote of a majority of those directors of the Fund who are not
interested persons of the Fund, and have no direct or indirect financial
interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such directors collectively being referred to
herein as the "Independent Directors"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for one year from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (i) by a vote of a majority of the Independent Directors, cast
in person at a meeting called for the
5
<PAGE>
purpose of voting on such approval, and (ii) by the Board or with respect to any
given Series by vote of a majority of the outstanding voting securities of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series, this
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent Directors or by vote
of a majority of the outstanding voting securities of the Shares of such Series
on sixty days' written notice to the Distributor or by the Distributor at any
time, without the payment of any penalty, on sixty days' written notice to the
Fund or such Series. This Agreement will automatically terminate in the event of
its assignment.
(d) Termination of this Agreement with respect to any given Series
shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series.
12. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
13. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of New York and the 1940 Act. To the extent that the applicable
laws of the State of New York conflict with the applicable provisions of the
1940 Act, the latter shall control.
14. Notice. Any notice required or permitted to be given by either party to the
other shall be deemed sufficient upon receipt in writing at the other party's
principal offices.
15. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors. As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meaning as such terms have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
ATTEST: ROCKWOOD FUND, INC.
/s/ William J. Maynard By: /s/ Thomas B. Winmill
ATTEST: INVESTOR SERVICE CENTER, INC.
/s/ William J. Maynard By: /s/ Robert D. Anderson
6
<PAGE>
SHAREHOLDER ADMINISTRATION AGREEMENT
AGREEMENT made as of February 28, 1997 between Rockwood Fund, Inc., a
Maryland corporation ("Fund"), and Investor Service Center, Inc. ("ISC"), a
Delaware corporation.
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund desires to retain ISC to provide certain shareholder
services for the Fund and each Series of shares now existing or as hereinafter
may be established; and
WHEREAS, as a convenience to the Fund and its shareholders ISC is
willing to furnish such services at cost and without a view to profit thereby;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ISC as agent to perform the services
for the period and on the terms set forth in this Agreement. ISC accepts such
appointment and agrees to furnish the services herein set forth, in return for
the reimbursement specified in paragraph 3 of this Agreement. ISC agrees to
comply with all relevant provisions of the 1940 Act and the Securities Exchange
Act of 1934, as amended ("1934 Act"), and applicable rules and regulations
thereunder in performing such services.
2. Services and Duties of ISC. ISC shall be responsible for the following
services relating to shareholders of the Fund ("Shareholders"): (a) assisting
the transfer agent in receiving and responding to written and telephone
Shareholder inquiries concerning their accounts; (b) processing Shareholder
telephone requests for transfers, purchases, redemptions, changes of address and
similar matters; (c) assisting as necessary in proxy solicitation; (d) providing
a service center for coordinating, researching and answering general inquiries,
as well as those required by legal process, regarding Shareholder account data;
and (e) administering and correcting Fund records as authorized by the Board of
Directors of the Fund.
3. Reimbursement. For the performance of its obligations hereunder, the Fund
will reimburse ISC the actual costs incurred with respect thereto, including,
without limitation, the following costs and all other expenses related to the
performance of ISC's obligations hereunder: (a) benefits, payroll taxes, and
search costs of ISC personnel; (b) telephone; (c) rent; (d) equipment, including
telephone PBX, answering machine, call distributor, conversation recording
machine and maintenance thereon; (e) blue sky registration and filing for ISC
and its registered representatives; (f) travel and meals; (g) mail, postage, and
overnight delivery services; (h) allocated E&O and fidelity bond insurance; (i)
publications, memberships, and subscriptions; (j) office supplies; (k) printing;
(l) Shareholder service related training courses; and (m) corporate audit and
franchise taxes. Such costs and expenses shall be allocated among the Fund and
the other investment companies or series thereof for which ISC or any affiliate
thereof provides services similar to those provided hereunder based on the
relative number of open Shareholder accounts and other factors deemed
appropriate by the Board of Directors of the Fund.
4. Cooperation with Accountants. ISC shall cooperate with the Fund's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion, including but not limited to the opinion included in the Fund's
semi-annual reports on Form N-SAR.
1
<PAGE>
5. Equipment Failures. In the event of failures beyond ISC's control, ISC shall
take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.
