45
As filed with the Securities and Exchange Commission on April 24,
1996.
File #33-14604
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993 o
Pre-Effective Amendment No.
o
Post-Effective Amendment No. 11
x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
x
Amendment No. 13
(Check appropriate box or boxes.)
BERWYN INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1189 LANCASTER AVENUE, BERWYN, PENNSYLVANIA
19312
(Address of Principal
Executive Offices)
(Zip Code)
Registrant's Telephone Number, including Area Code
(610) 408-9850
KEVIN M. RYAN, 1199 LANCASTER AVENUE,
BERWYN, PA 19312
(Name and Address of Agent for Service)
Approximate date of PROPOSED Public Offering
April 24, 1996
It is proposed that this filing will become effective (check
appropriate box):
x immediately upon filing pursuant to paragraph (b)
o on (date) pursuant to paragraph (b)
o 60 days after filing pursuant to paragraph (a)(1)
o on (date) pursuant to paragraph (a)(1)
o 75 days after filing pursuant to paragraph (a)(2)
o on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
o this post effective amendment designates a new effective
date for a previously filed post-effective
amendment.
Declaration Pursuant to Rule 24f-2. The registrant has
registered an indefinite number
or amount of securities under the securities act of 1933
pursuant to Rule 24(f)(2) under
the Investment Company Act of 1940. The Rule 24f-2
Notice for the registrant's most
recent fiscal year will be filed April 30, 1996.
CROSS REFERENCE SHEET
_________________________________________________________________
_________
Statement of
Prospectus Additional Registration
Section Page # Information Page # Statement Page #
_________________________________________________________________
_________
PART A
Item 1. - 3
Item 2. 2 5
Item 3. 3 & 4 6 & 7
Item 4. 4 & 9 7 & 12
Item 5. 9 & 16 12 & 19
Item 6. 13 & 16 16 & 19
Item 7. 10 & 12 13 & 15
Item 8. 14 17
Item 9. N/A N/A
PART B
Item 10. N/A 21
Item 11. 1 22
Item 12. 12 33
Item 13. 2 23
Item 14. 6 27
Item 15. 8 29
Item 16. 5 & 12 26 & 33
Item 17. 8 29
Item 18. 12 33
Item 19. 9 & 10 30 & 31
Item 20. 12 33
Item 21. N/A N/A
Item 22. 11 32
Item 23. 13 34
PART C
Item 24. 38
Item 25. 39
Item 26. 39
Item 27. 39
Item 28. 39
Item 29. 40
Item 30. 40
Item 31. 41
Item 32. 41
BERWYN INCOME FUND, INC.
1189 Lancaster Avenue
Berwyn, Pennsylvania 19312
PROSPECTUS
April 24, 1996
Investment Objective
The Berwyn Income Fund, Inc. is a no-load, diversified, open-
end management investment company. The Fund's investment
objective is to provide investors with current income while
seeking to preserve capital by taking what it considers to be
reasonable risks. In pursuing its investment objective, the Fund
may also offer the potential for capital appreciation.
The Fund intends to achieve its objective through investment
in fixed income corporate debt securities, preferred stocks, the
securities of the U.S. Government, its agencies and
instrumentalities, and common stocks paying cash dividends. The
Adviser determines the percentage of each category to hold based
upon the prevailing economic conditions. A majority of the
assets of the Fund may be invested in high yield, high risk
corporate debt securities, commonly referred to as "junk bonds".
Investments of this type are subject to a greater risk of loss of
principal and interest. Purchasers should carefully assess the
risks associated with an investment in this Fund.
There can be no assurance that the investment strategy of the
Fund will be successful and its objective may not be realized.
Investment Adviser
The Killen Group, Inc. is the Investment Adviser to the Fund.
Robert E. Killen is President and sole shareholder of The Killen
Group, Inc.
This Prospectus sets forth concisely the information that an
investor should know before investing in the Fund. Investors are
advised to retain this Prospectus for future reference. The Fund
has filed a Statement of Additional Information containing
additional information about the Fund with the Securities and
Exchange Commission. Such Statement is dated April 24, 1996 and
has been incorporated by reference into this Prospectus. It may
be obtained, without charge, by writing to the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Fee and Expense
Table............................................................
................................................. 2
Financial
Highlights.......................................................
........................................................... 3
Calculation of Performance
Data.............................................................
................................. 4
Investment Objectives, Policies and Risk
Factors..........................................................
............ 4
Management of the
Fund.............................................................
............................................ 9
Computation of Net Asset
Value............................................................
................................. 10
Share
Purchases........................................................
...............................................................10
Distributor......................................................
.................................................................
........ 12
Exchange of
Shares...........................................................
...................................................... 13
Dividends, Capital Gains Distributions and
Taxes............................................................
........ 13
Retirement
Plans............................................................
......................................................... 14
Redemption of
Shares...........................................................
.................................................. 14
General
Information......................................................
.......................................................... 16
Additional
Information......................................................
...................................................... 17
-1-
FEE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.50 %
Other Expenses 0.23 %
Total Fund Operating Expenses 0.73 %
_________________________________________________________________
_____________
The purpose of this Fee Table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Management
of the Fund" in the Prospectus and "Investment Advisory
Arrangements" in the Statement of Additional Information.
<TABLE>
Example
1 Year 3 Years 5 Years
10 Years
<S> <C> <C> <C>
<C>
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $ 7.00 $23.00
$41.00 $91.00
</TABLE>
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRE-SENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
-2-
BERWYN INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following Financial Highlights Information for a share
outstanding throughout each period, insofar as they relate to
each of the five years in the period ended December 31, 1995,
have been audited by Price Waterhouse LLP, Independent
Accountants, whose report on the Financial Statements containing
this information was unqualified. This information should be
read in conjunction with the Fund's financial statements and
notes thereto, which are incorporated by reference in the
Statement of Additional Information and this Prospectus, and
which appear, along with the report of Price Waterhouse LLP, in
the Fund's 1995 Annual Report to Shareholders. Additional
Information about the Fund's Investment Performance is contained
in the Fund's 1995 Annual Report to Shareholders which can be
obtained from the Fund without charge.
<TABLE>
Year EndedYear EndedYear EndedYear
Ended
12/31/95 12/31/94 12/31/9312/31/92
<S>
<C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.75 $11.63 $11.12 $10.20
-------- -------- ----------------
Income From Investment Operations
Net Investment Income 0.73 0.73 0.69 0.70
Net Realized and Unrealized Gains
(Losses) on Securities 1.48 (0.85) 1.15 1.47
-------- -------- ----------------
Total from Investment Operations 2.21 (0.12) 1.84 2.17
-------- -------- ----------------
Less Distributions
Dividends from Net Investment Income(0.70) (0.73) (0.65) (0.70)
Distributions from Net Realized Gains(0.31) (0.03) (0.68) (0.55)
Return of Capital Distributions --- --- --- ---
-------- -------- ----------------
Total Distributions (1.01) (0.76) (1.33) (1.25)
-------- -------- ----------------
Net Asset Value, End of Period$11.95 $10.75 $11.63 $11.12
Total Return 21.00% (1.10%) 16.90% 21.70%
Ratios/Supplemental Data
Net Assets, End of Period (000)$119,552$55,825$30,359 $12,486
Ratio of Expenses to Average Net Assets0.73% 0.93% 1.07% 1.34%
Average Net Assets 6.78% 7.20% 6.15% 6.14%
Portfolio Turnover Rate 39% 30% 83% 46%
</TABLE>
-3a-
BERWYN INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(Continued)
<TABLE>
Year EndedYear Ended Year EndedYear E
nded Year Ended
12/31/9112/31/9012/31/8919/31/8812/3
1/87
<S>
<C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Period$9.14 $10.03 $9.75 $9.50 $9.88
---------------------------------------
- -
Income From Investment Operations
Net Investment Income 0.85 0.83 0.79 1.365(2).04(1)(2)
Net Realized and Unrealized Gains
(Losses) on Securities 1.19 (0.85) 0.34 (0.300) (0.38)
---------------------------------------
- -
Total from Investment Operations 2.04 (0.02) 1.13 1.065 (0.34)
---------------------------------------
- -
Less Distributions
Dividends from Net Investment Income (0.85) (0.83) (0.79) (0.765) (0.04)
Distributions from Net Realized Gains ((0.05) (0.04) (0.06) (0.050) ---
Return of Capital Distributions (0.08) --- --- --- ---
---------------------------------------
- -
Total Distributions (0.98) (0.87) (0.85)(0.815) (0.04)
---------------------------------------
- -
Net Asset Value, End of Period $10.20 $9.14 $10.03 $9.75 $9.50
Total Return 23.00%(0.13%) 11.90%11.30%(2)(3.44%
)(2)
Ratios/Supplemental Data
Net Assets, End of Period (000) $5,359 $3,955 $3,870 2,644 $892
Ratio of Expenses to Average Net Assets 1.34% 1.46% 1.50% 1.75%(2)7.50%*(2)
Average Net Assets 8.40% 8.59% 8.00% 8.29% 0.87%*
Portfolio Turnover Rate 14% 14% 3% 17% ---
<FN>
*Annualized
(1) Net investment income per share was calculated based on
average daily number of Fund shares outstanding
during the period 9/03/87 (commencement of operations) through
12/31/87.
(2) Investment Advisory fees of $.06 per share and $.02 per
share were waived by The Killen Group, Inc. for the
year ended 12/31/88 and for the period 9/03/87 to 12/31/87,
respectively. If the waived fees had been included in expenses,
the total return of the Fund for those two periods would have
been lower and the Ratio
of Expenses to Average Net Assets would have been 20.8% for the year ended 12/31/88 and
7.50% (annualized) for the period 9/03/87 to 12/31/87.
</TABLE>
-3b-
CALCULATION OF PERFORMANCE DATA
From time to time the Fund may advertise its annual total
return and its yield for a particular month. The total return of
the Fund reflects the change in share price and reinvestment of
dividends and capital gains. The yield of the Fund for a
particular month is the net investment income per share for the
month stated as a percentage of the maximum share price on the
last day of the month. The Fund's total return, and its yield
are based on historical performance and are not intended to
indicate future performance. The Fund calculates total return
for a period by determining the redeemable value of a $1,000
investment made at the beginning of the period, with dividends
and capital gains reinvested on the reinvestment date, on the
last day of the period and dividing that value by $1,000. The
yield for a month is determined by dividing the net investment
income per share for the month by the share price on the last day
of the month.
