File #33-14604
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o
Pre-Effective Amendment No. o
Post-Effective Amendment No. 13 x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 15
(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
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 24f-2 under
the Investment Company Act of 1940. The Rule 24f-2 Notice
for the Registrant's most
recent fiscal year was filed April 8, 1998.
CROSS REFERENCE SHEET
Statement of
Prospectus Additional Registration
Section Page # Information Page# Statement Page #
PART A
Item 1.
Item 2. 2 5
Item 3. 3a & 3b 6 & 6b
Item 4. 4 - 10 & 18 7 - 13 & 21
Item 5. 10 - 11 & 18 13 - 14 & 21
Item 5A * *
Item 6. 15 -16 & 18 18 - 19 & 21
Item 7. 12 & 14 15 - 17
Item 8. 16 - 17 19 - 20
Item 9. N/A N/A
PART B
Item 10. Cover Page 23
Item 11. 1 24
Item 12. 12 - 13 35 - 36
Item 13. 2 - 5 25 - 28
Item 14. 6 - 8 29 - 31
Item 15. 8 31
Item 16. 5 - 6 28 - 29
Item 17. 8 - 10 31 - 33
Item 18. 12 35
Item 19. 10 & 11 33 - 34
Item 20. 13 36
Item 21. 10 & 11 33 - 34
Item 22. 11 & 12 34 - 35
Item 23. 13 36
PART C
Item 24. 40
Item 25. 41
Item 26. 41
Item 27. 41
Item 28. 41
Item 29. 42
Item 30. 42
Item 31. 43
Item 32. 43
_______________________________
*Information is provided in the Registrant's 1997 Annual Report to
Shareholders filed with the Securities and Exchange Commission on
February 27, 1998.
BERWYN INCOME FUND, INC.
Shareholder Services
c/o PFPC Inc.
P.O. Box 8987
Wilmington, DE 19899
PROSPECTUS
April 30, 1998
Investment Objective
Berwyn Income Fund, Inc. (the "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 the Fund 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, securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and common stocks paying cash dividends. The
Fund's investment adviser determines the percentage of each category
of securities to hold based upon the prevailing economic and market
conditions. All or 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. (the "Adviser") is the investment adviser
to the Fund. Robert E. Killen is Chief Executive Officer 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 ("SAI") containing
additional information about the Fund with the Securities and Exchange
Commission. The SAI is dated April 30,1998 and is incorporated by
reference into this Prospectus. The SAI 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 Objective, Policies and Risk
Factors...............................................................
..... 4
Management of the
Fund..................................................................
...................................... 10
Computation of Net Asset
Value.................................................................
........................... 12
Share
Purchases.............................................................
......................................................... 12
Distributor...........................................................
.................................................................... 14
Exchange of
Shares................................................................
................................................. 14
Dividends, Capital Gains Distributions and
Taxes................................................................. 15
Retirement
Plans.................................................................
.................................................... 16
Redemption of
Shares................................................................
............................................. 16
General
Information...........................................................
..................................................... 18
Additional
Information...........................................................
................................................. 18
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FEE and EXPENSE TABLE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.50 %
Other Expenses 0.15 %
Total Fund Operating Expenses 0.65 %
______________________________________________________________________
________
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.
Example
1 Year 3 Years
5 Years 10 Years
You would pay the following $7 $21 $36 $80
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period:
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.
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following financial highlights information for a share outstanding
throughout each period, insofar as it relates to each of the five
years in the period ended December 31, 1997, 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 Fund's Statement of Additional Information and this
Prospectus, and which appear, along with the report of Price
Waterhouse LLP, in the Fund's 1997 Annual Report to Shareholders (the
"Annual Report"). Additional Information about the Fund's investment
performance is contained in the Annual Report which can be obtained
from the Fund upon request without charge.
