As filed with the Securities and Exchange Commission on May 10, 1999
FORM N-1A
1933 Act File No. 033-02430
1940 Act File No. 811-04534
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. -----
Post-Effective Amendment No. 23
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
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)
DEBORAH A. SULLIVAN, ESQ.
11 Hanover Square, New York, NY 10005
(Name and Address of Agent for Service)
Copies to:
Stuart H. Coleman, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038-4982
It is proposed that this filing will become effective on (May 10, 1999) pursuant
to paragraph (b) 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 January 21, 1999.
<PAGE>
ROCKWOOD FUND, INC.
TABLE OF CONTENTS
This registration statement consists of the following:
Cover Sheet
Table of Contents
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Addition Information
Part C - Other Information
Signature Page
Exhibits
2
<PAGE>
ROCKWOOD FUND, INC.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
Item No.
of Form N-lA Caption in Prospectus
1 Front and Back Cover Pages
2 "Investment Objective and Strategy", "Main Risks",
"Past Performance"
3 "Fees and Expenses of the Fund"
4 "Investment Objective and Strategy", "Main Risks"
5 not applicable
6 "Management"
7 "Purchasing Shares", "Redeeming Shares", "Account and Transaction
Policies", "Distributions and Taxes"
8 "Fees and Expenses of the Fund"
9 "Financial Highlights"
Caption in Statement of Additional Information
10 Cover Page
11 "Description of the Fund"
12 "Investment Objective and Strategy", "Investment Restrictions"
13 "Management of the Fund"
14 "Management of the Fund"
15 "Management of the Fund", "Investment Manager"
16 "Allocation of Brokerage"
17 Not Applicable
18 "Determination of Net Asset Value", "Purchase of Shares"
19 "Distributions and Taxes"
20 "Distribution of Shares"
21 "Calculation of Performance Data"
22 "Financial Statements"
3
<PAGE>
(insert design)
Rockwood Fund, Inc.
Prospectus dated May 10, 1999
Rockwood Fund, Inc. seeks long term capital appreciation. This objective will be
pursued through investment in common stocks. There is no assurance that the Fund
will achieve its objective.
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.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
INVESTMENT OBJECTIVE AND STRATEGY .............................................2
MAIN RISKS ....................................................................2
PAST PERFORMANCE ..............................................................3
FEES AND EXPENSES OF THE FUND .................................................3
PORTFOLIO MANAGEMENT ..........................................................4
DISTRIBUTION AND SHAREHOLDER SERVICES .........................................4
FINANCIAL HIGHLIGHTS ..........................................................5
PURCHASING SHARES .............................................................6
REDEEMING SHARES ..............................................................7
ACCOUNT AND TRANSACTION POLICIES ..............................................7
DISTRIBUTIONS AND TAXES .......................................................7
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks long term capital appreciation.
The Fund seeks to achieve this objective by investing primarily in equity
securities. Any income which the Fund earns is incidental to its objective of
capital appreciation. The Fund will purchase primarily common stocks, which will
be selected generally for their potential for long term capital appreciation and
not dividend yield. Generally, the Fund will invest in companies expected to
achieve above-average growth, which have small, medium or large capitalizations.
In attempting to achieve capital appreciation, the Fund employs aggressive and
speculative investment strategies. The Fund may borrow money to purchase
securities and engage in short selling, where risk of loss is potentially
unlimited. Additionally, the Fund may invest in special situations such as
liquidations and reorganizations. The Fund may also lend portfolio securities to
other parties. The Fund may invest in options, warrants, financial futures, and
forward contracts, for which there is no assurance of success.
The Fund may from time to time take defensive positions, such as investing some
or all of its assets in cash, cash equivalents, money market securities,
short-term bonds, repurchase agreements, and convertible bonds. When the Fund
takes a defensive position, the Fund may not achieve its investment objective
over the short term.
MAIN RISKS
Market. The primary market risks associated with investing in the Fund are those
related to fluctuations in the value of the Fund's portfolio. A risk of
investing in stocks is that their value will go up and down reflecting stock
market movements and you could lose money. However, you also have the potential
to make money. Also, investing in stocks involves a greater risk of loss of
income than bonds because stocks need not pay dividends.
Small Capitalization. The Fund may invest in companies that are small or thinly
capitalized, and may have a limited operating history. A potential risk in
investing in small-cap stocks is that small-cap stocks are likely more
vulnerable than larger companies to adverse business or economic developments.
During broad market downturns, Fund value may fall further than that of funds
investing in larger companies. Full development of small-cap 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.
Non-Diversification. The Fund is non-diversified which means that more than 5%
of the Fund's assets may be invested in the securities of one issuer. As a
result, the Fund may hold a smaller number of issuers than if it were
diversified. If this situation occurs, investing in the Fund could involve more
risk than investing in a Fund that holds a broader range of securities because
changes in the financial condition of a single issuer could cause greater
fluctuation in the Fund's total return.
Illiquid Securities. The Fund may invest up to 15% of its assets in illiquid
securities. Potential risks from investing in illiquid securities are that
illiquid securities can 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.
Lending. The Fund may lend portfolio securities to borrowers for a fee.
Securities may only be lent if the Fund receives collateral equal to the market
value of the assets lent. Some risk is involved if the borrowers suffer
financial problems and are unable to return the assets lent.
<PAGE>
Portfolio Management. The portfolio manager's skill in choosing appropriate
investments for the Fund will determine in large part whether the Fund achieves
its investment objectives.
Active Trading. The Fund expects to trade securities actively. This strategy
could increase transaction costs, reduce performance, and may result in taxable
distributions.
Year 2000. The Fund could be adversely affected if computer systems used by
Rockwood Advisers, Inc. and the Fund's other service providers do not properly
process and calculate date-related information on and after January 1, 2000.
Rockwood Advisers, Inc. is working to avoid these problems and to obtain
assurances from other service providers that they are taking similar steps.
There could be a negative impact on the Fund. While the Fund cannot, at this
time, predict the degree of impact, it is possible that foreign markets will be
less prepared than U.S. markets.
PAST PERFORMANCE
The bar chart provides some indiction of the risks of investing in the Fund by
showing changes in the Fund's performance from year to year. The table compares
the Fund's average annual returns for the 1, 5 and 10 year periods with those of
the Russell 2000 Index, an index that is unmanaged and fully invested in common
stocks of small companies. Both the bar chart and the table assume reinvestment
of dividends and distributions. As with all mutual funds, past performance is
not necessarily an indication of future performance.
Year-by-year total percent return as of 12/31 each year
[GRAPHIC OMITTED]
1989: 19.14 1990: (31.75) 1991: 6.39 1992: 28.00 1993: 14.30 1994: 1.58
1995: 32.84 1996: 18.67 1997: 3.54 1998: (13.82)
Best Quarter:
1/96 - 3/96
24.77%
Worst Quarter:
7/90 - 9/90
(19.47)%
Average annual total return for the periods ended 12/31/98
1 Year 5 Years 10 Years
------ ------- --------
Rockwood Fund (13.82)% 7.40% 6.10%
Russell 2000 Index (2.57)% 11.87% 12.92%
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the following tables. Shareholder fees are paid out of
your account. Annual Fund operating expenses are paid out of Fund assets, so
their effect is included in the share price.
<PAGE>
Shareholder fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price).........................................NONE
Maximum Deferred Sales Charge (Load)........................................NONE
Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................NONE
Redemption Fee within 30 days of purchase..................................1.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)( as % of average daily net assets)
Management fees ..........................................................1.00%
Distribution and service (12b-1) fees ....................................0.25%
Other expenses ...........................................................8.02%
Total annual fund operating expenses .....................................9.27%
Fee waiver and Expense reimbursement......................................7.29%
Net expenses..............................................................1.98%*
*Reflects a contractual obligation by Rockwood Advisers, Inc. to waive and/or
reimburse the Fund to the extent Total annual fund operating expenses exceed
1.90% of average daily net assets, excluding certain expenses.
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds:
<TABLE>
<S> <C> <C> <C> <C>
One Three Five Ten
The example assumes that you invest $10,000 in the Fund for Year Years Years Years
the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the
Fund's operating expenses remain the same, except for the
first year in each of the time periods indicated. Although
your actual costs may be higher or lower, based on these
assumptions your costs would be**.................................. $201 $2,030 $3,707 $7,310
<FN>
**The first year expenses in each of the time periods indicated are based on a
contractual agreement.
</FN>
</TABLE>
PORTFOLIO MANAGEMENT
Rockwood Advisers, Inc. is the investment manager of the Fund, providing
day-to-day advice regarding portfolio transactions and is located at 11 Hanover
Square, New York, New York 10005. Bassett S. Winmill, Chief Investment Officer
of the investment manager, is the Fund's portfolio manager. Mr. Winmill has
served as a portfolio manager of the Fund since February 2, 1999. 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.