There is further information regarding the Fund's performance in
its annual report to shareholders. An investor who wishes may
obtain a copy of the report without charge by writing to the Fund
at its address or by calling the Fund at (800)824-2249.
INVESTMENT OBJECTIVE, POLICIES, AND RISK FACTORS
The Berwyn Income Fund is a no-load, diversified, open-end
management investment company. The Fund's investment objective
is to provide investors with current income while seeking to
preserve capital by taking what it considers to be reasonable
risks. While pursuing this objective, the Fund's investments may
also offer the possibility of capital appreciation. To achieve
its objective, the Fund will invest in fixed income corporate
debt securities, preferred stocks, securities issued or
guaranteed by the U. S. Government, its agencies and
instrumentalities, and common stocks paying cash dividends. The
fixed income corporate debt securities in which the Fund will
invest will be bonds, debentures and corporate notes. Since
there are risks in all investments, there can be no assurance
that the Fund will be successful or achieve its objective.
Under normal market conditions, the Fund will invest at least
80% of the value of its net assets in income producing
securities. The Fund may invest any percentage of its net assets
that the Adviser deems appropriate in investment grade corporate
debt securities, securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, high yield, high
risk corporate debt securities and preferred stocks. The Adviser
will determine the percentage of net assets to invest in each
category of securities and the percentage of each category to
hold based upon the prevailing economic conditions. This means
that the Fund has the option to invest up to 100% of its net
assets in high yield, high risk corporate debt securities,
commonly known as "junk bonds". Investments in these securities
may make an investment in the Fund riskier than an investment in
a fund investing only in securities of higher quality.
Investment in common stocks will be limited to 25% of the value
of the net assets. This means that the Fund will not invest in
common stocks anytime common stocks comprise 25% or more of the
value of its net assets. But the Fund may invest in fixed income
securities and preferred stocks that have common stock conversion
privileges.
-4-
The Adviser will select the fixed income corporate debt
securities primarily on the basis of current yield and
secondarily on the basis of anticipated long term return. When
selecting fixed income corporate debt securities the Adviser will
be aware of the rating the security has received from national
recognized credit rating services such as Standard & Poor's
Corporation ("S & P") and Moody's Investors Service ("Moody's").
These services rate the creditworthiness of the issuers of debt
securities and assign a rating to the debt securities that are
issued. S & P has a system that rates securities from AAA,
highest, to D, lowest. Moody's ratings go from Aaa to C. (See
Appendices A and B in Statement of Additional Information for
definitions of S & P and Moody's Bond Ratings.)
Investment grade securities are debt securities rated BBB or
higher by S & P and Baa or higher by Moody's. Securities rated
lower than BBB or Baa are termed high yield, high risk securities
or junk bonds. The Fund invests in junk bonds that have a rating
of CC or better in S & P and a Caa or better in Moody's. The
Fund will not invest in debt securities that are in default in
the payment of interest or principal. The Fund may also invest
in fixed income securities that are not rated. Investment in
unrated fixed income securities will be limited to 10% of the
value of the net assets at the time of investment and the
securities must have a creditworthiness, in the opinion of the
Adviser, better than or equal to a rating of CC in the S & P Bond
Rating Guide or Caa in Moody's. If a security's rating falls or
if it becomes unrated, the Fund will not be required to sell it.
At December 31, 1995, the Fund's portfolio was invested in
U.S. Treasury notes and bills, investment grade and high yield,
high risk corporate debt securities, preferred and common stocks
and repurchase agreements.
Listed below are the percentages of the portfolio invested in
various bond ratings published by Moody's and S & P at December
31, 1995, as well as the percentages in unrated securities,
preferred and common stocks and repurchase agreements:
Moody's Ratings
AAA: 0.5%; AAA/Treasuries: 2.6%; BA: 10.9%; B: 33.7%;
CAA: 1.8%; Unrated: 5.2%.
S & P Ratings
AAA/Treasuries: 2.6%; BBB: 1.7%; BB: 9.2%; B: 28.2%; CCC:
5.1%; Unrated: 7.9%.
Preferred and Common Stock and Repurchase Agreement
Preferred stocks: 14.9%; Common Stocks: 29.4%; Repurchase
Agreement: 1.0%.
Risk Considerations for High Yield High Risk Securities
Securities rated A or higher by S & P and Moody's are
considered high grade fixed income corporate securities and have
the highest rating for creditworthiness. Securities rated BBB or
-5-
Baa by the services are defined as medium grade investments.
These securities are considered creditworthy and of investment
quality but there is a possibility that the ability of the issuer
of the instrument to pay the obligation in the future may be
impaired by adverse economic conditions or changing
circumstances. Securities rated lower than BBB or Baa are high
yield, high risk securities, commonly known as "junk bonds".
These securities are less creditworthy than investment grade
securities with the same maturity and, as a consequence, pay
higher income.
Securities rated BB, B, CCC or CC by S & P or Ba, B or Caa by
Moody's are regarded on balance as predominantly speculative with
respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation.
Issuers of high yield, high risk securities are generally
smaller, less creditworthy companies or highly leveraged
companies which are generally less able than more financially
stable companies to make scheduled payments of interest and
principal. The risks posed by debt securities issued under such
circumstances are substantial. For example, during an economic
downturn or a sustained period of rising interest rates, highly
leveraged companies or smaller, less creditworthy companies may
experience financial stress. During these periods, such
companies may not have sufficient cash flow to meet their
interest payment obligations. A company's ability to service its
debt obligations may also be adversely affected by specific
corporate developments, the company's inability to meet specific
projected business forecasts, or the unavailability of additional
financing. The risk of loss due to default by the issuer may be
significantly greater for the holders of high yield, high risk
securities because such securities are unsecured and are often
subordinated to other creditors of the issuer. The default by an
issuer of securities held by the Fund will adversely affect the
Fund by lowering its net asset value and by decreasing the amount
of income available to the Fund from which dividends may be paid.
In addition to the risk of default holders of high yield, high
risk debt securities also face the risk of greater market
volatility than the holders of investment grade securities.
Changes in the general level of interest rates normally affect
the market value and yield of fixed income corporate debt
securities. As a general rule if the level of interest rates
were to decline, these securities would increase in value and the
yield would decline. Conversely, if the level rose, fixed income
securities would decline in value and the yield would increase.
Fluctuations in the general level of interest rates would
therefore affect the value of the Fund's investments and the
value of an investment in the Fund. However, the market value of
high yield, high risk securities may be affected not only by
changing interest rates, but also by investors' perception of
credit quality and the outlook for economic growth. When
economic conditions appear to be deteriorating lower rated bonds
may decline due to investors' heightened concern over credit
quality, regardless of prevailing interest rates. Especially at
such times, trading for high yield, high risk securities may
become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for high yield, high
risk securities may be less liquid than the market for investment
grade corporate debt securities. In periods of reduced market
liquidity, the prices of high yield, high risk securities may
become more volatile and these securities may experience sudden
and substantial price declines. A decline in value of the
securities held by the Fund would adversely affect its net asset
value and the value of a shareholder's investment in the Fund.
-6-
The Adviser will attempt to minimize the risks of investing
in medium grade and high yield, high risk securities by doing a
credit analysis of the issuer, diversifying the portfolio and
monitoring the Fund's investments and the investment environment.
As previously stated, in selecting fixed income securities,
the Adviser is aware of the issuer credit rating in S & P and
Moody's. But a rating is not the only criterion for selection.
The Adviser does examine the financial structure of each issuer
and with regard to high yield , high risk securities makes a
determination as to the issuer's ability to meet its debt
obligations. In selecting high yield, high risk securities
achievement of the Fund's investment objective is more dependent
on the Adviser's credit analysis than is the case in selecting
higher quality securities.
There can be no guarantee that the issuer of securities in
which the Fund has invested will not default or that the
securities will not decline in value.
In addition to debt securities that are rated, the Fund also
invests in unrated debt securities. These securities may or may
not be more speculative than investment grade securities. It is
the issuer's decision to seek to have a security rated. The
risks of investing in unrated securities depend upon the
creditworthiness of the issuer. Investors in unrated securities
face the same risks that investors in investment grade and high
yield securities face. There is the possibility of default by
the issuer or a change in interest rates that could adversely
affect the value of the security. The Adviser will determine the
creditworthiness of an unrated security and the issuer's ability
to meet the debt obligation. To be purchased by the Fund an
unrated security must have a credit worthiness, in the Adviser's
opinion, equal to or better than a CC rating in S & P or a Caa
rating in Moody's.
The investment objective of the Fund is to provide investors'
with current income while preserving capital. The Fund seeks to
achieve this objective by investing only in the corporate debt
securities of issuers that, in the opinion of the Adviser, have
sufficient net worth and operating cash flow to repay principal
and make timely interest payments. The Fund will not invest in
corporate debt securities issued to finance a leveraged buyout.
The Fund will also diversify its portfolio and do a credit
analysis of the issuers in which it invests. The Fund will only
invest in corporate debt securities that are listed on national
exchanges or on the over-the-counter market and will not invest
more than 10% of net assets in illiquid securities.
U.S. Government Securities
The securities of the U. S. Government that the Fund invests
in are U.S. Treasury bonds and notes and securities issued or
guaranteed by Federal agencies and U. S. Government sponsored
instrumentalities.
U. S. Treasury bonds and notes are backed by the "full faith
and credit" of the United States. Securities issued or
guaranteed by federal agencies and U. S. Government sponsored
instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, the
investor must
-7-
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 United States itself in the
event the agency or instrumentality does not meet its commitment.
Some of the federal agencies that issue or guarantee
securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime
Administration, Small Business Administration and the Tennessee
Valley Authority.
An instrumentality of the U. S. Government is a government
agency organized under Federal charter with government
supervision. Instrumentalities issuing or guaranteeing
securities include, among others, the Federal Home Loan Banks,
the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage
Association.
Preferred and Common Stocks
The Fund also invests in preferred stocks and may invest in
common stocks when the Adviser deems it appropriate. Preferred
stocks are selected from two categories: (1) stocks offering an
above average yield, in the opinion of the Adviser, in comparison
to preferred stocks of the same quality; and (2) preferred stocks
offering a potential for capital appreciation due to the business
prospects of the issuer.