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
Net Asset Value, Beginning of Period $12.31 $11.95 $10.75 $11.63 $11.12
-------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income 0.77 0.76 0.73 0.73 0.69
Net Realized and Unrealized Gains
(Losses) on Securities 0.84 0.87 1.48 (0.85) 1.15
-------- -------- -------- -------- --------
Total from Investment Operations 1.61 1.63 2.21 (0.12) 1.84
-------- -------- -------- -------- --------
Less Distributions
Dividends from Net Investment Income (0.77) (0.80) (0.70) (0.73) (0.65)
Distributions from Net Realized Gains (0.64) (0.47) (0.31) (0.03) (0.68)
Return of Capital Distributions --- --- --- --- ---
-------- -------- -------- -------- --------
Total Distributions (1.41) (1.27) (1.01) (0.76) (1.33)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $12.51 $12.31 $11.95 $10.75 $11.63
Total Return 13.36% 13.99% 21.00% (1.10%) 16.90%
Ratios/Supplemental Data
Net Assets, End of Period (000) $180,823 $137,166 $119,552 $55,825 $30,359
Ratio of Expenses to Average Net Assets 0.65% 0.68% 0.73% 0.93% 1.07%
Ratio of Net Investment Income to Average 6.15% 6.35% 6.78% 7.20% 6.15%
Net Assets
Portfolio Turnover Rate 53% 38% 39% 30% 83%
Average Commissions Rate Paid $0.0687* $0.0860* --- --- ---
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(Continued)
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
Net Asset Value, Beginning of Period $10.20 $9.14 $10.03 $9.75 $9.50
-------- -------- -------- -------- -------
Income From Investment Operations
Net Investment Income 0.70 0.85 0.83 0.79 1.365(1)
Net Realized and Unrealized Gains
(Losses) on Securities 1.47 1.19 (0.85) 0.34 (0.300)
-------- -------- -------- -------- --------
Total from Investment Operations 2.17 2.04 (0.02) 1.13 1.065
-------- -------- -------- -------- --------
Less Distributions
Dividends from Net Investment Income (0.70) (0.85) (0.83) (0.79) (0.765)
Distributions from Net Realized Gains (0.55) (0.05) (0.04) (0.06) (0.050)
Return of Capital Distributions --- (0.08) --- --- ---
-------- -------- -------- -------- --------
Total Distributions (1.25) (0.98) (0.87) (0.85) (0.815)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $11.12 $10.20 $9.14 $10.03 $9.75
Total Return 21.70% 23.00% (0.13%) 11.90% 11.30%(1)
Ratios/Supplemental Data
Net Assets, End of Period (000) $12,486 $5,359 $3,955 $3,870 $2,644
Ratio of Expenses to Average Net Assets 1.34% 1.34% 1.46% 1.50% 1.75%(1)
Ratio of Net Investment Income to 6.14% 8.40% 8.59% 8.00% 8.29%
Average Net Assets
Portfolio Turnover Rate 46% 14% 14% 3% 17%
Average Commissions Rate Paid --- --- --- --- ---
(1) Investment Advisory fees of $.06 per share were waived by The
Killen Group, Inc. for the year ended 12/31/88.
If the waived fees had been included in expenses, the total return
of the Fund would have been lower and the
Ratio of Expenses to Average Net Assets would have been 2.08%
fortheyear
ended 12/31/88.
* Computed by dividing the total amount of commission paid by the
total number of shares purchased and sold
during the year.
- -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. An investor may obtain a copy of the Annual Report
without charge by writing to the shareholder services agent of the
Fund or by calling (800) 992-6757.
INVESTMENT OBJECTIVE, POLICIES, AND RISK FACTORS
The 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 the Fund considers to be reasonable risks. In pursuing
its investment objective, the Fund may also offer the potential for
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
or 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
or 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 and market
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 that invests all or a larger percentage of its
net assets in securities of higher quality. Investment in common
stocks will be limited to a maximum of 30% of the value of the Fund's
net assets. This means that the Fund will not invest in additional
common stocks anytime common stocks comprise 30% or more (through
appreciation in value of the common stocks or depreciation in value of
other securities) of the value of its net assets. At such time,
however, the Fund may continue to invest in fixed income securities
and preferred stocks that have common stock conversion privileges.