6. Responsibility of ISC. ISC shall be under no duty to take any action on
behalf of the Fund or any Series except as specifically set forth herein or as
may be specifically agreed to by ISC in writing. In the performance of its
duties hereunder, ISC shall be obligated to exercise care and diligence, but
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of ISC or reckless
disregard by ISC of its duties under this Agreement. Without limiting the
generality of the foregoing or of any other provision of this Agreement, in
connection with its duties under this Agreement, ISC shall not be liable for
delays or errors occurring by reason of circumstances beyond ISC's control,
including acts of civil or military authorities, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
7. Indemnification. The Fund agrees to indemnify and hold harmless ISC and its
agents from all taxes, charges, expenses, assessments, claims and liabilities
including (without limitation) liabilities arising under the Securities Act of
1933, as amended, the 1934 Act and any state and foreign securities and blue sky
laws and regulations, all as or to be amended from time to time, and expenses,
including (without limitation) attorneys' fees and disbursements arising
directly or indirectly from any action or matter which ISC takes or does or
omits to take or do.
8. Duration and Termination. This Agreement shall continue until terminated by
the Fund with respect to any or all Series thereof, or by ISC. Termination of
this Agreement with respect to any given Series shall in no way affect the
continued validity of this Agreement or the performance thereunder with respect
to any other Series.
9. Amendments. This Agreement or any part thereof may be changed or waived only
by an instrument in writing signed by the party against which enforcement of
such change or waiver is sought.
10. Miscellaneous. This Agreement embodies the entire contract and understanding
between the parties hereto. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions thereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding and shall inure to the benefit
of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers designated below as of the date first above written.
ATTEST: ROCKWOOD FUND, INC.
/s/ William J. Maynard By: /s/ Thomas B. Winmill
ATTEST: INVESTOR SERVICE CENTER, INC.
/s/ William J. Maynard By: /s/ Robert D. Anderson
2
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated November 14, 1996 on the
financial statements and financial highlights of The Rockwood Growth Fund. Such
financial statements and financial highlights appear in the 1996 Annual Report
to Shareholders which is incorporated by reference in the Statement of
Additional Information filed in Post-Effective Amendment No. 18 under the
Securities Act of 1933 and Amendment No. 20 under the Investment Company Act ot
1940 to the Registration Statement of The Rockwood Growth Fund. We also consent
to the references to our Firm in the Registration Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 15, 1997
PLAN OF DISTRIBUTION
WHEREAS ROCKWOOD FUND, INC. (the "Fund") is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end management
investment company, and offers for public sale shares of common stock; and
WHEREAS the Fund has entered into a Distribution Agreement ("Agreement")
with Investor Service Center, Inc. (the "Distributor") pursuant to which the
Distributor has agreed to serve as the principal distributor for the Fund;
NOW, THEREFORE, the Fund hereby adopts this plan of distribution
("Plan") with respect to the Fund in accordance with Rule 12b-1 under the 1940
Act.
1. As Distributor for the Fund, the Distributor may spend such amounts as it
deems appropriate on any activities or expenses primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, but not limited to: advertising, direct mail, and
promotional expenses; compensation to the Distributor and its employees;
compensation to and expenses, including overhead and telephone and other
communication expenses, of the Distributor, the Investment Manager, the Fund,
and selected broker/dealers and their affiliates who engage in or support the
distribution of shares or who service shareholder accounts; fulfillment
expenses, including the costs of printing and distributing prospectuses,
statements of additional information, and reports for other than existing
shareholders; the costs of preparing, printing and distributing sales literature
and advertising materials; and internal costs incurred by the Distributor and
allocated by the Distributor to its efforts to distribute shares of the Fund or
service shareholder accounts such as office rent and equipment, employee
salaries, employee bonuses and other overhead expenses.
2. A. The Fund is authorized to pay to the Distributor, as compensation for the
Distributor's distribution and service activities as defined in paragraph 13
hereof with respect to its shareholders, a fee at the rate of 0.25% on an
annualized basis of its average daily net assets. All or a portion of such fee
may be designated by the Fund's board of directors ("Board") as a fee for
service activities or as a fee for distribution activities. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. The Fund may pay fees to the Distributor at a lesser rate than the fees
specified in paragraph 2A of this Plan as mutually agreed to by the Board and
the Distributor.
3. This Plan shall not take effect until it has been approved by:
A. the vote of at least a majority of the outstanding voting securities of the
Fund; and
B. the vote cast in person at a meeting called for the purpose of
voting on this Plan of a majority of both (i) those directors of the Fund who
are not interested persons of the Fund and have no direct or indirect financial
interest in the operation of this Plan or any agreement related to it (the "Plan
Directors"), and (ii) all of the directors then in office.