Common stocks are selected from three categories: (1) stocks
selling substantially below their book value; (2) stocks selling
at a low valuation to their present earnings level; and (3)
stocks, judged by the Adviser to have above average growth
prospects and to be selling at small premiums to their book value
or at modest valuations to their present earnings level.
Only common stocks that pay cash dividends are purchased by
the Fund. Preferred stocks, having a cumulative feature, do not
have to be paying current dividends in order to be purchased. If
a dividend on a stock is canceled, the Fund would not be required
to sell the stock.
The method of stock selection used by the Fund may result in
the Fund selecting stocks that are not being recommended by other
investment advisers or brokerage firms and the Fund may invest in
the securities of lesser known companies. The Adviser believes,
however, that any risks involved in the stocks selected for the
Fund will be minimized by diversification of the portfolio and
daily monitoring of the stock selection. In addition, the Fund
only invests in stocks listed on national exchanges and on the
over-the-counter market and the Fund only purchases stocks in
companies that have been in business at least 5 years and have at
least $10,000,000 in assets.
The Fund will not invest more than 10% of its total assets in
illiquid securities whether fixed income or equity securities.
The investment objective of the Fund is a fundamental policy
that cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund. Investment
-8-
policies other than the fundamental policy stated above may be
changed with the approval of a majority of the Board of
Directors.
Although the Fund will normally invest as outlined above, the
Fund may at times, for temporary defensive purposes, invest all
or a portion of its assets in savings accounts and certificates
of deposit of domestic banks with assets in excess of $1,000,000,
commercial paper rated A-1 by Standard Poor's Corporation,
repurchase agreements, treasury bills or the Fund may hold cash.
The Fund will not invest more than 5% of its net assets in
repurchase agreements. Also, the Fund will not invest more than
5% of its net assets in Real Estate Investment Trusts.
The Fund does not intend to engage in short-term trading. In
1995 the Fund had a portfolio turnover rate of 39%.
MANAGEMENT OF THE FUND
The Fund is a corporation formed under the laws of the
Commonwealth of Pennsylvania on December 26, 1986. The business
of the Fund is managed under the direction of the Board of
Directors. The Board is elected annually by the shareholders and
sets broad policies for the Fund. The daily operation of the
Fund is administered by employees of the Investment Adviser under
the supervision of the Board.
The Killen Group, Inc. (the Adviser) is the Investment
Adviser to the Fund. The Killen Group is a Pennsylvania
corporation that was formed in September 1982. Its address is
1189 Lancaster Avenue, Berwyn, Pennsylvania 19312. Robert E.
Killen is President and sole shareholder of The Killen Group.
Mr. Killen is also President and Chairman of the Board of the
Fund. Edward A. Killen is Vice-President and Secretary of The
Killen Group. He is also a Director of the Fund and its
portfolio manager. Edward A. Killen is the person responsible
for the day to day management of the Fund's portfolio. He has
been managing the Fund's portfolio since July 1, 1994. Prior to
July 1, 1994, Robert E. Killen was the person responsible for
management of the Fund's portfolio. Robert E. Killen managed the
Fund's portfolio from September 3, 1987, the date of the Fund's
public offering, until June 30, 1994.
Edward A. Killen has over seventeen years experience in the
investment advisory field. In 1978, he started to work for Compu
Val Management Associates, an investment advisory firm, as a
portfolio manager. In February, 1983, The Killen Group became a
partner in Compu Val Management Associates and Edward A. Killen
assumed his current position as Vice President and Secretary of
The Killen Group. The partnership of CompuVal Management
Associates was dissolved on December 31, 1983 and The Killen
Group continued its advisory business as a separate entity. As
of December 31, 1995, The Killen Group was managing 352
individual investment portfolios worth approximately $228
million.
-9-
The Adviser also manages The Berwyn Fund, Inc. The Berwyn
Fund is an open-end management investment company that seeks long-
term capital appreciation by investing in common stock and fixed
income securities. The Killen Group has been the Adviser to The
Berwyn Fund, Inc., since it became public in May 1984. On
December 31, 1995, The Berwyn Fund had net assets of over $97
million.
Under the contract between the Fund and the Adviser, the
Adviser provides the Fund with investment management services.
These services include advice and recommendations with respect to
investments, investment policies, the purchase and sale of
securities and the management of the Fund's resources. In
addition, employees of the Adviser manage the daily operations of
the Fund under the supervision of the Board.
As compensation for its services, the Adviser receives
monthly compensation at the annual rate of 1/2 of 1% of the
average daily net assets of the Fund. During 1995, the Fund paid
the Adviser $477,283 in advisory fees. Total expenses for the
Fund in 1995 were 0.73% of average net assets. Payments to the
Adviser were 0.50% of average daily net assets.
Subject to the policies established by the Fund's Board of
Directors, the Adviser is responsible for the Fund's portfolio
decisions. When buying and selling securities, the Adviser gives
consideration to brokers who have assisted in the distribution of
the Fund's shares. The Fund may also pay brokerage commissions
to brokers who are affiliated with the Adviser or the Fund.
COMPUTATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined by
dividing the total value of the Fund's investments and other
assets, less any liabilities, by the total number of outstanding
shares of the Fund. Net asset value per share is determined
daily, Monday through Friday, as of the close of regular trading
on the New York Stock Exchange (4 P.M., Eastern Time) and is
effective as of the time of computation. (The New York Stock
Exchange is closed on, and therefore net asset value is not
calculated on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.) For the purpose of making this determination,
securities listed on national securities exchanges are valued at
their last sales price on the exchange where primarily traded.
In the event there are no sales, the security is valued at the
last current bid price. An unlisted security, for which over-the-
counter market quotations are readily available, is valued on the
basis of the last current bid price. When over-the-counter
market quotations are not readily available, an unlisted security
is valued at its fair value as determined in good faith by, or
under the supervision of, the Board of Directors. All other
assets are valued at fair value as determined in good faith by
the Board of Directors.
SHARE PURCHASES
On August 16, 1995, the Fund was closed to new investors.
During the first six months of 1995, the Fund's net assets
increased by over $50 million and the Board of Directors
considered it to be in the best interest of the current
shareholders to close the Fund. Current shareholders may
-10-
still invest in the Fund and open new accounts. Investors who
were shareholders in The Berwyn Fund on or before August 16, 1995
may also open accounts in the Fund.
For investors who qualify to purchase shares, the Fund's
shares are offered for sale on a continuous basis. There is no
sales charge. The offering price of shares of the Fund is the
net asset value per share next determined after receipt by the
Transfer Agent of the order for the purchase of shares. The
value of a shares can be expected to fluctuate daily.
Orders for shares of the Fund received prior to the close of
the New York Stock Exchange (normal closing time is 4:00 P.M.,
Eastern Time) on any day the Exchange is open will be the net
asset value effective at the close of the Exchange on such a day.
Orders received after the close of the Exchange will be valued at
the net asset value computed on the next business day (i.e., the
next day the Exchange is open).
The minimum initial investment is $10,000 per investor. This
investment may be divided by a single investor among different
investment accounts that total $10,000 in the aggregate. An
investor may also split his or her investment between the Fund
and The Berwyn Fund. Subsequent investments must be least $250
per account. For Individual Retirement Accounts (IRA), the
minimum initial investment is $1,000. The minimum initial
investment for a spousal IRA is $250. Subsequent investments in
IRA accounts must be at least $250. There are no minimum
investment requirements for an investment in any retirement plan
(other than IRA) or custodial account for the benefit of a minor.
Initial investments must consist of a New Account Application and
payment of the initial investment. Investments are deemed
effective when they are received at the office of the Fund's
Transfer Agent, Rodney Square Management Corp., P. O. Box 8987,
Wilmington DE 19899.
The Fund has an Automatic Investment Plan under which an
investor may have money transferred from their checking account
to their account in the Fund. If you wish to use this Plan,
please contact the Fund for further information and an
application.
An investor may also exchange securities for shares of the
Fund. The securities offered, however, have to be acceptable to
the Fund and the Fund reserves the right to reject any security
that does not meet its criteria.
To be acceptable to the Fund, the securities offered must
have a fair market value, determined as set forth below, of at
least $20,000 for both initial and subsequent investments. (An
investor would be permitted to invest a combination of cash and
securities totaling $20,000.) The securities must meet the
investment standards and criteria listed in the Prospectus and
Statement of Additional Information and, lastly, the securities
will not be accepted if the Fund would violate any of its
investment restrictions by having the securities in its
portfolio. (See "Investment Objective and Policies" in the
Prospectus and "Statement of Additional Information and
Investment Restrictions" in the Statement of Additional
Information.)
-11-
The Investment Adviser will determine the acceptability and
the fair market value of the securities. An investor wishing to
exchange securities for Fund shares should write to the Adviser
stating his intention to make an exchange and giving the names
and amounts of securities being offered. Within three business
days of receipt of the letter, the Adviser will mail a notice to
the investor accepting or rejecting the securities being offered.
If the securities are acceptable to the Fund, the Adviser
will also inform the investor in the notification of the
preliminary value the Adviser has determined for each security
being offered and the date upon which the valuation was made.
This amount may be different from the value obtained on the
valuation date.
The investor will have fourteen calendar days from receipt of
the Adviser's notification to deliver to the Fund certificates
for securities offered endorsed to The Berwyn Income Fund, Inc.
Upon receipt of the securities, the Fund will determine the
value of the securities. (In the case of an initial investment,
a New Account Application completed by the investor must
accompany the certificates.) The amount of the investment will
be the value of the securities determined by the Fund. The value
of each security will be determined on the valuation date as of
the close of trading of the New York Stock Exchange and the
method of valuation will be the same as the one used to value
portfolio securities. If the security being exchanged pays
interest, the amount of interest due will be determined on the
valuation date and the Fund will issue shares equal to the amount
of accrued interest. (See "Computation of Net Asset Value".)
Dividends due on any security will be paid to the person who is
listed as owner on the record date. The net asset value of the
shares of the Fund and the date upon which the investment is
effective are determined in the same manner as cash transactions.
There may be Federal Income Tax consequences for an investor
exchanging securities for Fund shares, and an investor should
consult a qualified tax expert before entering into any exchange.
In addition, to purchasing and redeeming shares through the
Fund, investors may make telephone purchases and redemptions
through broker- dealers who charge a fee.