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The Adviser will select 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 a nationally recognized statistical rating
organization such as Standard & Poor's Ratings Group ("S & P") and
Moody's Investors Service, Inc. ("Moody's"). These organizations 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, highest, to C, lowest. (See Appendices A and B
in the Statement of Additional Information for definitions of S & P
and Moody's Bond Ratings.) The Adviser has the discretion to invest
in fixed income corporate debt securities with any rating as long as
the issuer is not in default in the payment of interest or principal.
The Adviser also may invest in unrated fixed income securities in
private transactions.
At December 31, 1997, the Fund's portfolio was invested in
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 at
December 31, 1997, in various bond ratings published by Moody's and S
& P, as well as the percentages invested in unrated debt securities,
preferred and common stocks and repurchase agreements:
Moody's Ratings
Aa: 0.3%; A: 7.2%; Baa: 8.6%; Ba: 3.9%; B: 21.8%; Caa:
1.9%; Unrated: 4.3%.
S & P Ratings
AA: 0.3%; A: 8.1%; BBB: 5.2%; BB: 4.9%; B: 15.6%; CCC:
1.4%; Unrated: 13.5%.
U.S. Treasury Bonds: 1.5%
Preferred and Common Stocks, Close-End Investment Companies and
Repurchase Agreements
Preferred stocks: 20.5%; Common Stocks: 26.9%; Close-End
Investment Companies:
2.7%;
Repurchase Agreements: 0.4%.
Risk Considerations for High Yield, High Risk Securities
Debt securities rated A or higher by S & P and Moody's are
considered high grade securities and have the three highest ratings
for creditworthiness. Debt Securities rated BBB by S & P or Baa by
Moody's are defined as medium grade securities. These securities are
considered creditworthy and of investment quality but there is a
possibility that the ability of the issuer of the securities to pay
interest or repay the principal in the future may be impaired by
adverse economic conditions or changing circumstances. Debt
securities rated lower than BBB or Baa are less creditworthy than
investment grade securities with the same maturity and, as a
consequence, may pay higher income.
- -5-
Debt 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 debt securities.
Issuers of high yield, high risk debt 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 debt
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 debt securities. Changes in the general
level of interest rates normally affect the market value and yield of
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, debt
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 debt securities may also 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 debt securities 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 debt securities may be less liquid than the
market for investment grade debt securities. In periods of reduced
market liquidity, the prices of high yield, high risk debt 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.
The Adviser will attempt to minimize the risks of investing in
medium grade and high yield, high risk debt securities by doing a
credit analysis of the issuer, diversifying the Fund's portfolio and
monitoring the Fund's investments and the investment environment.
As previously stated, in selecting debt securities, the Adviser
is aware of the issuer's credit rating in S & P and Moody's. But this
credit rating is not the only criterion for selection. The
- -6-
Adviser examines the financial structure of each issuer and with
regard to high yield, high risk debt securities makes a determination
as to the issuer's ability to meet its debt obligations. Achievement
of the Fund's investment objective is more dependent on the Adviser's
credit analysis in selecting high yield, high risk debt securities
than is the case in selecting higher quality securities.
There can be no guarantee that the issuer of debt 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 debt securities depend upon the creditworthiness
of the issuer, changes in interest rates and economic and market
factors. Investors in unrated debt securities face the same risks
that investors in investment grade and high yield, high risk debt
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 debt security and the issuer's ability to meet the debt
obligation. To be purchased by the Fund an unrated debt security must
have a creditworthiness, in the Adviser's opinion, equal to or better
than a CC rating by S & P or a Caa rating by Moody's.
The Fund may also purchase certain debt securities that have
restrictions regarding their resale. These restricted securities are
securities that have not been registered with the Securities and
Exchange Commission under the Securities Act of 1933, as amended
("1933 Act"). As a result, these securities may not be offered for
sale to the general public. The Fund may purchase these restricted
securities under the provisions of Rule 144A under the 1933 Act. This
rule provides an exemption from the 1933 Act that allows qualified
institutional buyers to buy and sell restricted securities in private
transactions. The Fund may purchase Rule 144A Securities from other
institutional investors or from the issuing company. If the Fund
wishes to sell a Rule 144A Security the Fund will have to sell it to a
qualified institutional buyer in a private transaction.