Generally, the Fund pays the investment manager a management 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.
For the fiscal year ended December 31, 1998, the investment manager waived all
fees.
DISTRIBUTION AND SHAREHOLDER SERVICES
Investor Service Center, Inc. is the distributor of the Fund and services
shareholder accounts. The Fund has adopted a plan under Rule 12b-1 and pays the
distributor a distribution or 12b-1 fee in an amount of one quarter of one
percent per annum of the Fund's average daily net assets as compensation for
distribution and service activities. These fees are
<PAGE>
paid out of the Fund's assets on an ongoing-basis. Over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the past five years. In 1998,
the fiscal year end changed to December 31. Previously, the fiscal year end was
October 31. Certain information reflects financial results for a single Fund
share. Total return shows how much your investment in the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. The figures for the periods ended 1996 through 1998
were audited by Tait, Weller & Baker, the Fund's independent accountants, whose
report, along with the Fund's financial statements, are included in the Annual
Report, which is available upon request. The Fund's financial statements for
periods prior to 1996 were audited by other auditors whose reports thereon
expressed unqualified opinions on those statements.
<TABLE>
<CAPTION>
Two Months Ended
December 31, Years Ended October 31,
1998 1998 1997 1996 1995 1994
- ---------------------------------------------------- ----------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA*
Net asset value at beginning of period $15.67 $24.92 $24.24 $18.73 $16.61 $16.32
.................................................... ........... .......... ......... ......... ......... ........
Income from investment operations:
Net investment income (loss) (.04) (.25) (.59) (.56) (.31) (.22)
Net Gains or Losses on Securities (both
realized and unrealized) .98 (7.20) 6.17 6.07 2.43 .51
Total from investment operations .94 (7.45) 5.58 5.51 2.12 .29
- ---------------------------------------------------- ----------- ---------- --------- --------- --------- --------
Less distributions:
Distributions (from capital gains) (2.04) (1.80) (4.90) .00 .00 .00
Total distributions (2.04) (1.80) (4.90) .00 .00 .00
.................................................... ........... .......... ......... ......... ......... ........
Net asset value, end of period $14.57 $15.67 $24.92 $24.24 $18.73 $16.61
TOTAL RETURN 6.48% (31.29)% 27.55% 29.42% 12.76% 1.78%
- ---------------------------------------------------- ----------- ---------- --------- --------- --------- --------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $548 $613 $1,771 $1,200 $774 $714
Ratio of expenses to average net assets(a)(b) 2.85%** 2.09% 2.81% 2.55% 2.30% 2.00%
Ratio of net income to average net assets(c) (1.54)%** (1.38)% (2.65)% (2.23)% (1.77)% (1.38)%
Portfolio turnover rate 0% 207.02% 44.00% 42.48% 30.04% 18.26%
<FN>
*Per share net investment loss and net realized and unrealized gain on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share.
**Annualized.
(a)Ratio prior to reimbursement by the investment manager was 18.84%**, 9.27%,
10.47%, 4.44%, 3.00%, and 2.82%, for the two months ended December 31, 1998 and
the years ended October 31, 1998, 1997, 1996, 1995, and 1994, respectively.
(b)Ratio after custodian fee credits was 1.97% for the year ended October 31,
1998. There were no custodian fee credits for prior years. (c)Ratio prior to
reimbursement by the manager was (17.53)%**, (8.56)%, (10.31)%, (4.12)%,
(2.47)%, and (2.20)% for the two months ended December 31, 1998 and the years
ended October 31, 1998, 1997, 1996, 1995, and 1994, respectively.
</FN>
</TABLE>
<PAGE>
PURCHASING SHARES
Your price for Fund shares is the Fund's next calculation, after the order is
placed, of net asset value (NAV) per share which is determined as of the close
of regular trading on the New York Stock Exchange (currently, 4 p.m. eastern
time) each day the exchange is open. The Fund's investments are valued based on
market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the Fund's board.
OPENING YOUR ACCOUNT
By check. Complete and sign the Account Application that accompanies this
prospectus and mail it, along with your check made payable to Rockwood Fund, to
Investor Service Center, Box 419789, Kansas City, MO 64141-6789 (see Minimum
Investments below).
By wire. Call toll-free 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 (see Minimum Investments below).
Minimum Investments
<TABLE>
<CAPTION>
Account Type Initial Subsequent IRA Accounts Initial Subsequent
- ------------------------ --------- ---------- ---------------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Regular $1,000 $100 Traditional, Roth IRA $1,000 $100
Unif Gifts/Trans to $1,000 $100 Spousal, Rollover IRA $1,000 $100
Minors
403(b) plan $1,000 $100 SEP-IRA, SIMPLE IRA $1,000 $100
Automatic Investment $100 $100 Education IRA $500 No min.
Program
........................ ......... .......... ...................... ......... ...........
</TABLE>
Checks must be payable to Rockwood Fund in U.S. dollars. Third party checks
cannot be accepted. You will be charged a fee for any check that does not clear.
IRAs and retirement accounts. For more information about the IRAs and retirement
accounts listed above, please call toll-free 1-888-ROCKWOOD.
Automatic Investment Program. With the 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 $100 or more into your Fund account.
................................................................................
Bank Transfer Plan For making automatic investments
from a designated bank account.
................................................................................
Salary Investing Plan For making automatic investments
through a payroll deduction.
................................................................................
Government Direct Deposit Plan For making automatic investments
from your federal employment,
Social Security or other regular
federal government check.
................................................................................
The Fund reserves the right to redeem any account if participation in the
program ends and the account's value is less than $1,000.
For more information, or to request the necessary authorization form, please
call toll-free 1-888-ROCKWOOD. You may modify or terminate the Bank Transfer
Plan at any time by written notice received 10 days prior to the scheduled
investment date. To modify or terminate the Salary Investing Plan or Government
Direct Deposit Plan, you should contact your employer or the appropriate U.S.
Government agency, respectively.
Adding to Your Account
By check. Complete a Rockwood FastDeposit form and mail it, along with your
check, made payable to Rockwood Fund, to Investor Service Center, Box 419789,
Kansas City, MO 64141-6789 (see Minimum Investments above). If you do not use
that form, include a letter indicating the account number to which the
subsequent investment is to be credited, and the name of the registered owner.
By Electronic Funds Transfer (EFT). Call toll-free 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. Requests received by 4 p.m., eastern time, will ordinarily
be credited to your Fund account within two business days. 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 (see
Minimum Investments above).
By wire. Subsequent investments by wire may be made at any time without having
to call by simply following the same wiring procedures above (see Minimum
Investments above).
REDEEMING SHARES
Generally, you may redeem by any of the methods explained below. Requests for
redemption should include the following information:
o name of the registered owner(s) of the account
o account number
o Fund name
o amount you want to sell
o name and address or wire information of person to receive proceeds
In some instances, a signature guarantee may be required. Signature guarantees
protect against unauthorized account transfers by assuring that a signature is
genuine. You can obtain one from most banks or securities dealers, but not from
a notary public. For joint accounts, each signature must be guaranteed. Please
call us to ensure that your signature guarantee will be processed correctly.
By mail. Write to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, and request the specific amount to be redeemed. The request must be
signed by the registered owner(s) and additional documentation may be required.
By telephone. Call toll-free 1-888-ROCKWOOD, to expedite redemption of Fund
shares.
By EFT. Call toll-free 1-888-ROCKWOOD and request the specific amount to be
redeemed through EFT. You may
<PAGE>
redeem as little as $250 worth of shares by requesting EFT service. EFT proceeds
are ordinarily available in your bank account within two business days.
By wire. Call toll-free 1-888-ROCKWOOD and request the specific amount to be
redeemed by wire.
Systematic Withdrawal Plan. If your shares have a value of at least $20,000 you
may elect automatic withdrawals from your Fund account, subject to a minimum
withdrawal of $100. All dividends and distributions are reinvested in the Fund.
ACCOUNT AND TRANSACTION POLICIES
Order execution. Orders to buy and sell shares are executed at the next NAV
calculated after the order has been accepted. Orders received on Fund business
days by 4 p.m., eastern time, will be executed from your account that day.
Orders received after 4 p.m., eastern time, will be executed from your account
on the next Fund business day.
Redemption fee. The Fund is designed as a long term investment, and short term
trading is discouraged. 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 NAV of shares redeemed or exchanged. Redemption fees are paid to
the Fund.
Redemption payment. Payment for shares redeemed will ordinarily be made within
seven days after receipt of the redemption request in proper form.
Accounts with below-minimum balances. If your account balance falls below $500
as a result of selling shares and not because of market action, the Fund
reserves the right, upon 45 days' notice, to close your account or request that
you buy more shares.