4. This Plan shall continue in effect for one year from its execution or
adoption and thereafter for
1
<PAGE>
so long as such continuance is specifically approved at least annually in the
manner provided for approval of this Plan in paragraph 3B.
5. The Distributor shall provide to the Board and the Board shall review, at
least quarterly, a written report of the amounts expended under this Plan and
the purposes for which such expenditures were made. A reasonable allocation of
overhead and other expenses of the Distributor related to its distribution
activities and service activities, including telephone and other communication
expenses, may be included in the information regarding amounts expended for such
activities.
6. This Plan may not be amended to increase materially the amount of fees
provided for in paragraphs 2A and 2B hereof unless such amendment is approved by
a vote of a majority of the outstanding voting securities of the Fund, and no
material amendment to this Plan shall be made unless approved by the Board and
the Plan Directors in the manner provided for approval of this Plan in para
graph 3B.
7. The amount of the fees payable by the Fund to the Distributor under
paragraphs 2A and 2B hereof is not related directly to expenses incurred by the
Distributor on behalf of the Fund in serving as distributor, and paragraph 2
hereof does not obligate the Fund to reimburse the Distributor for such
expenses. The fees set forth in paragraphs 2A and 2B hereof will be paid by the
Fund to the Distributor unless and until this Plan is terminated or not renewed.
If this Plan is terminated or not renewed, any expenses incurred by the
Distributor on behalf of the Fund in excess of payments of the fees specified in
paragraphs 2A and 2B hereof which the Distributor has received or accrued
through the termination date are the sole responsibility and liability of the
Distributor, and are not obligations of the Fund.
8. Any other agreements related to this Plan shall not take effect until
approved in the manner provided for approval of this Plan in paragraph 3B.
9. The Distributor shall use its best efforts in rendering services to the Fund
hereunder, but in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties or reckless disregard of its
obligations and duties hereunder, the Distributor shall not be liable to the
Fund, the Fund or to any shareholder of the Fund for any act or failure to act
by the Distributor or any affiliated person of the Distributor or for any loss
sustained by the Fund, the Fund or the Fund's shareholders.
10. This Plan may be terminated at any time by vote of a majority of the Plan
Directors, or by vote of a majority of the outstanding voting securities of the
Fund.
11. While this Plan is in effect, the selection and nomination of directors who
are not interested persons of the Fund shall be committed to the discretion of
the directors who are not interested persons.
12. The Fund shall preserve copies of this Plan and any other agreements related
to this Plan and all reports made pursuant to paragraph 5 hereof, for a period
of not less than six years from the date of this Plan, or the date of any such
agreement or of any such report, as the case may be, the first two years in an
easily accessible place.
13. For purposes of this Plan, "distribution activities" shall mean any
activities in connection with the Distributor's performance of its services
under this Plan or the Agreement that are not deemed
2
<PAGE>
"service activities." "Service activities" shall mean activities covered by the
definition of "service fee" contained in Rule 2830 of the National Association
of Securities Dealers, Inc.'s Conduct Rules.
14. As used in this Plan, the terms: "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
IN WITNESS WHEREOF, the Fund has executed this Plan as of the day and
year set forth below in the City and State of New York.
DATE: February 28, 1997
ATTEST: ROCKWOOD FUND, INC.
/s/ William J. Maynard By: /s/ Thomas B. Winmill
3
<PAGE>
AGREEMENT BETWEEN
INVESTOR SERVICE CENTER, INC.
AND
HANOVER DIRECT ADVERTISING COMPANY, INC.
AGREEMENT made as of February 28, 1997 by and between INVESTOR SERVICE
CENTER, INC., a corporation organized under the laws of the State of Delaware
(the "Distributor") and HANOVER DIRECT ADVERTISING COMPANY, INC., a corporation
organized under the laws of the State of Delaware ("HDAC").
WHEREAS, the Distributor and HDAC are affiliates of Rockwood Advisers, Inc.