DISTRIBUTOR
Berwyn Financial Services Corp. ("Berwyn Financial"), located
at 1199 Lancaster Avenue, Berwyn, Pennsylvania 19312, serves as
the non-exclusive distributor of the Fund's shares pursuant to a
selling agreement between Berwyn Financial and the Fund. Under
the terms of the agreement, Berwyn Financial is a selling agent
for the Fund in certain jurisdictions in order to facilitate the
registration of shares of the Fund under state securities laws
and assist in the sale of shares. Berwyn Financial does not
charge a fee for the services provided under the selling
agreement with the Fund. The Fund shall continue to bear the
expenses of all filing or registration fees incurred in
connection with the registration of shares under state securities
laws. Berwyn Financial is affiliated with the Fund and the
Adviser. Robert E. Killen is an Officer and Director
-12-
of the Fund and the Adviser. He is also a Director of Berwyn
Financial. Edward A. Killen is an Officer and Director of the
Adviser and Berwyn Financial and he is a Director of the Fund.
Kevin M. Ryan is an Officer of the Fund and an Officer and
Director of Berwyn Financial.
EXCHANGE OF SHARES
Shares of the Fund may be exchanged for shares of The Berwyn
Fund, a no-load mutual fund that is managed by The Killen Group.
Shares may also be exchanged for shares in the Rodney Square Fund
or the Rodney Square Tax-Exempt Fund. These Funds are money
market funds managed by Rodney Square Management Corporation and
distributed by Rodney Square Distributors, Inc. Exchanges will
be made on the basis of the net asset value per share of the
Funds involved next determined after an exchange has been
requested. The minimum initial investment of The Berwyn Fund is
$10,000 ($1,000 for IRAs and no minimum initial investment for
pension plans or custodial accounts for minors.) The minimum
initial investment for one of the Rodney Square Money Market
Funds is $1,000. A shareholder may make an exchange by telephone
or written request. Telephone requests for an exchange may be
made by calling the Fund's Transfer Agent at (800)992-6757 on any
business day between 9:00 A.M. and 4:00 P.M.
Any shareholder will be permitted to exchange shares among
the above Funds. When making a telephone exchange, the
shareholder must know the account number of the account from
which shares are exchanged and the social security or tax id
number under which the account is registered. Shares will only
be exchanged into an account that has same shareholder(s) of
record and same social security or tax id number.
A shareholder in Berwyn Income Fund will only be permitted to
exchange the shares in his or her account for shares in one of
the other Funds four times in any twelve month period. A
shareholder in one of the money market Funds may exchange shares
of the Money Market Fund for shares of Berwyn Income Fund as
often as they desire.
Before making an exchange, a shareholder should obtain and
review a current prospectus of the Fund into which shares of the
Fund will be exchanged. Prospectuses for The Berwyn Fund, Inc.,
Rodney Square Fund or Rodney Square Tax-Exempt Fund may be
obtained from the Fund by writing to the Fund at its address or
calling (800) 824-2249.
The exchange privilege is available only to investors
residing in states where the mutual funds in the exchange program
are qualified for sale.
The Fund, The Berwyn Fund, Rodney Square Fund and Rodney
Square Tax Exempt Fund reserve the right to amend or change the
exchange privilege upon 60 days' notice to shareholders.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS TAXES
It will be the policy of the Fund to distribute substantially
all of its net investment income and any net realized capital
gains. Dividends from net investment income will be paid
quarterly.
-13-
Distribution of net realized short term capital gains, if any,
may be made quarterly or annually based upon the determination of
the Board of Directors. Distribution of net realized long term
capital gains, if any, will be made annually.
Reinvestment of dividends and/or capital gains distributions
will be made at the net asset value per share next determined
after the record date. At the election of the shareholder,
dividends or capital gains distributions, or both, will be
reinvested in the shares of the Fund or distributed in cash.
This election by the shareholder is made at the time of the
initial purchase of shares indicating on the account application
whether distribution or reinvestment is desired.
The election of the shareholder to receive or reinvest
dividends and/or capital gain distributions may be changed at any
time after the initial account application is received. To
change the initial election, the shareholder must send the Fund a
letter by certified
mail, return-receipt requested, signed exactly as the
shareholder's signature appears on the transfer agent's register,
stating the change desired.
The Fund qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code in the past year and
intends to continue to so qualify by complying with the
provisions of this Subchapter in the future.
Subchapter M provides that an investment company which
qualifies will be relieved from Federal Income Tax on the income
it distributes. Generally, shareholders of the investment
company pay Federal Income Tax on dividends and capital gains
distributions. Shareholders are responsible for the tax whether
the dividend or capital gains distribution is received in cash or
additional shares of the Fund. Shareholders who are not subject
to income tax will not be required to pay on the amount
distributed.
The Fund will notify shareholders what portion of the
distribution is from net investment income or capital gains. In
addition to federal income tax, Fund distributions may also be
subject to state and local taxes.
RETIREMENT PLANS
The Fund sponsors Individual Retirement Accounts.
Individuals interested in having an IRA with the Fund may obtain
an IRA information booklet and application forms by writing to
the Fund at its address, 1189 Lancaster Avenue, Berwyn,
Pennsylvania 19312 or by calling the Fund at (800) 824-2249.
The Fund also sponsors a Prototype Defined Contribution Plan
under which self-employed individuals, partnerships and their
employees and corporations may establish profit-sharing and money
purchase retirement plans. Additional details concerning these
retirement plans are available from the Fund.
-14-
REDEMPTION OF SHARES
The Fund will redeem all shares in an account upon receipt of
a written request from the shareholder by the Transfer Agent.
The Fund will also redeem shares worth up to $5,000 in value in
an account upon a telephone request from a "qualified"
shareholder. (To qualify for telephone redemption, a shareholder
must check the box on the new account application.) The
redemption price will be the net asset value per share next
determined after receipt of a notice of redemption. Shareholders
liquidating their holdings will receive upon redemption all
dividends reinvested through the date of redemption.
A shareholder who wishes to submit a written redemption
request should mail it to Berwyn Income Fund, c/o Rodney Square
Management Corp., P.O. Box 8987, Wilmington, DE 19899. The
letter should list the shareholder's account number and the
amount of money or number of shares being redeemed. The letter
should be signed by the person(s) in whose name(s) the shares are
registered.
A shareholder who qualifies for telephone redemption may
redeem up to $5,000 from an account by telephoning the Transfer
Agent at (800) 992-6757 on any business day between the hours of
9:00 A.M. and 4:00 P.M.
A shareholder requesting a redemption by telephone must give
the account number for the account and the social security number
or tax id number under which the account is registered. Checks
will only be issued in the name(s) listed on the account and will
only be mailed to the address listed.
Neither the Fund nor the Transfer Agent is responsible for
any shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of shares which are
reasonably believed to be genuine. With respect to such
telephone transactions, the Fund will ensure that reasonable
procedures are used to confirm that instructions communicated by
telephone are genuine (including verification of a form of
personal identification) as, if it does not, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized
or fraudulent transactions. Instructions received by telephone
are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions
initiated by telephone.
Payment will be mailed generally within seven days of receipt
of a notice of redemption.
The Fund also has a Systematic Withdrawal Plan under which an
investor may have money automatically withdrawn from his or her
account on a regular basis. Investors who wish to establish a
systematic withdrawal should complete the section or systematic
withdrawals on the account application.
The Fund reserves the right to liquidate the account of any
shareholder whose total shares fall below $1,000 in value by
reason of redemption. Upon receiving written notice from the
Fund,
-15-
a shareholder must increase his account value to $1,000 or above
within 60 days to prevent liquidation.
When permitted by the Securities and Exchange Commission, the
Fund may suspend the right of redemption and postponement of
payment for more than seven days during any period when the New
York Stock Exchange is closed, other than customary weekend and
holiday closing; when trading on such Exchange is restricted, as
determined by the Securities and Exchange Commission, during any
period when an emergency, as defined by rules of the Securities
and Exchange Commission, exists making disposal of portfolio
securities or valuation of net assets by the Fund not reasonably
practicable; or when the Securities and Exchange Commission may
permit for the protection of shareholders of the Fund.
GENERAL INFORMATION
Capital Structure
The Fund has authorized capital of 20,000,000 shares of
common stock of $1 par value per share. Each share has equal
dividend, distribution and liquidation rights. There are no
conversion or preemptive rights applicable to any shares of the
Fund. All shares issued are fully paid and nonassessable.
Fund shares do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for
election of Directors may elect 100% of the Directors if they
choose to do so and, in such event, the holders of the remaining
shares so voting will not be able to elect any Directors.
Transfer Agent and Dividend Paying Agent
Rodney Square Management Corp., P. O. Box 8987, Wilmington,
Delaware 19899 is the Transfer Agent and Dividend Paying Agent.
Shareholder Inquiries
Shareholder inquiries may be made by writing to the Fund or
Transfer Agent or calling the Transfer Agent at (800) 992-6757
between the hours of 9:00 A.M. and 4:00 P.M.
Share Certificates
Share certificates will be issued only upon written request.
Reports
The Fund will issue annual and semi-annual reports to
shareholders and may issue quarterly reports. In these reports
management of the Fund will discuss the Fund's performance with
the performance of Treasury Bonds and that of other Income Funds.
-16-
The annual report will contain audited financial statements
and the semi annual report will have unaudited financial
statements.
ADDITIONAL INFORMATION
This Prospectus omits certain information contained in the
registration statement filed with the Securities and Exchange
Commission. The registration statement consists of three parts:
the Prospectus, a Statement of Additional Information and a third
section containing exhibits and other information. A copy of the
Statement of Additional Information is available from the Fund
free of charge. The third part of the registration statement may
be obtained from the Commission paying the charges prescribed.
No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus and the Statement of Additional Information, and
information or representations not herein contained, if given or
made, must not be relied upon as having been authorized by the
Fund. This Prospectus does not constitute an offer or
solicitation in any jurisdiction in which such offering may not
lawfully be made.
-17-
PART B
BERWYN INCOME FUND, INC.
1189 LANCASTER AVENUE
BERWYN, PA. 19312
STATEMENT OF ADDITIONAL INFORMATION
April 24, 1996
This Statement of Additional Information is not a Prospectus.