Telephone privileges. The Fund accepts telephone orders from all shareholders
and guards against fraud by following reasonable precautions such as requiring
personal identification before carrying out shareholder requests. You could be
responsible for any loss caused by an order which later proves to be fraudulent.
The Fund is not liable as long as the Fund follows reasonable procedures.
Assignment. Fund shares may be transferred to another owner. Instructions are
available by calling toll-free 1-888- ROCKWOOD.
DISTRIBUTIONS AND TAXES
Distributions. The Fund pays its shareholders dividends from any net investment
income, and distributes any net capital gains that it has realized, if any. Each
of these distributions, if any, is paid out once a year. Your distributions will
be reinvested in the Fund unless you instruct the Fund otherwise by calling
toll-free 1-888-ROCKWOOD.
Taxes. Generally, you will be taxed when you sell shares, exchange shares and
receive distributions (whether reinvested or taken in cash). Typically, your tax
treatment will be as follows:
Transaction Tax treatment
Income dividends...........................................Ordinary income
Short-term capital gains distributions.....................Ordinary income
Long-term capital gains distributions......................Capital gains
Sales or exchanges of shares held for more than one year...Capital gains or
losses
Sales or exchanges of shares held for one year or less.....Gains are treated as
ordinary income;
losses are subject to
special rules
Because income and capital gains distributions are taxable, you may want to
avoid making a substantial investment in a taxable account when the Fund is
about to declare a distribution. Each January, the Fund issues tax information
on its distributions for the previous year. Any investor for whom the Fund does
not have a valid taxpayer identification number will be subject to backup
withholding for taxes. The tax considerations described in this section do not
apply to tax-deferred accounts or other non-taxable entities. Because everyone's
tax situation is unique, please consult your tax professional about your
investment.
<PAGE>
(insert design)
(back cover)
FOR MORE INFORMATION
For investors who want more information on the Fund, the following documents are
available free upon request:
Annual/Semi-Annual Reports. Contains performance data, lists portfolio holdings
and contains a letter from the Fund's manager discussing recent market
conditions, economic trends and Fund strategies that significantly affected the
Fund's performance during the last fiscal year.
Statement of Additional Information (SAI). Provides a fuller technical and legal
description of the Fund's policies, investment restrictions, and business
structure. A current SAI is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference (is legally considered part of this
prospectus).
To Obtain Information
By telephone, call
1-888-ROCKWOOD
By mail, write to:
Rockwood Fund, Inc.
Box 419789
Kansas City, MO 64141-6789
By e-mail, write to:
[email protected]
On the Internet, Fund documents
can be viewed online or downloaded from:
SEC at http://www.sec.gov or
Rockwood at http://www.mutualfunds.net
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
The Fund's Investment Company Act file number is 811-04534.
<PAGE>
Statement of Additional Information May 10, 1999
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 May 10, 1999. 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.
The most recent Annual Report and Semi-Annual Report to Shareholders
for the Fund are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
DESCRIPTION OF THE FUND........................................................2
THE FUND'S INVESTMENT PROGRAM..................................................2
INVESTMENT RESTRICTIONS........................................................5
MANAGEMENT OF THE FUND.........................................................6
INVESTMENT MANAGER.............................................................8
CALCULATION OF PERFORMANCE DATA................................................9
DISTRIBUTION OF SHARES........................................................13
DETERMINATION OF NET ASSET VALUE..............................................14
PURCHASE OF SHARES............................................................15
ALLOCATION OF BROKERAGE.......................................................15
DISTRIBUTIONS AND TAXES.......................................................18
REPORTS TO SHAREHOLDERS.......................................................19
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT.............................19
AUDITORS......................................................................19
1
<PAGE>
DESCRIPTION OF THE FUND
The Fund is a Maryland corporation formed 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. Rockwood Advisers, Inc.
("Investment Manager") serves as the Fund's investment adviser and general
manager. Investor Service Center, Inc. ("Distributor") is the distributor of the
Fund's shares.
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.
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. Certain of these instruments
are often restricted securities
2
<PAGE>
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 ("QIBs"). 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.
("NASD") An insufficient number of QIBs 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 creditworthy
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 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
3
<PAGE>
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 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.
Year 2000 Risks. Like other investment companies, financial and
business organizations around the world, the Fund will be adversely affected if
the computer systems used by the Investment Manager and the Fund's other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Fund is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to the computer systems it uses and
to obtain satisfactory assurances that comparable steps are being taken by each
of the Fund's major service providers. The Fund does not expect to incur any
significant costs in order to address the Year 2000 Problem. However, at this
time there can be no assurances that these steps will be sufficient to avoid any
adverse impact on the Fund.
4
<PAGE>
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") (which currently limits borrowing to 33
1/3% of the value of the Fund's total assets);
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. 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:
The Fund may:
(i) Invest up to 15% of the value of its net assets in
illiquid securities, including repurchase agreements
providing for settlement in more than seven days after
notice.
(ii) Purchase securities issued by other investment companies
to the extent permitted under the 1940 Act.
5
<PAGE>
(iii) Pledge, mortgage, hypothecate or otherwise encumber its
assets to the extent permitted under the 1940 Act.
MANAGEMENT OF THE FUND
The Fund's board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements with those companies
that furnish services to the Fund. These companies are as follows: Rockwood
Advisers, Inc., Investment Adviser and General Manager; Investor Service Center,
Inc., Distributor; DST Systems, Inc., Transfer and Dividend Disbursing Agent;
and Investors Fiduciary Trust Company, Custodian.
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. There are seven investment companies advised by subsidiaries of
Winmill & Co. Incorporated (formerly Bull & Bear Group, Inc.) ("Winmill")
(collectively referred to as "Investment Company Complex").
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is a Financial Representative with New England Financial 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. He was born February 7, 1930. He is
also a Director of five 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 Hunt & Howe, Inc. executive recruiting consultants. He was born
December 14, 1930. He is also a Director of five other investment companies in
the Investment Company Complex.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
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 was born February 9, 1923. He is also a Director of five other investment
companies in the Investment Company Complex.
THOMAS B. WINMILL* -- Director, President, Chief Executive Officer, and General
Counsel. He is Co- President of the Investment Manager and the Distributor, and
of their affiliates. He is also a Director of eight other investment companies
in the Investment Company Complex. 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.
The executive officers of the Fund, each of whom serves at the
pleasure of the Board of Directors, are as follows:
BASSETT S. WINMILL -- Chairman of the Board and Chief Investment Officer. He is
Chairman of the Board of three investment companies advised by an affiliated
investment manager and of the parent of the Investment Manager, Winmill and
Chief Investment Officer of the Investment Manager. 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 Thomas B. Winmill.
THOMAS B. WINMILL -- Chairman, Chief Executive Officer, President and General
Counsel (see biographical information above).
ROBERT D. ANDERSON -- Vice Chairman. He is Vice Chairman of the Investment
Manager and its affiliates.
6
<PAGE>
He was 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. He was born December 7, 1929.
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., and from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading
Company.
He was born March 1, 1955.
JOSEPH LEUNG, CPA -- Chief Accounting Officer, Chief Financial Officer and
Treasurer. He is Chief Accounting Officer, Chief Financial Officer and Treasurer
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. He is a
member of the American Institute of Certified Public Accountants. He was born
September 15, 1965.
DEBORAH ANN SULLIVAN, ESQ. -- Chief Compliance Officer, Secretary and Vice
President. She is Chief Compliance Officer, Secretary and Vice President of the
investment companies in the Investment Company Complex, and the Investment
Manager and its affiliates. From 1993 through 1994 she was the Blue Sky
Paralegal for SunAmerica Asset Management Corporation and from 1992 through 1993
she was Compliance Administrator and Blue Sky Administrator with Prudential
Securities, Inc. and Prudential Mutual Fund Management, Inc. She is member of
the New York State Bar. She was born June 13, 1969.
*Thomas B. Winmill is an "interested person" of the Fund as defined by the 1940
Act, because of his position with the Investment Manager.
<TABLE>
<CAPTION>
Compensation Table
Name of Person, Aggregate Pension or Retirement Estimated Annual Total Compensation From
Position Compensa- Benefits Accrued as Benefits Upon Registrant and Investment
tion From Registrant Part of Fund Retirement Company Complex Paid to
Expenses Directors
<S> <C> <C> <C> <C>
Bruce B. Huber, None None None $12,500 from 6 Investment
Director Companies
James E. Hunt, None None None $12,500 from 6 Investment
Director Companies
John B. Russell, None None None $12,500 from 6 Investment
Director Companies
</TABLE>
Information in the preceding table is based on fees paid during the
Fund's fiscal year ended October 31, 1998.
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 22, 1999, 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 February 22, 1999, the officers and directors of the Fund
owned, as a group, less than 1% of the outstanding voting securities of the
Fund.
7
<PAGE>
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:
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.
Under the Investment Management Agreement, the Fund assumes and pays
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 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 will 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 will 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, is to 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.