There are risks associated with investing in Rule 144A
Securities. The securities may become illiquid if qualified
institutional buyers are not interested in acquiring the securities.
Although the Rule 144A Securities may be resold in negotiated
transactions, the price realized from these sales could be less than
the price originally paid by the Fund or less than what may be
considered the fair value of such securities. Furthermore, if such
securities are required to be registered under the securities laws of
one or more jurisdictions before being resold, the Fund may be
required to bear the expense of registration.
The Fund will seek to minimize these risks by limiting
investment in Rule 144A Securities to 10% of the value of the Fund's
net assets. This means that whenever the value of the Rule 144A
Securities of the Fund is 10% or more of the value of the Fund's net
assets, the Fund will not purchase any more Rule 144A Securities. In
addition, the Fund will only purchase Rule
- -7-
144A Securities of companies that have publicly traded securities
outstanding , have been in business a minimum of 5 years, and have a
market capitalization of at least $100 million.
Finally, the Fund will purchase Rule 144A Securities only in
situations where the Adviser has a reasonable expectation that the
securities will be registered with the Securities and Exchange
Commission within six months.
The investment objective of the Fund is to provide investors
with current income while seeking to preserve capital. The Fund seeks
to achieve this objective by investing in the corporate debt
securities of only those 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.
U.S. Government Securities
The securities of the U. S. Government in which the Fund invests
are U.S. Treasury bonds and notes and securities issued or guaranteed
by Federal agencies or 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 or 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 Fund must look principally to the
agency or instrumentality issuing or guaranteeing the security 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, among others, 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, subject to the 30% limit described above, 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) stocks offering a potential for capital
- -8-
appreciation due to the business prospects of the issuer. The Fund
may also purchase preferred stocks in transactions that qualify under
Rule 144A.
Common stocks are selected from three categories: (1) stocks
selling substantially below their book value; (2) stocks selling at
low valuations 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.
The Fund purchases only common stocks that have been paying cash
dividends. Preferred stocks that have 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 Fund's 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 five years and have at least $10,000,000 in
assets.
Real Estate Investment Trusts
The Fund may invest in Real Estate Investment Trusts ("REITs").
REITs are companies that invest in real estate. REITs normally do not
pay federal income tax but distribute their income to their
shareholders who become liable for the tax. Some REITs own properties
and earn income from leases and rents. These types of REITs are
termed "Equity" REITs. Other REITs hold mortgages and earn income
from interest payments. These REITs are termed "Mortgage" REITs.
Finally, there are "Hybrid" REITs that own properties and hold
mortgages.
The Fund may invest in any of the three types of REITs and may
purchase the common stocks, preferred stocks or debt securities issued
by REITs. The Fund invests in REITs that generate income and have a
potential for capital appreciation.
There are risks in investing in REITs that are in addition to
risks of investing in securities in general.
The Properties owned by a REIT could decrease in value, a REIT
could have trouble finding tenants for a property, 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. In addition, the Fund will not purchase
additional securities issued by REITs whenever securities of REITs
comprise 10% or more of the value of the Fund's net assets.
Investment in common stocks issued by a REIT is subject to both the
10% limitation on investment in REITs and the 30% limitation on
investment in common stock. Investment in.
- -9-
other securities issued by REITs such as preferred stocks and debt
securities is subject to the 10% limitation.
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 policies other
than the fundamental policy stated above may be changed with the
approval of a majority of the Fund's 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 no load money market funds, savings accounts
and certificates of deposit of domestic banks with assets in excess of
$1,000,000, commercial paper rated A-1 by S & P, repurchase
agreements, treasury bills or the Fund may hold cash.