It is a document that relates to the Berwyn Income Fund
Prospectus dated April 24, 1996 and contains additional
information regarding the Fund. This Statement should be read in
conjunction with the Prospectus. A Prospectus may be obtained by
writing to the Fund at the above address.
TABLE OF CONTENTS
Investment Objective, Policies and Risk
Factors..........................................................
............ 2
Investment
Restrictions.....................................................
..................................................... 3
Investment Advisory
Arrangements.....................................................
................................... 5
Expense
Limitation.......................................................
......................................................... 6
Directors and
Officers.........................................................
................................................... 6
Ownership of the
Fund.............................................................
.............................................. 8
Portfolio Transactions and Brokerage
Commissions......................................................
......... 8
Computation of Net Asset
Value............................................................
................................ 9
Share
Purchases........................................................
.............................................................10
Distributor......................................................
.................................................................
...... 10
Redemption of
Shares...........................................................
................................................. 10
Calculation of Performance
Data.............................................................
............................... 11
General
Information......................................................
......................................................... 12
Financial
Statements.......................................................
........................................................ 13
-1-
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
(See also "Investment Objective, Policies and Risk Factors" in
the Fund's Prospectus.)
The Fund is a no-load, diversified, open-end management
investment company. Its investment objective is to provide
investors with current income while seeking to preserve capital
by taking what it considers to be reasonable risks. In pursuing
this objective, the Fund may also offer the potential for capital
appreciation. To achieve its objective, the Fund invests in
investment grade fixed income corporate debt securities, the
securities of the U.S. Government, its agencies and
instrumentalities, high yield, high risk corporate debt
securities (also known as junk bonds) and preferred and common
stocks. The Adviser determines the percentage of each category
to purchase and hold based upon the prevailing economic
conditions. This means, that the Fund may invest up to 100% of
its net assets in high yield, high risk securities.
Investment grade corporate debt securities are considered to
be securities rated BBB or higher in the S & P Bond Rating Guide
or Baa or better by Moody's Investors Service and high yield
securities are considered to be securities rated lower than BBB
or Baa by these services. Appendices A and B list the
definitions of the Standard Poor's and Moody's bond ratings.
The Fund may also invest in fixed income securities that are
not rated. The Fund will not invest more than 10% of the value
of its total net assets in unrated securities. Also the Fund
will only invest in unrated securities that have a
creditworthiness, in the opinion of the Adviser, that is equal to
or better than the creditworthiness of fixed income securities
with S & P ratings of CC or better or a Moody's rating of Caa.
In addition to corporate debt securities the Fund may invest
in the securities of the U.S. Government, its agencies and
instrumentalities and in preferred and common stocks. The
securities of the U.S. Government that the Fund Invests in are
U.S. Treasury bonds and notes. The Fund may also purchase debt
securities issued by Government agencies, such as, Export-Import
Bank, or by an instrumentality of the Government, such as the
Federal National Mortgage Association. Treasury bonds and notes
are backed by the full faith and credit of the U.S. Government.
Securities issued by agencies and instrumentalities may or may
not be backed by the full faith and credit of the United States.
In the case of securities not backed by full faith and credit of
the United States, an investor must look principally to the
agency or instrumentality for repayment.
The Fund invests in preferred stocks that, in the opinion of
the Adviser, are offering an above average yield in comparison to
preferred stocks of the same quality or in preferred stocks
offering a potential for capital appreciation.
The Fund invests in common stocks that it considers to be
selling at undervalued prices. The investment approach of the
Fund may be deemed "contrarian" in its selection of common stocks
due to the fact that this approach may lead the Fund to select
stocks not recommended by other investment advisers or brokerage
firms.
-2-
The Fund, however, will only purchase common stocks that pay
cash dividend and will not purchase common stocks when common
stocks comprise 25% of the Fund's net assets.
Aside from the investments listed above, the Fund may at
times, for temporary defensive purposes, invest all or a portion
of its assets in savings accounts and certificates of deposit of
domestic banks with assets in excess of $1,000,000, commercial
paper rates A-1, repurchased agreements, Treasury bills, and the
Fund may hold cash.
The Fund does invest in real estate investment trusts (REITs)
and repurchase agreements. The Fund, however, limits investment
in these securities to 5% of its net assets.
REITs are companies that invest their capital in real estate,
long and short term mortgages and construction loans. These
companies normally do not pay Federal Income Tax but distribute
their income to their shareholders who become liable for the tax.
The Fund invests in REITs that generate income and have a
potential for capital appreciation. There are risks in investing
in REITs. The property owned by a REIT could decrease in value
and the mortgages and loans held by a REIT could become
worthless. The Adviser, however, monitors the investment
environment and the Fund's investments as a means of lessening
risks. As of December 31, 1995, 2.6% of the Fund's net assets
were invested in REITs.
Repurchase agreements are defined as agreements wherein a
seller of securities agrees with the Fund at the time of sale to
repurchase the security from the Fund at a mutually agreed upon
time and price. The Fund intends to enter into repurchase
agreements only with established banking institutions that deal
in Treasury bills and notes. The Fund intends to invest mostly
in overnight repurchase agreements. In the event of a bankruptcy
of a seller of a repurchase agreement or the failure of a seller
to repurchase the underlying security as agreed upon, the Fund
could experience losses that include a possible decline in the
value of the underlying security during the period the Fund seeks
to enforce its rights thereto and a possible loss of all or part
of the income. The Fund would also incur additional expenses
enforcing its rights. As of December 31, 1995, 1% of the Fund's
net assets were invested in repurchase agreements.
In 1995, the Fund had a portfolio turnover rate of 39%. The
portfolio turnover rate for 1994 was 30%.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below may not be
changed without the approval by vote of a majority of the Fund's
outstanding voting securities. As used in this Statement of
Additional Information and in the Prospectus, "a majority of the
Fund's outstanding voting securities" means the lesser of (a)
more than 50% of the Fund's outstanding shares, or (b) at least
67% of the shares present or represented at a meeting of
shareholders provided that the holders of more than 50% of the
Fund's outstanding shares are present in person or represented by
proxy.
-3-
When investing its assets, the Fund will not:
(1) invest more than 5% of the value of its total assets in
the securities of any one issuer or purchase more than 10%
of the outstanding voting securities, debt or preferred stock
of any one issuer. This restriction does not apply to
obligations issued or guaranteed by the U. S. Government, its
agencies or instrumentalities;
(2) invest more than 25% of the value of its total assets in
the securities of issuers in any one industry;
(3) lend money, provided that for purposes of this
restriction, the acquisition of publicly distributed
corporate bonds, and investment in U.S. government
obligations, short-term commercial paper, certificates of
deposit and repurchase agreements shall not be deemed to be
the making of a loan;
(4) buy or sell real estate and real estate mortgage loans,
commodities, commodity futures contracts, puts and calls and
straddles;
(5) underwrite securities of other issuers, except as the
Fund may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the purchase and sale of
portfolio securities in accordance with its objectives and
policies;
(6) make short sales or purchase securities on margin;
(7) borrow money, except that the Fund may borrow up to 5% of
the value of its total assets at the time of such borrowing
from banks for temporary or emergency purposes. (The
proceeds of such loans will not be used for investment or to
purchase securities, but will be used to pay expenses.);
(8) invest for the purposes of exercising control or
management;
(9) invest in restricted securities (securities that must be
registered under the Securities Act of 1933, as amended,
before they may be offered and sold to the public);
(10) participate in a joint investment account; and
(11) issue senior securities.
The Fund has also adopted certain investment restrictions
that are not fundamental. These restrictions are that the Fund
will not invest in real estate limited partnerships, in oil, gas
or other mineral leases and any investments in warrants will not
exceed 5% of the Fund's net assets. Restrictions that are not
fundamental may be changed by a vote of the majority of the Board
of Directors. But if any of these non fundamental restrictions
are changed, the Fund will give shareholders at least 60 days'
written notice.
-4-
INVESTMENT ADVISORY ARRANGEMENTS
(See also "Management of the Fund" in Fund's Prospectus)
The Killen Group, Inc., is the Investment Adviser (the
Adviser) to the Fund, Robert E. Killen is President-Treasurer, a
Director and sole shareholder of The Killen Group. He is also
President and Chairman of the Board of the Fund. Edward A.
Killen is Vice President, Secretary and a Director of The Killen
Group and a Director of the Fund. Edward A. Killen is the person
responsible for the day to day management of the Fund's
portfolio. He has had this responsibility since July 1, 1994.
Prior to Edward A. Killen, Robert E. Killen was responsible for
managing the portfolio. He held this position from September 3,
1987 to June 30, 1994.
The Killen Group, Inc. provides the Fund with investment
management services. Under the contract between the Fund and the
Adviser, the Adviser provides the Fund with advice and
recommendations with respect to investments, investment policies,
the purchase and sale of securities and the management of the
Fund's resources. In addition, employees of the Adviser
administer the daily operation of the Fund. These employees
prepare and maintain the accounts, books and records of the Fund,
calculate the daily net asset value per share, prepare and file
all the documents required of the Fund under federal and state
laws and prepare all shareholder reports.
The contract provides that it will continue in effect from
year to year if continuation is specifically approved annually by
a vote of a majority of the outstanding voting securities of the
Fund. Continuance of the contract must also be approved annually
by the Board of Directors, including a majority of directors who
are not parties to such contract or interested persons of any
such party cast in person at a meeting called for the purpose of
voting on such approval. The Fund may terminate the contract on
sixty days' written notice to the Adviser, without payment of any
penalty, provided such termination is authorized by the Board of
Directors or by a majority of the outstanding voting securities.
The Adviser may terminate the contract by notifying the Fund in
writing at least sixty days before the date of the annual
shareholder meeting that continuation of the contract is not
desired. The contract will be automatically and immediately
terminated in the event of its assignment by the Adviser.
As compensation for its investment management services to the
Fund, the Adviser will receive monthly compensation at the annual
rate of 1/2 of 1% of the average daily net assets. The fee is
computed daily by multiplying the net assets for a day by the
appropriate percentage and dividing the result by 365. At the
end of the month, the daily fees are added and the amount paid to
the Adviser.
The Fund paid the Adviser $477,283 in fees in 1995, $218,720
in 1994, and $120,174 in 1993.