Voluntary reimbursements for the year ended October 31, 1998 and the two
8
<PAGE>
months ended December 31, 1998 are $77,131 and $15,416, respectively. The Fund
reimbursed the Investment Manager $465 and $56 for providing certain
administrative and accounting services at cost for the year ended October 31,
1998 and December 31, 1998, respectively.
The Investment Manager, a registered investment adviser, is a
wholly-owned subsidiary of Winmill. The other principal subsidiaries of Winmill
include Investor Service Center, Inc., a registered broker-dealer, and Bull &
Bear Advisers, Inc. and Midas Management Corporation, registered investment
advisers
Winmill is a publicly-owned company whose securities are listed on
the Nasdaq National Market System ("NMS") and traded in the over-the-counter
market. Bassett S. Winmill, Chairman of the Board of Winmill, may be deemed a
controlling person of Winmill on the basis of his ownership of 100% of Winmill'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 $250,000,000 as of February
12, 1999.
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 December 31, 1998
One Year (13.82)%
Five Years 7.40%
Ten Years 6.10%
9
<PAGE>
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
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 one year, five year and
ten year periods ending December 31, 1998 is (13.82)%, 42.88%, and 80.85%,
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.
10
<PAGE>
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
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.
11
<PAGE>
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 Smith Barney GNMA Index -- includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government National
Mortgage Association.
Salomon Smith Barney 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 Smith Barney 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 Smith Barney 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.
12
<PAGE>
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 Smith Barney Holdings 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, the 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 may 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 who are not
"interested persons" of the Fund will 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 Winmill, 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 fees. The amount of Hanover Direct's fees 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 fees, Hanover Direct will absorb any of such
costs.
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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.
Of the amounts compensated to the Distributor during the Fund's
fiscal year ended October 31, 1998, and the two month period ended December 31,
1998, approximately $7 and $0, respectively, represented expenses incurred for
advertising; $1,297 and $47, respectively, for printing and mailing prospectuses
and other information to other than current shareholders, $937 and $130,
respectively, for salaries of marketing and sales personnel, $92 and $69,
respectively, for payments to third parties who sold shares of the Fund and
provided certain services in connection therewith, and $358 and $0,
respectively, for overhead and miscellaneous expenses.
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 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, Washington's Birthday, 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 listed or traded on a
national securities exchange or the NMS are valued at the last quoted sales
price on the day the valuations are made. Such listed securities that are not
traded on a particular day and securities traded in the over-the-counter market
that are not on the NMS are valued at the mean between the current bid and
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asked prices. Securities for which quotations from the national securities
exchange or the NMS are not readily available or reliable and other assets may
be valued based on over-the-counter quotations or at fair value as determined in
good faith by or under the direction 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 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 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 avail able.
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 shares, of the Funds or other Funds advised by the Investment
Manager or its affiliates. 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
15
<PAGE>
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
ongoing 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 trans actions and performing functions
incidental thereto (such as clearance, settlement, and custody). Pursuant to
arrangements with certain broker/dealers, such 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
broker/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.
Until March 31, 1999, Bull & Bear Securities, Inc. ("BBSI") was a
wholly owned subsidiary of Winmill and the Investment Manager's affiliate. BBSI
provides discount brokerage services to the public as an introducing broker
clearing through unaffiliated firms on a fully disclosed basis. The Investment
Manager was, until March 31, 1999, authorized to place Fund brokerage through
BBSI at its posted discount rates and indirectly through a BBSI clearing firm.
The Fund did not deal with BBSI in any transaction in which BBSI acts as
principal. The clearing firm executed trades in accordance with the fully
disclosed clearing agreement between BBSI and the clearing firm. BBSI was
financially responsible to the clearing firm for all trades of the Fund until
complete payment was received by the Fund or the clearing firm. BBSI provided
order entry services or order entry facilities to the Investment Manager,
arranged for execution and clearing of portfolio transactions through executing
and clearing brokers, monitored trades and settlements and performed 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 have been
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 adopted procedures in conformity
with Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid
to BBSI were 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 determined that portfolio
transactions may have been
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executed through BBSI if, in the judgment of the Investment Manager, the use of
BBSI was likely to result in price and execution at least as favorable as those
of other qualified broker/dealers and if, in particular transactions, BBSI
charged the Fund a rate consistent with that charged to comparable unaffiliated
customers in similar transactions. Brokerage transactions with BBSI were also
subject to such fiduciary standards as may be imposed by applicable law. The
Investment Manager's fees under its agreement with the Fund were not reduced by
reason of any brokerage commissions paid to BBSI.
Brokerage commissions paid in fiscal years ended October 31, 1996,
1997 and 1998 and the two month period ended December 31, 1998 were $9,411,
$2,059, $7,439 and $20, respectively. $5,554 and $0 of such commissions paid
during the fiscal year ended October 31, 1998 and the two month period ended
December 31, 1998 (representing approximately $4,264,012 and $0, in portfolio
transactions), respectively, was allocated to bro ker/dealers that provided
research services. $0 and $0 of such commissions paid during the fiscal year
ended October 31, 1998 and the two month period ended December 31, 1998,
respectively, was allocated to broker/dealers for selling shares of the Funds
and other Funds advised by the Investment Manager or its affiliates. During the
Fund's fiscal year ended October 31, 1996, the Fund paid $122 in brokerage
commissions to BBSI 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. During the Fund's fiscal
years ended October 31, 1997 the Fund paid $859 in brokerage commissions to BBSI
which represented approximately 41.74% of total brokerage commissions paid by
the Fund and 28.56% of the aggregate dollar amount of transactions involving the
payment of commissions. During the Fund's fiscal year ended October 31, 1998 and
the two month period ended December 31, 1998, the Fund paid $1,885 and $20 in
brokerage commissions to BBSI which represented approximately 25.34% and 100% of
total brokerage commissions paid by the Fund and 22.03% and 100% of the
aggregate dollar amount of transactions involving the payment of commissions,
respectively.
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 (a "bunched trade") if it appears that a combined order would reduce
brokerage commissions and/or result in a more favorable transaction price. All
accounts participating in a bunched trade shall receive the same execution price
with all transaction costs (e.g. commissions) shared on a pro rata basis. In the
event that there are insufficient securities to satisfy all orders, the partial
amount executed shall be allocated among participating accounts pro rata on the
basis of order size. In the event of a partial fill and the portfolio manager
does not deem the pro rata allocation of a specified number of shares to a
particular account to be sufficient, the portfolio manager may waive in writing
such allocation. In such event, the account's pro rata allocation shall be
reallocated to the other accounts that participated in the bunched trade.
Following trade execution, portfolio managers may determine in certain instances
that it would be fair and equitable to allocate securities purchased or sold in
such trade in a manner other than that which would follow from a mechanical
application of the procedures outlined above. Such instances may include (i)
partial fills and special accounts (In the event that there are insufficient
securities to satisfy all orders, it may be fair and equitable to give
designated accounts with special investment objectives and policies some degree
of priority over other types of accounts.); (ii) unsuitable or inappropriate
investment (It may be appropriate to deviate from the allocation determined by
application of these procedures if it is determined before the final allocation
that the security in question would be unsuitable or inappropriate for one or
more of the accounts originally designated). 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 or other affiliated
investment companies do business with may, from time to time, own more than 5%
of the publicly traded Class A non-voting Common Stock of Winmill, the parent of
the Investment Manager, and may provide clearing services to BBSI.
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
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Common Stock of Winmill, 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 two month period ended December 31, 1998
and the fiscal years ended October 31, 1998, 1997 and 1996, the Fund's portfolio
turnover rate was 0% and 207.02%, 44.00% and 42.48%, 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.
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 redeposit a shareholder check, thereby crediting 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'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.
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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 a December 31 fiscal year basis), plus
(3) generally, 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.
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 December 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO
64105 ("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, 8 Penn Center Plaza, Suite 800, Philadelphia,
PA 19103-2108, are the independent accountants for the Fund. Financial
statements of the Fund are audited annually.
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PART C. OTHER INFORMATION
ITEM 23. Exhibits
(a) Articles of Incorporation: Filed with the Securities and
Exchange Commission on February 26, 1997, accession number
0000767531-97-000005.
(b) By-Laws as now in effect: Filed with the Securities and
Exchange Commission on December 30, 1997, accession number
0000052234-97-000013.
(c) Articles of Incorporation: Filed with the Securities and
Exchange Commission on February 26, 1997, accession number
0000767531-97-000005. By-Laws as now in effect: Filed with
the Securities and Exchange Commission on December 30,
1997, accession number 0000052234-97-000013.
(d) Investment Management Agreement, filed with the Securities
and Exchange Commission on February 26, 1997, accession
number 0000767531-97-000005.
(e) (1) 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, accession number 0000767531-97-000005.