Investment by the Fund in a no-load money market fund will
result in the Fund paying a management fee on the money invested in
such fund in addition to the operating expenses of the Fund..
The Fund will not invest more than 5% of its net assets in
repurchase agreements. Also, the Fund will not investment more than
10% of its net assets in illiquid securities, whether fixed income or
equity securities.
The Fund does not intend to engage in short-term trading. In
1997, the Fund had a portfolio turnover rate of 53% and anticipates it
will have a portfolio turnover rate of less than 100% in 1997.
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 Adviser under the supervision of the
Board.
The Killen Group, Inc. (the "Adviser") is the investment adviser
to the Fund. The Adviser is a Pennsylvania corporation that was
formed in September 1982. Its address is 1189 Lancaster Avenue,
Berwyn, Pennsylvania 19312. Robert E. Killen is Chairman, CEO and
sole shareholder of the Adviser. Mr. Killen is also President and
Chairman of the Board of the Fund. Edward A. Killen is Vice-President
and Secretary of the Adviser. He is also a Director of the Fund and
its portfolio manager, responsible for the day-to-day management of
the Fund's portfolio. He has been managing the Fund's portfolio since
July 1, 1994.
Edward A. Killen II has over twenty years' experience in the
investment advisory field. In 1978, he started to work for Compu Val
Management Associates, an investment advisory firm,
- -10-
as a portfolio manager. In February, 1983, the Adviser became a
partner in Compu Val Management Associates and Edward A. Killen II
assumed his current position as Vice President and Secretary of the
Adviser. The partnership of CompuVal Management Associates was
dissolved on December 31, 1983 and the Adviser continued its advisory
business as a separate entity. As of December 31, 1997, the Adviser
was managing 380 individual investment portfolios worth approximately
$555 million.
The Adviser also manages The Berwyn Fund, Inc. ("The Berwyn
Fund"). 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 Adviser has been the investment
adviser to The Berwyn Fund, since it became public in May 1984. On
December 31, 1997, The Berwyn Fund had net assets of over $100
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 0.50% of the average daily net
assets of the Fund. During 1997, the Fund paid the Adviser $806,436
in advisory fees. Total expenses for the Fund in 1997 were 0.65% of
average daily 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.
Year 2000
Many computer software systems in use today cannot properly
process date-related information from and after January 1, 2000.
Should any of the computer systems employed by the Fund's major
service providers fail to process this type of information properly,
that could have a negative impact on the Fund's operations and the
services that are provided to the Fund's shareholders. The Adviser,
the Fund's distributor, Berwyn Financial Services Corp., and PFPC,
Inc., the Fund's registrar, transfer agent and dividend disbursing
agent, have advised the Fund that they are reviewing all of their
computer systems with the goal of modifying or replacing such systems
prior to January 1, 2000 to the extent necessary to foreclose any such
negative impact. In addition, the Adviser has been advised by the
Fund's custodian that it is also in the process of reviewing its
systems with the same goal. As of the date of this Prospectus, the
Fund and the Adviser have no reason to believe that these goals will
not be achieved.
- -11-
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 (the "Exchange") (4 p.m., Eastern Time) and is effective as
of the time of computation. (The Exchange is closed on, and therefore
net asset value is not calculated on, New Year's Day, President's Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day, and on the
preceding Friday or subsequent Monday when any of these holidays falls
on a Saturday or Sunday, respectively.) 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
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 Fund has
authorized certain brokers and intermediaries designated by such
brokers to accept purchase and redemption orders. The receipt of an
order by such broker or its intermediary will be considered the same
as receipt of an order by the Fund's Transfer Agent and the order
received by the broker or its intermediary will receive the net asset
value per share next determined after receipt by the broker or its
intermediary.
The value of the shares in the Fund can be expected to fluctuate
daily.
Orders for shares of the Fund received prior to the close of the
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 in the Fund that total $10,000 in the aggregate or
between accounts in the Fund and The Berwyn Fund. Subsequent
investments must be least $250 per account. For Individual Retirement
Accounts (each, an "IRA"), the minimum initial investment is $1,000.