-5-
EXPENSE LIMITATION
The contract between the Fund and the Adviser provides that
the Adviser's fee will be reduced in any fiscal year by any
amount necessary to prevent Fund expenses and liabilities
(excluding taxes, interest, brokerage commissions and
extraordinary expenses, determined by the Fund or the Adviser,
but inclusive of the Adviser's fee) from exceeding 2% of the
average daily net assets of the Fund. In any month that the Fund
expenses and liabilities exceed 2%, the Adviser's fee will be
reduced so that expenses and liabilities will be 2%. Although
the Fund expects to maintain expenses within 2% of its average
daily net assets, the Adviser will not be responsible for
additional expenses exceeding its advisory fee. Once the net
assets of the Fund exceed $100 million, the expense limitation
will be reduced to 1-1/2%.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund and their
ages and principal occupations for the past five years are set
forth below:
Name, Age, Position
Principal Occupation for the Past Five Years
and Address
*Robert E. Killen (54)
Director and Shareholder, Berwyn Financial Services Corp., a
President & Director
financial services company (registered as a broker-dealer with
1199 Lancaster Avenue with
the SEC since 12/93 and a member of the NASD since 7/94),
Berwyn, Pennsylvania
since October, 1991. President and Director, of the Berwyn
Fund,
Inc. since February 1983. President,
Treasurer, Director and Sole
Shareholder of The Killen Group, Inc. (an
Investment Advisory
firm and the Investment Adviser to the Fund)
since September
1982.
*Anthony N. Carrelli (46)
Director of The Berwyn Fund, Inc. since January 1995. Vice
Director President of The Killen Group, Inc. (an
Investment Advisory
1189 Lancaster Avenue Firm
and the Investment Adviser to the Fund) since August 1986.
Berwyn, Pennsylvania
*Edward A. Killen, II (46)
Director, Secretary and Shareholder of Berwyn Financial Services
Director Corp., a financial services company
(registered as a broker-dealer
1189 Lancaster Avenue with
the SEC since 12/93 and a member of the NASD since 7/94),
Berwyn, Pennsylvania
since October 1991. Director of Berwyn Income Fund, Inc. since
January, 1995. Director of The Berwyn Fund,
Inc. from February
1983 to January 1995. Vice president,
Secretary and Director of
The Killen Group, Inc. (an Investment
Advisory Firm and the
Investment Adviser to the Fund) since
February 1983.
Denis P. Conlon (47)
Director of The Berwyn Fund, Inc., since June 1992. Vice
Director President, Corporate Development Berwind
Corporation
1282 Farm Road (Diversified Manufacturing and Financial
Company) since 1990.
Berwyn, Pennsylvania
-6-
William H. Vonier (67)
Director of The Berwyn Fund, Inc. since June 1992. Independent
Director Consultant in Sales and Marketing since
1989.
348 Valley View Lane
Chester Springs, Pennsylvania
*Kevin M. Ryan (48) President, Treasurer, Director and
Shareholder of Berwyn
Secretary-Treasurer Financial Services corp.. (registered as a
broker-dealer with the
and Director SEC
since 12/93 and a member of the NASD since 7/95) since
1199 Lancaster Avenue
October 1991. Director of Berwyn Income Fund, Inc., from
Berwyn, Pennsylvania
December 1986 to January 1995. Secretary, Treasurer and
Director of The Berwyn Fund, Inc., since
February 1983. Legal
Counsel to The Killen Group, Inc. (an
Investment Advisory Firm
and the Investment Adviser to the Fund)
since September 1985.
* Robert E. Killen, Anthony N. Carrelli, Edward A. Killen II and
Kevin M. Ryan are interested persons of the Fund as defined in
the 1940 Act. Messrs. R. Killen, Carrelli, and E. Killen are
the "Interested Directors" of the Fund as defined in the 1940
Act. Robert E. Killen is an Officer, Director and sole
shareholder of the Adviser to the Fund. He is also a Director of
Berwyn Financial Services Corp., a registered broker-dealer, and
owns 1/3 of its outstanding shares. Anthony N. Carrelli is a
Vice President of the Adviser to the Fund. Edward A. Killen II
is an Officer and Director of the Adviser to the Fund. He is
also an Officer, Director and the owner of 1/3 of the outstanding
shares of Berwyn Financial Services Corp. Kevin M. Ryan is legal
counsel to the Adviser and he is an Officer, Director and Owner
of 1/3 of the outstanding shares of Berwyn Financial Services
Corp. In addition, Robert E. Killen and Edward A. Killen II are
brothers and Kevin M. Ryan is brother-in-law to both. Berwyn
Financial Services Corp. serves as the distributor for the Fund's
shares in certain jurisdictions.
Messrs. Conlon and Vonier are the Independent Directors of the
Fund and are paid a fee of $400 for each Board or Committee
meeting attended and are reimbursed for any travel expenses. If
a Board and Committee meeting are held on the same date, the
Independent Directors receive only one fee. Messrs. Conlon and
Vonier also serve as Independent Directors of The Berwyn Fund,
Inc. (another registered investment company managed by The Killen
Group, Inc.). The Fund has not adopted a pension or retirement
plan or any other plan that would afford benefits to its
Directors.
Officers of the Fund are not paid compensation by the Fund for
their work as Officers and no fees are paid to the Interested
Directors for the performance of their duties. (See "Management
of the Fund" in the Prospectus for a discussion of management
responsibilities of the Board and Officers.)
-7-
OWNERSHIP OF THE FUND
As of March 25, 1996, there were 9,952,493 shares of the Fund
outstanding. Charles Schwab & Co., 101 Montgomery Street San
Francisco, CA was the record owner of 39% of the outstanding
shares. Although Charles Schwab & Co. is the record owner of
more than 25% of the outstanding shares of the Fund, Schwab
cannot be considered to control the Fund. Schwab holds the
shares for its customers and does not have the power to vote on
the shares or to sell them. National Financial Services Corp.,
One World Trade Center, 200 Liberty Street, New York, NY was the
record owner of 10% of the Fund's outstanding shares. National
Financial Services Corp. holds the shares for its customers and
does not have the power to vote on the shares or the power to
sell them. The records of the Fund do not indicate that any
individual owns more than 5% of the Fund's outstanding shares.
As of March 25, 1996, the Directors and Officers of the Fund, as
a group, owned beneficially and of record 95,926 of the
outstanding shares. This amount constituted 1.0% of the Fund's
outstanding shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Subject to policy established by the Fund's Board of
Directors, the Investment Adviser is responsible for the Fund's
portfolio decisions and the buying and selling of the Fund's
portfolio transactions. In executing such transactions, the
Adviser will seek to obtain the best net results for the Fund,
taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order,
difficulty of execution and operational facilities of the firm
involved. While the Adviser generally seeks reasonably
competitive commission rates, the Adviser is authorized to pay a
broker a brokerage commission in excess of that which another
broker might have charged for effecting the same transaction, in
recognition of the value of brokerage and research services
provided by the broker.
The Adviser may select brokers who, in addition to meeting
the primary requirements of execution and price, have furnished
statistical or other factual information and services which, in
the opinion of the Board, are reasonable and necessary to the
Fund's normal operations. The services provided by these
brokerage firms may also be used in dealing with the portfolio
transactions of the Adviser's other clients, and not all such
services may be used by the Adviser in connection with the Fund.
Those services may include economic studies, industry studies,
security analysis or reports, sales literature and statistical
services furnished either directly to the Fund or to the Adviser.
Consideration will be given to brokers who have assisted in the
distribution of the Fund. No effort is made in any given
circumstance to determine the value of these materials or
services or the amount they might have reduced expenses of the
Adviser.
The Board has adopted procedures under 17e-1 of the 1940 Act
that permit portfolio transactions to be executed through
affiliated brokers. In 1995, the Fund used an affiliated broker.
The affiliated broker was Berwyn Financial Services Corp.
("BFS").
-8-
BFS is affiliated with the Fund by reason of the fact that
Officers and Directors of the Fund and the Adviser are Officers,
Directors and Shareholders of BFS. In addition, BFS serves as
the distributor for the Fund's shares in various jurisdictions
pursuant to a written agreement.
In 1995, the Fund paid a total of $199,302 in commission to
BFS. This figure represents 87% of the total commissions paid by
the Fund. The percentage of the Fund's aggregate dollar amount
of transactions involving the payment of commissions effected
through BFS was 92%
In 1994, the Fund used two affiliated brokers. During the
first eight months of 1994, the affiliated broker used by the
Fund was Securities America, Inc. ("SAI"). SAI was affiliated
with the Fund and the Adviser by reason of the fact that David C.
Dameron and Kevin M. Ryan, persons affiliated with the Fund and
the Adviser, were registered representatives with SAI and had
portfolio transactions executed for the Fund through SAI. During
the last four months of 1994, BFS was the affiliated broker used
by the Fund.
In 1994, the Fund paid a total of $41,954 in Commissions to
SAI and $51,261 to BFS. In 1993, SAI was the only affiliated
broker used by the Fund and the Fund paid $10,654 in brokerage
commissions to SAI during that year.
The Fund paid brokerage commissions of $229,668 in 1995,
$133,581 in 1994, and $112,768 in 1993. An increase in net
assets in 1994 and 1995 led to an increase in trading and an
increase in commissions.
The Adviser has other advisory clients which include
individuals, trusts, pension and profit sharing funds, and an
investment company, some of which have similar investment
objectives to the Fund.
As such, there will be times when the Adviser may recommend
purchases and/or sales of the same portfolio securities for the
Fund and its other clients. In such circumstances, it will be
the policy of the Adviser to allocate purchases and sales as well
as expenses incurred in the transactions among the Fund and its
other clients in a manner which the Adviser deems equitable,
taking into consideration such factors as size of account,
concentration of holdings, investment objectives, tax status,
cash availability, purchase cost, holding period and other
pertinent factors relative to each account. Simultaneous
transactions could adversely affect the ability of the Fund to
obtain or dispose of the full amount of a security which it seeks
to purchase or sell or the price
at which such security can be purchased or sold.
COMPUTATION OF NET ASSET VALUE
(See also "Computation of Net Asset Value" in the Fund's
Prospectus)
The net asset value per share of the Fund is determined by
dividing the total value of the Fund's investments and other
assets, less any liabilities, by the total number of outstanding
shares of the Fund. Net asset value per share is determined as
of the close of regular trading on the New
-9-
York Stock Exchange (ordinarily 4:00 p.m. eastern time) on each
day that the Exchange is open and is effective as of the time of
computation.