(2) Distribution Agreement, filed herewith
Securities and Exchange Commission on February
26, 1997, accession number 0000767531-97-000005.
(f) not applicable.
(g) (1) Form of Custody and Investment Accounting
Agreement, filed with the Securities and Exchange
Commission on February 3, 1998, accession number
0000767531-98-000005.
(2) Form of Retirement Plan Custodial Services
Agreement, filed with the Securities and Exchange
Commission on February 3, 1998, accession number
0000767531-98-000005.
(h) (1) Form of Transfer Agency Agreement, Filed
herewith.
(2) Shareholder Administration Agreement, filed with
the Securities and Exchange Commission on
February 26, 1997, accession number
0000767531-97-000005.
(3) Forms of credit facilities agreements, filed with
the Securities and Exchange Commission on
February 3, 1998, accession number
0000767531-98-000005.
(4) Forms of Securities Lending Authorization
Agreement, filed with the Securities and Exchange
Commission on February 3, 1998, accession number
0000767531-98-000005.
(5) Form of Segregated Account Procedural and
Safekeeping Agreement, filed with the Securities
and Exchange Commission on February 3, 1998,
accession number 0000767531-98-000005.
(i) Opinion and Consent of Counsel as to Legality of
Securities, filed herewith.
(j) (1) Accountant's Consent: Filed herewith.
(2) Opinion of Counsel with respect to eligibility
for effectiveness under paragraph (b)of Rule 485.
Filed herewith.
(n) Financial Data Schedule for the Fiscal Year End October 31,
1998, and for the two months ended December 31, 1998.
ITEM 24. Persons Controlled by or Under Common Control With
Registrant
Not Applicable.
ITEM 25. 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.
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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 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 26. 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 an
officers of other Funds managed by CEF Advisers, Inc. (formerly Bull & Bear
Advisers, Inc.) and Midas Management Corporation, both of which are wholly-owned
subsidiaries of Winmill & Co. Incorporated (formerly 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. Winmill & Co.
Incorporated'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. CEF Advisers, Inc. serves as investment manager of Bull & Bear Dollar
Reserves, a series of shares issued by Bull & Bear Funds II, Inc.; Bull & Bear
U.S. Government Securities Fund, Inc., Global Income Fund, Inc.; Tuxis
Corporation; 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 27. 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.
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Name and Principal Position and Offices Position and Offices
Business Address with Service Center with Registrant
- ------------------------ --------------------------- ------------------------
Robert D. Anderson Vice Chairman N/A
11 Hanover Square and Director
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Thomas B. Winmill President, Director, President, Director,
11 Hanover Square General Counsel Chief Executive Officer
New York, NY 10005
Deborah A. Sullivan Vice President, Vice President,
11 Hanover Square Secretary, Secretary,
New York, NY 10005 Compliance Officer Compliance Officer
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
Joseph Leung Treasurer, Treasurer,
11 Hanover Square Chief Accounting Officer, Chief Accounting Officer,
New York, NY 10005 Chief Financial Officer Chief Financial Officer
Item 28. 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 Fiduciary
Trust Company, 801 Pennsylvania, Kansas City, MO 64105 (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 Fiduciary Trust
Company and DST Systems, Inc. are kept at 11 Hanover Square, New York, NY 10005
(the offices of Registrant and the Investment Manager).
Item 29. Management Services
There are no management related service contracts not discussed in
Part A or Part B of this Registration Statement.
Item 30. Undertakings
None.
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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, thereunto
duly authorized, in the City, County and State of New York on this 10th day of
May, 1999.
ROCKWOOD FUND, INC.
/s/Thomas B. Winmill
Thomas B. Winmill, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/Thomas B. Winmill Chairman, President, General May 10, 1999
Thomas B. Winmill Counsel and Chief Executive Officer
/s/Joseph Leung Treasurer, May 10, 1999
Joseph Leung Chief Accounting Officer,
Chief Financial Officer
/s/Bruce B. Huber Director May 10, 1999
Bruce B. Huber
/s/James E. Hunt Director May 10, 1999
James E. Hunt
/s/John B. Russell Director May 10, 1999
John B. Russell
<PAGE>
EXHIBIT INDEX
PAGE
EXHIBIT NUMBER
(23)(h) (1) Form of Transfer Agency Agreement.
(23)(j) (1) Accountants' consent.
(2) Opinion of counsel with respect to eligibility for
effectiveness under paragraph (b) of Rule 485.
(23)(n) Financial Data Schedule for the Fiscal Year End October 31,
1998, and for the two months ended December 31, 1998.
Law office
WRIGHT, MCNAMARA, HOMER & DAVIS
P.O. Box 578
445 No Capital
Idaho Falls, Idaho 83402
October 17, 1985
Ross H. Harmer, President
Rockwood Growth Fund, Inc.
545 Shoup Avenue
Idaho Falls, Idaho 83402
Re: Rockwood Growth Fund, Inc.
registration of indefinite
number of shares
Dear Mr. Farmer:
The Rockwood Growth Fund, Inc. proposes to register an indefinite number of
the Funds's ten cent par value common stock as permitted by Rule 24F-2 under the
Investment Company Act of 1940 ("1940 Act").
In connection with above mentioned registration you have requested our
opinion of counsel regarding the legality of the shares to be registered and
sold.
In preparing our opinion we have reviewed the Articles of Incorporation of
of the Fund, confirmation that the Fund is in good standing in the State of
Idaho; copies of the Fund's Bylaws that you have represented to be true and
correct as amended; the minutes of the meetings or actions of the Fund's Board
of Directors that you have represented to us to be true and correct; general
business corporation law of the State of Idaho.
In forming our opinions set forth below, we have relied without independent
verification, upon the aforesaid representations of the officers and directors
of the Fund, and the representations that the documents described above are true
and correct, and our opinion is qualified to the extent of such reliance.
Based upon the foregoing and subject to the qualification contained therin,
it is our opinion that under the general business corporation law of the state
of Idaho the indefinite number of shares to be registered, when sold, will be
legally issued, fully paid, and non-assessable, provided that a minimum of ten
cents per share is received on the sale of the shares, and futher provided that
the number of the issued shares does not exceed the number of shares autorized
by the Articles of Incorporation of the Fund as amended from time to time.
We Consent to the filing of this opinion as an exhibit to the registration
statement filed with the commissioner and to the use of this opinion in
connection with any filing with any state securities agency or commission in any
state in which shares are to be offered.
Very truly yours,
WRIGHT, McNAMARA, HOMER & DAVIS
/s/ Harlow J. McNamara
Harlow J. McNamara
Attorney at Law
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Post-Effective Amendment to the
Registration Statement on Form N-1A of Rockwood Fund, Inc. and to the use of our
report dated January 15, 1999 on the financial statements and financial
highlights. Such financial statements and financial highlights appear in the
December 31, 1998 Annual Report to Shareholders which is incorporated by
reference in the Registration Statement.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
May 10, 1999
May 10, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are counsel to Rockwood Fund, Inc. (the "Fund"), and in so acting have
reviewed Post-Effective Amendment No. 23 (the "Post-Effective Amendment") to the
Fund's Registration Statement on Form N-1A, Registration File No. 33-02430.
Representatives of the Fund have advised us that the Fund will file the
Post-Effective Amendment pursuant to paragraph (b) of Rule 485 ("Rule 485")
promulgated under the Securities Act of 1933. In connection therewith, the Fund
has requested that we provide this letter.
In our examination of the Post-Effective Amendment, we have assumed the
conformity to the originals of all documents submitted to us as copies.
Based upon the foregoing, we hereby advise you that the prospectus included as
part of the Post-Effective Amendment does not include disclosure which we
believe would render it ineligible to become effective pursuant to paragraph (b)
of Rule 485.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
TRANSFER AGENCY AGREEMENT
This Agreement made as of the 19th day of August, 1996 between The
Rockwood Growth Fund, Inc., an Idaho corporation (liFund") , having its
principal office and place of business at 11 Hanover Square, New York, New York
10005 and DST Systems, Inc., ("DST") a Delaware corporation having its principal
office and place of business at 1055 Broadway, Kansas City, Missouri 64105-1594
(hereinafter referred to as the "Transfer Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "Approved Institution" shall mean an entity so named in a Certificate.
From time to time the Fund may amend a previously delivered Certificate by
delivering to the Transfer Agent a Certificate naming an additional entity or
deleting any entity named in a previously delivered Certificate.
2. The "Board of Directors" shall mean the Board of Directors of the Fund.
3. "Certificate" shall mean any notice, instruction, or other instrument in
writing,
authorized or required by this Agreement to be given to the Transfer Agent by
the Fund which is signed by any Officer, as hereinafter defined, and actually
received by the Transfer Agent.