(the "Investment Manager"), the investment manager to Rockwood Fund, Inc. (the
"Fund"); and
WHEREAS, pursuant to a Distribution Agreement between the Fund and the
Distributor, the Distributor acts as the Fund's principal agent for the sale of
Fund shares. The Fund has also adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, HDAC is an advertising agency and desires to provide the
Distributor with marketing services; and
WHEREAS, the Distributor desires to enter into an agreement with HDAC
related to the Plan;
NOW THEREFORE, in accordance with Rule 12b-1 of the 1940 Act, the
Distributor and HDAC hereby enter into this agreement (the "Agreement") on the
following terms and conditions:
1. HDAC will provide services to the Distributor on behalf of the Fund and
the other investment companies.
2. All expenses incurred hereunder shall be deemed expenses incurred under
the Plan.
3. HDAC shall bill the Distributor at standard industry rates, which
includes commissions. HDAC will absorb any of its costs exceeding such
commissions.
4. This Agreement shall not take effect until it has been approved by the vote
of a majority of both (i) those directors of the Fund who are not "interested
persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of this Agreement or the Plan or any other
agreement related to it (the "12b-1 Directors"), and (ii) all of the directors
then in office, cast in person at a meeting (or meetings) called for the purpose
of voting on this Agreement and such related Agreements.
5. This Agreement shall continue in effect for one year from its execution or
adoption and thereafter for so long as such continuance is specifically approved
at least annually in the manner provided for approval of the Plan.
1
<PAGE>
6. HDAC shall provide to the Board of Directors of the Fund and the directors
shall review, at least quarterly, a written report of all expenditures made
pursuant to this Agreement, and the purposes for which such expenditures were
made.
7. HDAC shall use its best efforts in rendering services to the Distributor and
the Fund hereunder, but in the absence of willful misfeasance, bad faith, or
gross negligence in the performance of its duties or reckless disregard of its
obligations and duties hereunder, HDAC shall not be liable to the Distributor or
the Fund or to any shareholder of the Fund for any act or failure to act by HDAC
or any affiliated person of HDAC or for any loss sustained by the Fund or its
shareholders.
8. Nothing contained in this Agreement shall prevent HDAC or any affiliated
person of HDAC from performing services similar to those to be performed
hereunder for any other person, firm, corporation or for its or their own
accounts or for the accounts of others.
9. This Agreement may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement shall automatically terminate in the
event of its assignment, as defined in the 1940 Act.
10. This Agreement may not be modified in any manner which would materially
increase the amount of money to be spent pursuant to the Plan and no material
amendment to this Agreement shall be made unless approved in the manner provided
for approval and annual renewal above.
11. The Fund shall preserve copies of this Agreement and all reports made
pursuant to paragraph 6 hereof, for a period of not less than six years from the
date of this Agreement, the first two years in an easily accessible place.
12. This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the 1940 Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
IN WITNESS WHEREOF, the Distributor and HDAC have executed this
Agreement on the day and year set forth above in the City and State of New York.
INVESTOR SERVICE CENTER, INC.
By: /s/ Thomas B. Winmill
HANOVER DIRECT ADVERTISING COMPANY, INC.
By: /s/ Robert D. Anderson
2
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Rockwood Fund, Inc.'s Annual Report and is qualifed in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000767531
<NAME> Rockwood Fund,Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Oct-31-1996
<PERIOD-START> Nov-01-1995
<PERIOD-END> Oct-31-1996
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 968,038
<INVESTMENTS-AT-VALUE> 1,114,458
<RECEIVABLES> 48,799
<ASSETS-OTHER> 59,737
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,222,994
<PAYABLE-FOR-SECURITIES> 15,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,154
<TOTAL-LIABILITIES> 23,404
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 807,459
<SHARES-COMMON-STOCK> 49,491
<SHARES-COMMON-PRIOR> 41,317
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 245,711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 146,420
<NET-ASSETS> 1,199,590
<DIVIDEND-INCOME> 2,213
<INTEREST-INCOME> 1,359
<OTHER-INCOME> 0
<EXPENSES-NET> 28,368
<NET-INVESTMENT-INCOME> (24,796)
<REALIZED-GAINS-CURRENT> 253,710
<APPREC-INCREASE-CURRENT> (36,721)
<NET-CHANGE-FROM-OPS> 192,193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,308
<NUMBER-OF-SHARES-REDEEMED> 7,125
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 425,719
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,497
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,382
<AVERAGE-NET-ASSETS> 1,110,921
<PER-SHARE-NAV-BEGIN> 18.73
<PER-SHARE-NII> (.56)
<PER-SHARE-GAIN-APPREC> 6.07
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.24
<EXPENSE-RATIO> 2.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