SHARE PURCHASES
The Fund is closed to new investors. Only current
shareholders or investors who qualify may open new accounts and
purchase shares of the Fund. For investors who may purchase the
Fund's shares, the shares are offered for sale on a continuous
basis. There is no sales load. The offering price of shares of
the Fund is the net asset value per share next determined after
receipt by the Transfer Agent of the order for purchase of
shares.
The minimum initial investment is $10,000 per investor. This
investment may be divided by a single investor among different
investment accounts that total $10,000 in the aggregate or
between accounts in the Fund and The Berwyn Fund. Subsequent
investments must be at least $250 per account. The minimum
initial investment for IRA's is $1,000. The minimum is $250 for
a spousal IRA. Subsequent investments in IRA's must be at least
$250. There are no minimum requirements for pension and profit
sharing plans or custodial accounts for minors.
The Fund reserves the right to reduce or waive the minimum
purchase requirements in certain cases where subsequent and
continuing purchases are contemplated.
DISTRIBUTOR
BFS Corp., a broker-dealer registered with the Securities and
Exchange Commission, is the current distributor of the Fund's
shares, pursuant to a selling agreement which became effective
July 25, 1994. Under the agreement, BFS is the non-exclusive
agent in certain jurisdictions for the Fund's continuous offer of
shares. Shares of the Fund are offered to the public at net
asset value, without the imposition of a sales load. The
jurisdictions in which BFS is the distributor are Arizona,
Arkansas, Florida, Maryland, North Dakota, Nebraska, Texas,
Vermont and West Virginia.
The selling agreement provides that it will continue in
effect form year to year only so long as such continuance is
approved at least annually by the Fund's Board of Directors and
by the vote of a majority of the directors who are not parties to
the agreement or interested persons of any such party by vote
cast in person at a meeting called for the purpose of voting on
such approval. The agreement will terminate automatically in the
event of its assignment.
REDEMPTION OF SHARES
(See also "Redemption of Shares" in the Fund's Prospectus)
The Fund has elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940, under which the Fund is obligated
to redeem the shares of any shareholder solely in cash up
-10-
to the lesser of 1% of the net asset value of the Fund or
$250,000 during any 90 day period. Should any shareholder's
redemption exceed this limitation, the Fund can, at its sole
option, redeem the excess in cash or in portfolio securities
selected solely by the Fund (and valued as in computing net asset
value). In these circumstances an investor selling such
securities would probably incur a brokerage charge and there can
be no assurance that the price realized by an investor upon the
sale of such securities will not be less than the value used in
computing net asset value for the purpose of such redemption.
CALCULATION OF PERFORMANCE DATA
Yield
The Fund's yield for the month ended December 31, 1995 was
6.94%.
The yield was determined based upon the net investment income
per share for the period December 1 to December 31, 1995.
Expenses accrued for the period were subtracted from the interest
and dividends accrued and the remainder was divided by daily
average number of shares multiplied by maximum offering price per
share. The number then obtained was annualized.
Total Return
The average annual total return of the Fund for one year,
five years and the life of the Fund ended December 31, 1995 are
listed below:
One Year: 21.0%
Five Years: 16.0%
Life of The Fund:11.7%
The period of time for one year's performance is from January
1, 1995 to December 31, 1995. The dates for the 5 year period
are January 1, 1991 to December 31, 1995 and the life of the Fund
covers the period from September 3, 1987 to December 31, 1995.
To obtain the performance listed above, the Fund computed its
average total return for each period of time. The Fund made this
calculation by first determining the total return for a period
and then using an exponential function based upon the number of
years involved to obtain an average.
The total return for a period is calculated by determining
the redeemable value of $1,000 initial investment made at the
beginning of the period, with dividends and capital gains
reinvested on the reinvestment date, on the last day of the
period and dividing that value by $1,000. The average annual
total return for the period is calculated by taking the total
return for the period and determining the annual average by using
an exponential function based upon the number of years and any
fraction thereof in the period.
In addition to an average annual total return, the Fund
calculates its total return on a calendar year basis. Listed
below are the Fund's total returns for the calendar years 1988,
1989, 1990, 1991, 1992, 1993, 1994 and 1995:
-11-
January 1, 1988 -December 31, 1988 l1.3%
January 1, 1989 -December 31, 1989 11.9%
January 1, 1990 -December 31, 1990 -
0.13%
January 1, 1991 -December 31, 1991 23.0%
January 1, 1992 -December 31, 1992 21.7%
January 1, 1993 -December 31, 1993 16.9%
January 1, 1994 -December 31, 1994 -1.1%
January 1, 1995 -December 31, 1995 21.0%
The Fund calculates the total return for a calendar year by
determining the redeemable value of $1,000 investment made at the
beginning of the year with dividends and capital gains reinvested
on the reinvestment date, on last day of the year and dividing
that value by $1,000.
Annual average total return and the total returns for
calendar year are based on historical performance and are not
intended as an indication of future performance.
GENERAL INFORMATION
Capital Structure
The Fund has authorized capital of 20,000,000 shares of
common stock of $1 par value per share. Each share has equal
dividend, distribution and liquidation rights. There are no
conversion or preemptive rights applicable to any shares of the
Fund. All shares issued are fully paid and nonassessable. Fund
shares do not have cumulative voting rights. See "General
Information" in the Prospectus for a discussion of noncumulative
voting rights.)
Custodian
Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001 is the Custodian of the
Fund. The Custodian holds all securities and cash owned by the
Fund and collects all dividends and interest due on the
securities.
Independent Accountants
Price Waterhouse LLP, 30 South 17th Street, Philadelphia,
Pennsylvania has been selected as the independent accountants for
the Fund by the Board of Directors. Price Waterhouse LLP will
perform an annual audit of the financial statements of the Fund.
Tax Status
The Fund intends to comply with Subchapter M of the Internal
Revenue Code. (See "Dividends, Capital Gains, Distributions and
Taxes" in the Prospectus for a discussion of the tax status of
the Fund and the consequences to its shareholders.)
-12-
Litigation
The Fund is not involved in any litigation or other legal
proceedings.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the year ended
December 31, 1995 are included in the Fund's 1995 annual report
to shareholders which is incorporated by reference in this
statement of additional information. An investor may obtain a
copy of the annual report by writing to the Fund or calling
(800)992-6757.
-13-
Thirty South Seventeenth
Street Telephone 215 575 5000
Philadelphia, PA 19103-4094
PRICE WATERHOUSE LLP
Report of Independent Accountants
February 8, 1996
To the Shareholders and Board of Directors
Berwyn Income Fund, Inc.
In our opinion, the accompanying statement of assets and
liabilities, including the statement of investments, and the
related statements of operations and of changes in net assets and
the financial highlights present fairly, in all material
respects, the financial position of Berwyn Income Fund, Inc. (the
"Fund") at December 31, 1995, the results of its operations, the
changes in its net assets and the financial highlights for each
of the respective periods presented, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of
securities at December 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received,
provided a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
-14-
APPENDIX A
DEFINITIONS OF STANDARD & POOR'S BOND RATINGS
Standard Poor's gives ratings to bonds that range from AAA
to D. The Fund may invest in bonds with ratings of CC above.
Definitions of these ratings are set forth below.
AAA Debt rated AAA has the highest rating assigned
by Standard Poor's.
Capacity to pay interest and repay principal is
extremely strong.
AADebt rated AA has a very strong capacity to pay
interest and repay principal
and differs from the higher rated issues only in
small degree.
A Debt rated A has a strong capacity to pay interest
and principal although it
is somewhat more susceptible to the adverse effects
of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB Debt rated BBB is regarded as having an adequate
capacity to pay interest
and repay principal. Whereas it normally exhibits
adequate protection
parameters, adverse economic conditions or changing
circumstances are
more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this
category than in higher rated categories.
BB,B,CCC,CC
Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly
speculative with respect to capacity to pay interest
and repay principal in
accordance with the terms of the obligation. BB
indicates the lowest degree
of speculation and C the highest degree of
speculation. While such debt will
likely have some quality and protective
characteristics, these are outweighed
by large uncertainties or major risk exposures to
adverse conditions.
APPENDIX B
MOODY'S BOND RATINGS
Moody's give ratings to bonds that range from Aaa to D.
Definitions of these ratings are set forth below. The Fund may
invest in bonds with any of these ratings.
Aaa - These bonds are judged to be of the best quality.
They carry the smallest degree of investment risk.
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
Aa - These bonds are judged to be of high quality by all
standards. They are rated lower than the best bonds
because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - These are bonds which possess many favorable
investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to
principal and interest are considered adequate but
elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa - These bonds are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba - These are bonds judged to have speculative elements;
their future cannot be considered as well assured.
Uncertainty of position characterizes bonds in this
class.
B - These bonds generally lack characteristics of the
desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - These are bonds of poor standing. Such issues may
be in default or there may be present elements of danger
with respect to principal or interest.
Ca - These bonds represent obligations which are
speculative in a high degree. Such issues are often in
default or have other market shortcomings.
C - These are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
PART C
Item 24
(a) Financial Statements:
The Financial Statements and Financial Highlights in the 1995
Annual Report are incorporated by reference into this
Registration Statement. The Financial Statements incorporated
include the Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Financial
Highlights, Statement of Investments, and Notes to Financial
Statements..
(b) Exhibits:
1. A copy of the Articles of Incorporation was filed in
Exhibit #1 in the registration
statement filed May 21, 1987 and is incorporated by
reference.
2. A copy of the amended bylaws was filed 3/01/94 as
Exhibit #1 and is incorporated by
this reference.
3. Not applicable.
4. A copy of the security being issued was filed as Exhibit
#3 in the registration statement
filed May 21, 1987 and is incorporated by this
reference.
5. A copy of the amended investment advisory contract was
filed 3/01/94 as exhibit #2 and
is incorporated by this reference.
6. A copy of the Selling Agreement between the Fund and
Berwyn Financial Services
Corp. was filed 4/24/95 and is incorporated by this
reference.
7. Not applicable.
8. A copy of the new custodian agreement was filed 3/01/94
as Exhibit #3 and is
incorporated by this reference.
9. Not applicable.
10. A copy of the opinion and consent of counsel will be
filed with the Funds rule 24f-2
notice on 4/30/96.