4. "Custodian" shall mean the financial institution appointed as custodian
under the terms and conditions of the Custody Agreement between the financial
institution and the Fund, or its successors)
5. "Fund Business Day" shall be deemed to be each day on which the York
Stock Exchange, Inc. is open for trading.
6. "Officer" shall be deemed to be the Fund's President, any Vice President
of the Fund, the Fund's Secretary, the Fund's Treasurer, the Fund's Controller,
any Assistant Controller of the Fund, any Assistant Treasurer of the Fund and
any Assistant Secretary of the Fund, and any other person duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and named in the Certificate annexed
hereto as Appendix A, as such Certificate may be amended from time to time, and
any person reasonably believed by the Transfer Agent to be such a person.
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7. "Out-of-Pocket Expenses" means amounts reasonably necessary and actually
incurred by Transfer Agent in the provision of Transfer Agent services or
pursuant to this Agreement for the following purposes: postage (and first class
mail insurance in connection with mailing share certificates), envelopes, check
forms, continuous forms, forms for reports and statements, stationery, and other
similar items, telephone and telegraph charges incurred in answering inquiries
from dealers or shareholders, microfilm used to record transactions in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms.
Transfer Agent may, at its option, arrange to have various service providers
submit invoices directly to the Fund for payment of out-of-pocket expenses
reimbursable hereunder; and such other expenses paid or incurred by Transfer
Agent at the request of the Fund. Any charges associated with special or
exception processing shall also be considered Out-of-Pocket Expenses.
8. "Prospectus" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
becomes effective, including the Statement of Additional Information,
incorporated by reference therein.
9. "Shares" shall mean all or any part of each class or series of the
shares of common stock of the Fund or Portfolio listed in the Certificate as to
which the Transfer Agent acts as transfer agent hereunder, as may be amended
from time to time, which are authorized and/or issued by the Fund.
10. "Transfer Agent" shall mean DST Systems, Inc., (FIDST'l), as transfer
agent and dividend disbursing agent under the terms and conditions of this
Agreement, its successors) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFERAGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as transfer
agent of all the Shares of the Fund and as dividend disbursing agent during the
period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of the
Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the Fund and all
amendments thereto certified by the Secretary of the Fund;
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<PAGE>
(ii) A copy of the By-Laws of the Fund certified by the Secretary of
the Fund;
(iii) A copy of a resolution of the Board of Directors of the Fund
certified by the Secretary of the Fund appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund specifying: the
number of authorized Shares, the number of such authorized Shares issued, the
number of such authorized Shares issued and currently outstanding; the names and
specimen signatures of the officers of the Fund; and the name and address of the
legal counsel for the Fund;
(v) Specimen Share certificate for each or series class of Shares in
the form approved by the Board of Directors of the Fund (and in a format
compatible with the Transfer Agent's system), together with a Certificate signed
by the Secretary of the Fund as to such approval;
(vi) Copies of the Fund's Registration Statement, as amended to date,
and the most recently filed Post-Effective Amendment thereto, filed by the Fund
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, together with
any applications filed in connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the validity of
the authorized and outstanding Shares, whether such Shares are fully paid and
non-assessable and the status of such Shares under the Securities Act of 1933,
as amended, and any other applicable federal law or regulation (i.e., if subject
to registration, that they have been registered and that the Registration
Statement has become effective or, if exempt, the specific grounds therefor.)
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents on
or before the effective date of any increase or decrease in the total number of
Shares authorized to be issued.
(a) A certified copy of the amendment to the Articles of Incorporation
giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the Fund
with respect to the validity of the Shares of the Fund and the status of such
Shares under the Securities Act of 1933, as amended, and any other applicable
3
<PAGE>
federal law or regulation (i.e., if subject to registration, that they have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the Transfer
Agent was theretofore expressly limited, a certified copy of a resolution of the
Board of Directors of the Fund increasing the authority of the Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant to
stock dividends or stock splits, etc., and prior to any reduction in the number
of shares outstanding, the Fund shall deliver the following documents to the
Transfer Agent:
(a) A certified copy of the resolutions) adopted by the Board of
Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the validity of
the Shares of the Fund and the status of such Shares under the Securities Act of
1933, as amended, and any other applicable federal law or regulation (i.e., if
subject to registration, that they have been registered and that the
Registration Statement has become effective, or, if exempt, the specific grounds
therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or
other capital adjustment requiring a change in the form of Share
certificates, the Transfer Agent will issue Share certificates in the new
form in exchange for, or upon transfer of, outstanding Share certificates
in the old form, upon receiving:
(a) A Certificate authorizing the issuance of the Share certificates
in the new form;
(b) A certified copy of any amendment to the Articles of of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in the new
form approved by the Board of Directors of the Fund, with a Certificate signed
by the Secretary of the Fund as to such approval; and
(d) An opinion of counsel for the Fund with respect to the validity of
the Shares in the new form and the status of such Shares under the Securities
Act of 1933, as amended, and any other applicable federal law or regulation
(i.e., if subject to registration, that the Shares have been registered and that
the Registration Statement has become effective or, if exempt, the specific
grounds therefor.)
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<PAGE>
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or otherwise by Officers of the Fund
authorized by law or by the By-Laws to sign Share certificates and, if required
shall bear the corporate Seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this section 2.
ARTICLE V
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a copy
of the Fund's Prospectus, which Prospectus describes how sales and redemption of
shares of the Fund shall be made, and the Transfer Agent agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. The Fund agrees to provide the
Transfer Agent with sufficient advance notice to enable the Transfer Agent to
effect any changes in the procedures set forth in the Prospectus regarding such
purchase and redemption procedure; provided, however, that in no event will such
advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution. The Transfer Agent shall
not be liable for any losses or damages to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
2. On each Fund Business Day the Transfer Agent shall, as of
the time at which the Fund computes the net asset value of the Fund, issue to
and redeem from the accounts specified in a purchase order, redemption request,
or computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Fund Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Fund
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part and shall within
twentyfour hours orally advise the Approved Institution which supplied such tape
of the discrepancy.
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3. In connection with a reinvestment of a dividend or distribution
of Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day the Transfer Agent shall supply the
Fund with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to preceding paragraph 2
of this Article; the total number of Shares of the Fund redeemed from
Shareholders by the Transfer Agent on such day; the total number of Shares of
the Fund, if any, sold on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares,
the Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign, issue and mail to such
shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day the Transfer Agent shall furnish the
Fund with an advice setting forth the number and dollar amount of Shares to be
redeemed on such Fund Business Day in accordance with paragraph 2 of this
Article.
7. Upon receipt of a proper redemption request and moneys paid to
it by the Custodian in connection with a redemption of Shares, the Transfer
Agent shall cancel the redeemed Shares and after making appropriate deduction
for any withholding of taxes required of it by applicable law (a) in the case of
a redemption of Shares pursuant to a redemption described in preceding paragraph
1(a) of this Article, make payment in accordance with the Fund's redemption and
payment procedures described in the Prospectus, and (b) in the case of a
redemption of Shares pursuant to a computer tape or electronic data transmission
described in preceding paragraph 1(b) of this Article, make payment by directing
a federal funds wire order to the account previously designated by the Approved
Institution specified in said computer tape or electronic data transmission.
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<PAGE>
8. The Transfer Agent shall not be required to issue any
Shares after it has received from an officer of the Fund or from an appropriate
federal or state authority written notification that the sale of Shares has been
suspended or discontinued, and the Transfer Agent shall be entitled to rely upon
such written notification.
9. Upon the issuance of any Shares in accordance with this
agreement the Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid by the Fund in connection with
such issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic
data transmission consistent with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
ll.(a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be
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<PAGE>
transferred or redeemed upon presentation to the Transfer Agent of Share
certificates or instructions properly endorsed for transfer or redemption,
accompanied by such documents as the Transfer Agent deems necessary to evidence
the authority of the person making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transf er taxes. In the case of
small estates where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer or redeem Shares registered in the name of a decedent where
the current market value of the Shares being transferred does not exceed such
amount as may from time to time be prescribed by various states. The Transfer
Agent reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the endorsement on the stock certificate or instructions is valid
and genuine, and for that purpose it will require, unless otherwise instructed
by an authorized officer of the Fund, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15 under the
Securities Exchange Act of 1934. The Transfer Agent also reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or redemptions which the
Transfer Agent, in its judgement, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Fund shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful misfeasance, bad
faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision contained
in this Agreement to the contrary, the Transfer Agent shall be fully protected
by the Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
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12. Notwithstanding any provision contained in this agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 13 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 13 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article.