The minimum initial investment for a spousal IRA is $250.
- -12-
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 an 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, PFPC Inc., P. O. Box 8987, Wilmington DE 19899.
The Fund has an Automatic Investment Plan under which an
investor may have money transferred from the investor's checking
account to the investor's 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 by the investor, 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 by the
investor for both initial and subsequent investments must have a fair
market value, determined as set forth below, of at least $20,000. (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 Fund's Prospectus and Statement
of Additional Information ("SAI") and, 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
Policies and Risk Factors" in the Prospectus and "Invesetment Policies
and Risk Factors" and "Investment Restrictions" in the SAI.)
The 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 described below.
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. (In the
case of an initial investment, a New Account Application completed by
the investor must accompany the certificates.)
Upon receipt of the securities, the Fund will determine the
value of the securities on the valuation date which will be the date
on which the net asset value of shares of the Fund are next determined
after receipt of such securities. The amount of the investment in the
Fund will be the offered value of the securities as determined by the
Fund. The value of each security offered by
- -13-
the investor will be determined on the valuation date as of the close
of trading of the Exchange and the method of valuation will be the
same as the one used to value the Fund's portfolio securities. If a
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. For such an
exchange, 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 for 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 may 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 notification 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 who is an Officer and Director of the Fund
and the Adviser, 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
The Adviser to the Fund also manages The Berwyn Fund. The
Berwyn Fund was closed to new investors on January 1, 1998. Only
investors who were shareholders in Berwyn Income Fund, Inc. as of
December 31, 1997 may exchange their shares for shares in The Berwyn
Fund, Inc. Shares may also be exchanged for shares in the Rodney
Square Fund or the Rodney Square Tax-Exempt Fund (each of such Funds,
a "Rodney Square Fund"). The Rodney Square 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
- -14-
investment for each of the Rodney Square 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.
Subject to the foregoing minimum investment amounts, any
shareholder will be permitted to exchange shares among the above
mutual funds ("Eligible 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 identification
number under which the account is registered. Shares will be
exchanged only into an account that has same shareholder(s) of record
and same social security or tax identification number.
A shareholder in the Fund will be permitted to exchange the
shares in his or her account for shares in one of the other Eligible
Funds only four times in any twelve-month period. A shareholder in a
Rodney Square Fund may exchange shares of the Rodney Square Fund for
shares of the Fund as often as the shareholder desires.
Before making an exchange, a shareholder should obtain and
review a current prospectus of the Eligible Fund into which shares of
the Fund will be exchanged. Prospectuses for The Berwyn Fund or the
Rodney Square Funds may be obtained from the Fund by writing to the
Shareholder Services Agent of the Fund or calling (800) 992-6757.
The exchange privilege is available only to investors residing
in states where the Eligible Funds have filed a notice of sales with
the sate securities administrator.
The Fund, The Berwyn Fund and each of the Rodney Square Funds
reserve the right to amend or change the exchange privilege upon 60
days' notice to shareholders.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND 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.
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
- -15-
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 of 1986, as amended, 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 the company
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 in additional shares
of the Fund. Shareholders who are not subject to income tax will not
be required to pay tax on the amount distributed. The Fund will notify
shareholders what portion of the distribution is from net investment
income or capital gains.
A dividend shortly after a purchase of Fund shares is taxable to
the shareholder even though it appears to be a return of capital.
Redemptions and exchanges of Fund shares are treated as sales of
Fund shares. Consequently, redemptions and exchanges are generally
subject to capital gains tax.
In addition to Federal income tax, Fund distributions and
capital gains or losses from the sale, redemption or exchange of Fund
shares may also be subject to state and local taxes. The Fund is
required to withhold 31% of taxable dividends, capital gains
distributions, and redemption proceeds paid to shareholders that do
not provide their correct taxpayer identification number, certify that
it is correct, and certify that they are not subject to backup
withholding.