11. The consent of Price Waterhouse LLP is included as
Exhibit #11.
12. Not applicable.
13. Not applicable.
14. Copies of the IRA information booklet and SEP
Information booklet were filed as
Exhibit #2 in post effective amendment filed April 8,
1991 and are incorporated by
reference. The Prototype Defined Contribution Plan used
by the Fund was filed as part
of The Berwyn Fund post effective amendment filed April
8, 1991 and the documents
are incorporated by this reference.
15. Not applicable.
16. Schedules for computation of each performance figure are
included as Exhibit #16.
17. Financial Data Schedule.
Item 25
The Registrant is not under common control with any person
and the Registrant does not control directly or indirectly any
person.
Item 26
Listed below is the class of stock and number of holders, the
Registrant had on March 29, 1996:
(1) (2)
Title of Class Number of Record Holders
Common Stock 1,960
Item 27
Article XVI of the Registrant's bylaws sets forth the rules
on indemnification of officers and directors. There will be no
indemnification of a director or officer from an judgment,
verdict or settlement resulting from liability to the corporation
or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of his office. The following methods will be used to
determine if a director or officer is guilty of disabling
conduct: (a) a final decision on the merits by a court or other
body before whom a proceeding was brought, or (b) a reasonable
determination based upon a review of the facts, by independent
legal counsel in a written opinion, that the director or officer
was not liable on the basis of disabling conduct. If there is no
disabling conduct, a director or officer would be entitled to
indemnification for expenses and for any judgment, verdict or
settlement.
Item 28
Robert E. Killen, President and a Director of the Registrant,
is President and a Director of the Adviser to the Registrant.
Mr. Killen is President and a Director of The Berwyn Fund, Inc.,
a registered investment company. He is a Director and
Shareholder of Berwyn Financial Services Corp., a registered
broker-dealer.
Edward A. Killen II is Vice President and a Director of the
Adviser to the Registrant. He is a Director of the Adviser to
the Registrant and a Director of Berwyn Income Fund, Inc., a
registered investment company. He is also a Director, Officer
and Shareholder of Berwyn Financial Services Corp., a registered
broker-dealer.
Item 29
(a) Berwyn Financial Services Corp. also serves as the
distributor for The Berwyn Fund, Inc., in certain jurisdictions.
(b)
Name & Principal Positions & Office Positions & Office
Business Address w/Berwyn Financial with the Fund
Services Corp.
Robert E. Killen Director President and
Director
1199 Lancaster Ave.
Berwyn, PA
Edward A. Killen Secretary and Director Director
1189 Lancaster Ave.
Berwyn, PA
Kevin M. Ryan President, Treasurer Secretary and
Treasurer
1199 Lancaster Ave. and Director
Berwyn, PA
Item 30
Accounts, books and other documents that are required to be
maintained under Section 31(a) of the 1940 Act and the
regulations thereunder will be maintained as follows:
1) Journals detailing the purchase and sale of securities,
the receipt and delivery of securities, receipt and
disbursement of cash and all other debits and credits will be
in the physical possession of Kevin M. Ryan at 1189 Lancaster
Avenue, Berwyn, Pennsylvania 19312.
2) Ledgers reflecting all asset, liability, reserve,
capital, income and expense accounts as well as ledgers
containing the information required for each portfolio
security, for each broker-dealer, bank or other person
through whom transactions in portfolio securities are
effected and for each shareholder of record in the investment
company will be maintained in the physical possession of
Kevin M. Ryan, 1189 Lancaster Avenue, Berwyn, Pennsylvania
19312.
3) The Articles of Incorporation, the bylaws, the minutes
of shareholders and directors' meetings will be maintained in
the physical possession of Kevin M. Ryan, 1189 Lancaster
Avenue, Berwyn, Pennsylvania 19312.
4) A record of all brokerage orders and a record of all
portfolio purchases and sales will be maintained in the
physical possession of Kevin M. Ryan, 1189 Lancaster Avenue,
Berwyn, Pennsylvania 19312.
5) Monthly trial balances for all ledger accounts, a
quarterly record of broker commissions, a record identifying
persons authorizing the purchase or sale of portfolio
securities and files of all advisory material received from
the investment advisor will be maintained by Kevin M. Ryan,
1189 Lancaster Avenue, Berwyn, Pennsylvania 19312.
6) Records required to be maintained by the investment
advisor will be in the physical possession of Robert E.
Killen, 1189 Lancaster Avenue, Berwyn, Pennsylvania 19312.
Item 31
Not applicable
Item 32
(a) Not applicable.
(b) Not applicable.
(c) The Registrant has placed information required by Item 5A
in the latest annual report to shareholders and undertakes to
furnish each person to whom a prospectus is delivered with a copy
of the Registrant's latest annual report to shareholders upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Berwyn and State of Pennsylvania
on the 17th day of April 1996.
Berwyn Income Fund, Inc.
Registrant
BY: Robert E. Killen
Robert E. Killen, 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 date indicated.
Signature Title Date
Robert E. Killen
President and Director 4/17/96
Robert E. Killen
Kevin M. Ryan
Secretary and Director 4/17/96
Kevin M. Ryan and Treasurer
Anthony N. Carrelli Director
4/17/96
Anthony N. Carrelli
Denis P. Conlon Director
4/17/96
Denis P. Conlon
William H. Vonier Director
4/17/96
William H. Vonier
Edward A. Killen Director
4/17/96
Edward A. Killen
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Berwyn and State of Pennsylvania
on the 17th day of April 1996.
Berwyn Income Fund, Inc.
Registrant
By:____________________________
Robert E. Killen, 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 date indicated.
Signature Title Date
President and Director 4/17/96
Robert E. Killen
Secretary 4/17/96
Kevin M. Ryan and Treasurer
Director
4/17/96
Anthony N. Carrelli
Director
4/17/96
Denis P. Conlon
Director
4/17/96
William H. Vonier
Director
4/17/96
Edward A. Killen
EXHIBIT INDEX
Exhibit #11
Consent of Price Waterhouse LLP
Exhibit #16
Performance Calculation
Exhibit #17
Financial Data Schedule
EXHIBIT #11
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information
constituting parts of this Post-Effective Amendment No. 11
to the registration statement on Form N-1A of our report
dated February 8, 1996, relating to the financial statements
and financial highlights of the Berwyn Income Fund, Inc.
appearing in the December 31, 1995 Annual Report to
Shareholders, which is incorporated by reference in such
Statement of Additional Information. We also consent to the
reference to us under the heading "General Information" in
the Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in the
Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
April 23, 1996
EXHIBIT #16
Schedules for Computation of Performance Figures
a) Annual Average Total Return:
The Fund calculated its annual average total return for
one year, five years and the life of the Fund by using
the formula P(1+T)n = ERV in Item 22 of Form N-1A. In
using this formula, P is equal to an initial investment
of $1,000, T is equal to average annual total return for
the period, n equals the number of years and ERV is the
ending redeemable value.
For the one year period ending December 31, 1995
P equals $1,000
T equals -.211
n equals 1 year
ERV equals $1,211
For the five years ending December 31, 1995
P equals $1,000
T equals .16
n equals 5 years
ERV equals $2,097
For the life of the Fund
P equals $1,000
T equals .117
n equals 7 1/4 years
ERV equals $2,518
b) Yield quotation for one month ending December 31.
The formula used is Yield=2[a-b + 1)6-1]
cd
a = interest and dividends for period and that was
$724,182
b = expenses accrued and that equals $56,608
c = average daily number shares outstanding entitled
to receive dividends and that is
9,783,144
d = the maximum offering price per share on last day
of the period and that is $11.96
724,182 - 56,608 + 1 = .00570544
117,006,402
raised to 6th power = 1.03472465
minus 1 and multiplied by 2 = 0.0694493
c) Annual Total Return
The Fund calculated its annual total return for each year by
using the formula P(1+T)n=ERV. In using this formula, P is
equal to an initial investment of $1,000, T is equal to the
total return for the period, equals the number of years and
ERV is the ending redeemable value.
1-2
For the year ending December 31, 1988:
P equals $1,000
T equals .113
n equals 1
ERV equals $1,113
For the year ending December 31, 1989:
P equals $1,000
T equals .119
n equals 1
ERV equals $1,119
For the year ending December 31, 1990:
P equals $1,000
T equals .0013
n equals $998.70
For the year ending December 31, 1991:
P equals $1,000
T equals .23
n equals 1
ERV equals $1,230
For the year ending December 31, 1992:
P equals $1,000
T equals .217
n equals 1
ERV equals $1,217
For the year ending December 31, 1993:
P equals $1,000
T equals .169
n equals 1
ERV equals $1,169
For the year ending December 31, 1994:
P equals $1,000
T equals -.011
n equals 1
ERV equals $989
For the year ending December 31, 1995:
P equals $1,000
T equals .211
n equals 1
ERV equals $1,211
2-2
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 113,247,295
<INVESTMENTS-AT-VALUE> 117,529,544
<RECEIVABLES> 2,802,579
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,332,123
<PAYABLE-FOR-SECURITIES> 300,354
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 480,101
<TOTAL-LIABILITIES> 780,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,918,545
<SHARES-COMMON-STOCK> 10,006,054
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 293,228
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,592
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,282,249
<NET-ASSETS> 119,551,668
<DIVIDEND-INCOME> 1,398,656
<INTEREST-INCOME> 5,552,414
<OTHER-INCOME> 57,561
<EXPENSES-NET> 682,733
<NET-INVESTMENT-INCOME> 6,295,898
<REALIZED-GAINS-CURRENT> 3,063,135
<APPREC-INCREASE-CURRENT> 7,392,882
<NET-CHANGE-FROM-OPS> 16,751,915
<EQUALIZATION> 56,021,073
<DISTRIBUTIONS-OF-INCOME> 6,034,698
<DISTRIBUTIONS-OF-GAINS> 3,012,003
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,395,245
<NUMBER-OF-SHARES-REDEEMED> 2,196,051
<SHARES-REINVESTED> 611,416
<NET-CHANGE-IN-ASSETS> 63,726,287
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 460
<OVERDISTRIB-NII-PRIOR> 4,675
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 477,283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 682,733
<AVERAGE-NET-ASSETS> 98,295,956
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> 1.48
<PER-SHARE-DIVIDEND> 0.70
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.95
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