13. (a) As used in this Agreement, the terms "computer tape or electronic
data transmission" and "computer tape believed by the Transfer Agent to be
furnished by an Approved Institution", shall include any tapes generated by the
Transfer Agent to reflect information believed by the Transfer Agent to have
been input by an Approved Institution, via a remote terminal or other similar
link, into a data processing, storage, or collection system, or similar system
(the "System"), located on the Transfer Agent's premises. For purposes of
paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as are agreed
upon from time to time by the Transfer Agent and Fund only if the information
reflected thereon was input to the System at such times as are agreed upon in
writing from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance,
any Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the Fund
when in the reasonable opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Fund's
records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or any
Assistant Secretary, either (i) setting forth the date of the
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<PAGE>
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or
resolution, as the case may be, the Fund shall, in the case of a cash dividend
or distribution, cause the Custodian to deposit in an account in the name of the
Transfer Agent on behalf of the Fund an amount of cash, if any, sufficient for
the Transfer Agent to make the payment, as of the mail date, specified in such
Certificate or resolution, as the case may be, to the Shareholders who were of
record on the record date. The Transfer Agent will, upon receipt of any such
cash, make payment of such cash dividends or distributions to the shareholders
of record as of the record date by: (i) mailing a check, payable to the
registered shareholder, to the address of record or dividend mailing address, or
(ii) wiring such amounts to the accounts previously designated by an Approved
Institution, as the case may be. The Transfer Agent shall not be liable for any
improper payments made in good faith and without negligence, in accordance with
a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
4. It is understood that the Transfer Agent shall file such
appropriateinformation returns concerning the payment of dividend and
capitalgain distributions with the proper federal, state and
local authorities as are required by law to be filed by the Fund but shall in no
way be responsible for the collection or withholding of taxes due on such
dividends or distributions due to shareholders, except and only to the extent,
required by applicable law.
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<PAGE>
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existig under the laws of
the State of Maryland.
(b) It is empowered under applicable laws and by its Articles of
Incorporation and By- Laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
(d) It is an investment company registered under the Investment
Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933, as
amended, with respect to the Shares is effective. The Fund shall notify the
Transfer Agent if such registration statement or any state securities
registrations have been terminated or a stop order has been entered with respect
to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and copies of all
amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund.
3. The Fund shall promptly deliver to the Transfer Agent written notice of
any change in the Officers authorized to sign Share Certificates, notifications
or requests, together with a specimen signature of each new Officer. In the
event any Officer who shall have signed manually or whose facsimile signature
shall have been affixed to blank Share certificates shall die, resign or be
removed prior to issuance of such Share certificates, the Transfer Agent may
issue such Share certificates of the Fund
11
<PAGE>
notwithstanding such death, resignation or removal, and the Fund shall promptly
deliver to the Transfer Agent such approval,adoption or ratification as may be
required by law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time, not to exceed
ten (10) business days, after it is actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund that:
(a) It is a corporation duly organized and existing under the laws of the
State of Delaware.
(b) It is empowered under applicable law and by its Charter and By-laws to
enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon reasonable notice to the Fund may
establish such additional procedures, rules and regulations governing the
transfer or registration of Share certificates as it may deem advisable and
consistent with such rules and regulations generally adopted by mutual fund
transfer agents.
4. The Transfer Agent shall keep such records as are specified in
Schedule II hereto in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Rules 3la-2 and
3la-3 under the Investment Company Act of 1940, as amended. The Transfer Agent
12
<PAGE>
acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, canceled Share certificate, or other document so returned, if and
when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the officers, employees, auditors of the Fund, or such
staff of applicable regulatory agencies as the Fund may designate, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance, gross negligence or reckless disregard of its
duties under this agreement.
6. (a) The Fund shall indemnify and exonerate, save and hold
harmless the Transfer Agent from and against any and all claims (whether with or
without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by any prior transfer agent of the Fund or as a result of any action taken
or omitted to be taken by the Transfer Agent in good faith and without
negligence or willful misconduct or in reliance upon (i) any provision of this
Agreement; (ii) the Prospectus; (iii) any instruction or order including,
without limitation, any computer tape or electronic data transmission reasonably
believed by the Transfer Agent to have been received from an Approved
Institution; (iv) any instrument, order or Share certificate
13
<PAGE>
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Of f icer of the Fund; (v) any Certificate or
other instructions of an Officer; or (vi) any opinion of legal counsel for the
Fund or the Transfer Agent. The Fund shall indemnify and exonerate, save and
hold the Transfer Agent harmless from and against any and all claims (whether
with or without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence in connection
with its appointment or in reliance upon any law, act, regulation or any
interpretation of the same even though such law, act or regulation may
thereafter have been altered, changed, amended or repealed.
(b) The Transfer Agent shall not settle any claim, demand, expense
or liability to which it may seek indemnity pursuant to paragraph 6(a) above
(each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Fund. The Transfer Agent shall notify the Fund within 15 days of
receipt of notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its right to
seek indemnification from the Fund unless the Fund is unable to adequately
defend the Indemnifiable Claim as a result of such failure, or if as a result of
the Transfer Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered. The Fund shall have
the right to defend any Indemnifiable Claim at its own expense, provided that
such defense shall be conducted by counsel selected by the Fund. The Transfer
Agent may join in such defense at its own expense, but to the extent that it
shall so desire the Fund shall direct such defense. The Fund shall not settle
any Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have an
adverse effect on the Transfer Agent beyond the scope of this Agreement. In the
event the Transfer Agent does not provide its written consent, each of the Fund
and the Transfer Agent shall be responsible for their own defense at their own
cost and expense, and such claim shall not be deemed an Indemnifiable Claim
hereunder. If the Fund shall fail or refuse to defend an Indemnifiable Claim,
the Transfer Agent may provide its own defense at the cost and expense of the
Fund. Anything in this
14
<PAGE>
Agreement to the contrary notwithstanding, the Fund shall not indemnify the
Transfer Agent against any liability or expense arising out of the Transfer
Agent's willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement.
The Transfer Agent shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as a result of the Transfer Agent's
lack of good faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Fund with respect
to any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian or Cash Management ]3ank has advised the Transfer Agent to
honor the redemption. Provided that the Transfer Agent inspects redemption
drafts with reasonable care to verify the drawer's signature against signatures
on file, the Transfer Agent shall not be liable for any material alteration or
absence or forgery of any endorsement.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
control and not reasonably foreseeable in that the Transfer Agent could not
reasonable have made back-up or alternative arrangements (collectively,
"Causes"), including, without limitation (except as provided below), mechanical
breakdowns of equipment (including any alternative power supply and operating
systems software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, strikes, lockouts, work stoppages
or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the
Fund for written instructions with respect to any matter arising in connection
with the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in
15
<PAGE>
any such application on or after the date specified therein unless, prior to
taking or omitting any such action, the Transfer Agent has received written
instructions in response to such application specifying the action to be taken
or omitted. The Transfer Agent may consult counsel of the Fund, or if acceptable
to the Fund, its own counsel, at the expense of the Fund and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in place of
certificates represented to have been lost, stolen, or destroyed upon receiving
written instructions from the shareholder accompanied by proof of an indemnity
or surety bond issued by a recognized insurance institution specified by the
Fund or the Transfer Agent. If the Transfer Agent receives written notification
from the shareholder or broker dealer that the certificate issued was never
received, and such notification is made within 30 days of the date of issuance,
the Transfer Agent may reissue the certificate without requiring a surety bond.
The Transfer Agent may also reissue certificates which are represented as lost,
stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing, the
Transfer Agent will reissue a certificate upon written authorization from an
officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund the Transfer Agent will
address and mail such appropriate notices to shareholders as the Fund may
direct.
13. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation
16
<PAGE>
to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares, or of a redemption of
any Shares, the propriety of the amount to be paid therefor, or the authority of
the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by the Fund,
or the legality of the issue of any Shares in payment of any stock dividend;
or
(d) The legality of any recapitalization or readjustment of
Shares.
14. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Schedule I hereto, (i) its
reasonable out-of-pocket expenses (including reasonable legal expenses and
attorney's fees) incurred in connection with its performance hereunder and (ii)
such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
15. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
16. Purchase and Prices of Services.
(a)The Fund will compensate the Transfer Agent for, and Transfer
Agent will provide, beginning on the execution date of this Agreement and
continuing until the termination of this Agreement as provided hereinafter, the
Services set forth in Schedule I.
(b)The current unit prices for the Services are set forth in
Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
after the third anniversary of the date hereof, the Transfer Agent may elect to
raise the Schedule III Fees upon ninety (90) days prior notice to the Fund.
Notwithstanding the annual right to raise the Schedule III Fees, the Transfer
Agent may increase prices due to changes in legal or regulatory requirements
subject to the approval of the Fund, which approval shall not be unreasonably
withheld.
17. Billing and Payment.
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<PAGE>
(a) The Transfer Agent shall bill the Fund as follows: (i) monthly in
arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii) monthly in
advance for estimated postage expenses to be incurred by the Transfer Agent for
the following month. Documentation to support reconciliation of actual postage
expense charges will be provided to the Fund monthly. The Transfer Agent may
from time to time request the Fund to make additional advances when appropriate.