RETIREMENT PLANS
The Fund sponsors IRAs, including "Roth" IRAs and an "Education"
IRAs. Individuals interested in having an IRA with the Fund may
obtain an IRA information booklet and application forms by writing to
the Shareholder Services Agent of the Fund or calling (800) 992-6757.
REDEMPTION OF SHARES
The Fund will redeem any portion of or 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.
- -16-
A shareholder who wishes to submit a written redemption request
should mail it to Berwyn Income Fund, c/o PFPC, Inc., 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
identification number under which the account is registered. Checks
will be issued only in the name(s) listed on the account and will be
mailed only 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). 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 ("SWP") under
which an investor may have money automatically withdrawn from his or
her account on a regular basis. Investors who wish to establish a SWP
should complete the section on systematic withdrawals on the account
application.
The Fund reserves the right to redeem the Fund shares of, and
send the redemption proceeds to, any shareholder whose total shares in
all accounts fall below $1,000 in net asset value by reason of
redemption. Upon receiving written notice from the Fund, a
shareholder must increase the shareholder's accounts net asset value
to $1,000 or above within 60 days to prevent liquidation.
When permitted by the Securities and Exchange Commission (the
"SEC"), the Fund may suspend the right of redemption and may postpone
payment for more than seven days during any period when the Exchange
is closed, other than customary weekend and holiday closing; when
trading on the Exchange is restricted, as determined by the SEC,
during any period when an emergency, as defined by rules of the SEC,
exists making disposal of portfolio securities or valuation of net
assets by the Fund not reasonably practicable; or when the SEC may
permit for the protection of shareholders of the Fund.
- -17-
GENERAL INFORMATION
Capital Structure
The Fund has authorized capital of 100,000,000 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
PFPC Inc., 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 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 and compare
the Fund's performance with the performance of certain bond indices
and an index of income funds. 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 SEC. The registration statement
consists of three parts: the Prospectus, the SAI and a third section
containing exhibits and other information. A copy of the SAI is
available from the Fund upon request free of charge. The third part
of the registration statement may be obtained from the SEC upon paying
the charges prescribed.
- -18-
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus and
the SAI, 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.
- -19-
PART B
BERWYN INCOME FUND, INC.
Shareholder Services
c/o PFPC Inc.
P.O. Box 8987
Wilmington, DE 19899
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1998
This Statement of Additional Information ("SAI") is not a
Prospectus. It is a document that relates to the Prospectus of the
Berwyn Income Fund, Inc. (the "Fund") dated April 30, 1998 and
contains additional information regarding the Fund. This SAI 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 Policies and Risk
Factors...............................................................
..................... 2
Investment
Restrictions..........................................................
................................................ 4
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.................................................................
.......................... 10
Share
Purchases.............................................................
........................................................ 10
Distributor...........................................................
................................................................... 10
Redemption of
Shares................................................................
............................................ 11
Calculation of Performance
Data..................................................................
......................... 11
General
Information...........................................................
.................................................... 12
Financial
Statements............................................................
.................................................. 13
- -1
INVESTMENT 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
the Fund considers to be reasonable risks. In pursuing its investment
objective, the Fund may also offer the potential for capital
appreciation. To achieve its objective, the Fund invests in
investment grade corporate debt securities, securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
high yield, high risk corporate debt securities (also known as "junk
bonds"), unrated corporate debt securities, and preferred and common
stocks. The Adviser determines the percentage of each category of
securities to purchase and hold based upon the prevailing economic and
market conditions. This means, that the Fund may invest up to 100% of
its net assets in high yield, high risk corporate debt securities.
Investment grade corporate debt securities are considered to be
securities rated BBB or higher by Standard & Poor's Rating Group
("S&P") or Baa or better by Moody's Investors Service, Inc.
("Moody's") 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 S&P and Moody's bond ratings.
The Fund may invest in fixed income securities that are not
rated. 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 Moody's ratings of Caa.