(b) The Fund shall pay the Transfer Agent in immediately available
funds at United Missouri Bank in Kansas City, Missouri within thirty (30) days
of the date of the bill and receipt of supporting documents. Any amounts due
under this Agreement which are not paid within said thirty (30) day period shall
bear interest at the rate of one and one-half percent (1 1/2 %) per month from
such date until paid in full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination, which
shall be not less than ninety (90) days after the date of receipt of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating the successor transfer agent or transfer agents. In the event
such notice is given by the Transfer Agent, the Fund shall on or before the
termination date, deliver to the Transfer Agent a copy of a resolution of its
Board of Directors certified by the Secretary or any Assistant Secretary
designating a successor transfer agent or transfer agents. In the absence of
such designation by the Fund, the Fund shall upon the date specified in the
notice of termination of this Agreement and delivery of the records maintained
hereunder, be deemed to be its own transfer agent and the Transfer Agent shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Fund, shall deliver the records
of the Fund on electromagnetic media to the Fund or its successor transfer
agent. The Fund shall be responsible to the Transfer Agent for the reasonable
costs and expenses associated with the preparation and delivery of such media.
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<PAGE>
ARTICLE X
MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto, which consent shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its office at the address
first above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Transfer Agent shall be sufficiently given
if addressed to the Transfer Agent and mailed or delivered to the Secretary at
1055 Broadway, Kansas City, Missouri 64105-1594 with a copy to the President at
1055 Broadway, Kansas City, Missouri 64105-1594 or at such other place as the
Transfer Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns. This Agreement
shall not be assignable by either party without the written consent of the other
party, except that the Transfer Agent may assign this Agreement to a corporate
affiliate with advance written notice to and consent by the Fund, which consent
shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.
7. This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by the Transfer Agent will be referred to the
Fund.
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(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records, canceled certificates
and correspondence of the Fund created or produced prior to the time of
conversion which are under its control and acknowledged in a writing to the Fund
to be in its possession. Any expenses or liabilities incurred by the Transfer
Agent as a result of shareholder inquiries, regulatory compliance or audits
related to such records and not caused as a result of Transfer Agent's bad
faith, willful malfeasance or negligence shall be the responsibility of the Fund
as provided in Article VIII herein.
10. The Transfer Agent shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
periodic backup or computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of equipment
failures the Transfer Agent shall at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions, the Transfer Agent shall
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not caused
by the negligence of the Transfer Agent and provided further that the Transfer
Agent has complied with the provisions of this Paragraph.
11. The Transfer Agent agrees on its own behalf and that of its
employees to make reasonable efforts to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment advisor and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where Transfer Agent may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
12. The Transfer Agent shall maintain insurance of the types and in
the amounts deemed by it to be appropriate. To the extent that policies of
insurance may provide for coverage of claims for liability or indemnity by the
parties set forth in this Agreement, the contracts of insurance shall take
precedence, and no provision of this Agreement shall be construed to relieve an
insurer of any obligation to pay claims to the Fund, the Transfer Agent or other
insured party which would otherwise be a covered claim in the absence of any
provision of this Agreement.
13. The Transfer Agent represents and warrants that, to the
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<PAGE>
best of its knowledge, the various procedures and systems which the Transfer
Agent has implemented with regard to the safeguarding from loss or damage
attributable to fire, theft or any other cause (including provision for
twenty-four hours a day restricted access) of the Fund's blank checks,
certificates, records and other data and the Transfer Agent's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its judgment are required for the secure performance of its
obligations hereunder. The Transfer Agent shall review such systems and
procedures on a periodic basis and the Fund shall have access to review these
systems and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
DST SYSTEMS, INC. THE ROCKWOOD
GROWTH FUND, INC.
By: /s/ DST Systems. Inc. By: /s/ Thomas B. Winmill
(Signature) (Signature)
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<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements, Dealer
Statements.
DAILY ACTIVITY
- --------------
Maintain the following shareholder information in such a manner as
the Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each
certificate outstanding and cancellation date for each certificate
date for each certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash)
Type of account code
Establishment date indicating the date an account was opened,
carrying forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
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<PAGE>
Social Security or taxpayer identification number, and indication of
certification
Historical transactions on the account for the most recent 18
months, or other period as mutually agreed to from time-totime
Indication as to whether phone transactions can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant,etc.
An alternate or "secondary" account number issued by a dealer (or
bank, etc.) to a customer for use, inquiry and transaction input by
"remote accessors"
FUNCTIONS
- ---------
Answer investor and dealer telephone and/or written inquiries,
except those concerning Fund policy, or requests for investment
advice which will be referred to the Fund, or those which the Fund
chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e. Dividend
Codes, etc.
Microfilm source documents for transactions, such an account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
23
<PAGE>
employee benefit plans. Prepare and mail 5498s and 1099R's Solicit
missing taxpayer identification numbers Provide remote access
inquiry to Fund records via Fund supplied hardware (Fund responsible
for connection line and monthly fee)
REPORTS PROVIDED
- ----------------
Daily Journals Reflecting all shares and dollar activity
for the previous day
Blue Sky Report Supply information monthly for Fund's
preparation of Blue Sky Reporting
N-SAR Report Supply monthly correspondence, redemption
and liquidation information for use in
fund's N-SAR Report
Additionally, monthly average daily balance reports will be provided
at the Fund's request to the Fund at no charge. Prepare and mail
copies of summary statements to dealers and investment advisers
Generate and mail confirmation statements for financial transactions
DIVIDEND ACTIVITY
- -----------------
Reinvest or pay in cash including reinvesting in other funds within
the fund group serviced by the Transfer Agent as described in each
Fund Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
- ---------------
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<PAGE>
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same frequency as
investor statements
ANNUAL MEETINGS
- ---------------
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
- -------------------
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must
be adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to Governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S
Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
25
<PAGE>
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
Account applications
Canceled certif icates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment records
and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
26
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Rockwood Fund, Inc. semi-annual Report and is qualified 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> Year
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-START> Nov-1-1997
<PERIOD-END> Oct-31-1998
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 732,794
<INVESTMENTS-AT-VALUE> 631,363
<RECEIVABLES> 0
<ASSETS-OTHER> 455
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 631,818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,924
<TOTAL-LIABILITIES> 18,924
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 648,358
<SHARES-COMMON-STOCK> 39,116
<SHARES-COMMON-PRIOR> 71,061
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 65,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (101,431)
<NET-ASSETS> 612,894
<DIVIDEND-INCOME> 4,035
<INTEREST-INCOME> 2,327
<OTHER-INCOME> 0
<EXPENSES-NET> 21,180
<NET-INVESTMENT-INCOME> (14,818)
<REALIZED-GAINS-CURRENT> 66,114
<APPREC-INCREASE-CURRENT> (473,290)
<NET-CHANGE-FROM-OPS> (421,994)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 116,177
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,020
<NUMBER-OF-SHARES-REDEEMED> 44,937
<SHARES-REINVESTED> 5,973
<NET-CHANGE-IN-ASSETS> (1,158,041)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 116,030
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,762
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 99,624
<AVERAGE-NET-ASSETS> 1,091,321
<PER-SHARE-NAV-BEGIN> 24.92
<PER-SHARE-NII> (0.25)
<PER-SHARE-GAIN-APPREC> (7.20)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.67
<EXPENSE-RATIO> 2.09
<AVG-DEBT-OUTSTANDING> 20,978
<AVG-DEBT-PER-SHARE> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Rockwood Fund, Inc. Annual Report and is qualified 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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> Nov-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 567,182
<INVESTMENTS-AT-VALUE> 508,658
<RECEIVABLES> 362
<ASSETS-OTHER> 63,389
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 572,409
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,253
<TOTAL-LIABILITIES> 24,253
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 612,105
<SHARES-COMMON-STOCK> 37,611
<SHARES-COMMON-PRIOR> 39,116
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,425)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (58,524)
<NET-ASSETS> 548,156
<DIVIDEND-INCOME> 619
<INTEREST-INCOME> 644
<OTHER-INCOME> 0
<EXPENSES-NET> 2,747
<NET-INVESTMENT-INCOME> (1,484)
<REALIZED-GAINS-CURRENT> (5,425)
<APPREC-INCREASE-CURRENT> 42,907
<NET-CHANGE-FROM-OPS> 35,998
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 65,967
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,035
<NUMBER-OF-SHARES-REDEEMED> 7,244
<SHARES-REINVESTED> 4,704
<NET-CHANGE-IN-ASSETS> (64,738)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 65,967
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 983
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,163
<AVERAGE-NET-ASSETS> 576,788
<PER-SHARE-NAV-BEGIN> 15.67
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> (.98)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.57
<EXPENSE-RATIO> 2.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