The Fund may also purchase certain debt securities that have not
been registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended ("1933 Act") and are restricted
from sale to the general public. The Fund will purchase these
restricted securities from the issuer or qualified institutional
buyers, and will sell these restricted securities, exclusively in the
transactions that are exempt pursuant to Rule 144A under the 1933 Act.
The Fund will limit its investment in such restricted securities to
10% of the value of its net asset.
In addition to corporate debt securities, the Fund may invest in
the securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and in preferred and common stocks. The
securities of the U.S. Government in which the Fund invests 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. U.S. Treasury bonds and notes are backed by the
full faith and credit of the U.S. Government. Securities issued by
Government agencies or 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, an investor must look principally to the agency or
instrumentality for repayment.
- -2-
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 may also purchase
preferred stocks that are restricted securities subject to the
limitations under Rule 144A described above.
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.
The Fund, however, will purchase only common stocks that pay
cash dividends and will not purchase additional common stocks when
common stocks comprise 30% 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 no load money market funds, savings accounts and
certificates of deposit of domestic banks with assets in excess of
$1,000,000, commercial paper rated A-1, repurchase agreement and
Treasury bills, and may hold cash.
Investment by the Fund in a no-load money market fund will
result in the Fund paying a management fee on the money invested in
such fund in addition to the operating expenses of the Fund.
The Fund may invest in real estate investment trusts ("REITs")
and repurchase agreements. The Fund limits investment in REITs to 10%
of its net assets and investment in repurchase agreements 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, 1997, 5.78% 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 bankruptcy of the seller of a repurchase
agreement or the failure of the 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
- -3-
part of the income. The Fund would also incur additional expenses
enforcing its rights. As of December 31, 1997, 0.38% of the Fund's
net assets were invested in repurchase agreements.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below may not be changed
without approval by vote of a majority of the Fund's outstanding
voting securities. As used in this SAI 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.
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, as amended, 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, except that the
- -4-
Fund will be permitted to purchase restricted securities that
are eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended);
(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.
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 Chairman, CEO and sole
shareholder of the Adviser. He is also President and Chairman of the
Board of the Fund. Edward A. Killen is Vice President, Secretary and
a Director of the Adviser and a Director of the Fund.
The Adviser provides the Fund with investment management
services. Under the contract between the Fund and the Adviser (the
"Contract"), 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
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 each day the New York Stock Exchange is open, 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 the 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.
- -5-
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 $806,435 in fees in 1997, $638,212 in
1996, and $477,283 in 1995.
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 1.5%. The expense limitation has not been used since 1988.
In 1997 the Fund's expense ratio was 0.65%.
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 (56) Director of Westmoreland Coal Co. (a
mining company) since President & Director July 1996. Director
and Shareholder,
Berwyn Financial Services 1199 Lancaster Avenue Corp.,
a financial services company
(registered as a broker-dealer Berwyn, Pennsylvania
with the Securities and Exchange Commission ("SEC") since
12/93 and a member of the National
Association of Securities
Dealers, Inc. (the "NASD") since 7/94),
since October 1991.
President and Director of The Berwyn
Fund, Inc. (a registered
investment company managed by the
Adviser) since February
1983. Chairman, CEO and Sole
Shareholder of the Adviser (an
investment advisory firm) since April
1996. President, Treasurer,
Director and Sole Shareholder of the
Adviser from September
1982 to March 1996.
- -6-
*Anthony N. Carrelli (49) Director of The Berwyn Fund, Inc. since
January 1995. Vice
Director President of the Adviser since August
1986.
1189 Lancaster Avenue
Berwyn, Pennsylvania
*Edward A. Killen, II (46) Director, Secretary and Shareholder of
Berwyn Financial Services
Director since October 1991. Director of the
Fund since January, 1995.
1189 Lancaster Avenue Director of The Berwyn Fund, Inc. from
February 1983 to January
Berwyn, Pennsylvania 1995. Vice president, Secretary and
Director of the Adviser since
February 1983.
Denis P. Conlon (50) Director of The Berwyn Fund, Inc.,
since June 1992 President and
Director CEO of CRC Industries (a worldwide
manufacturer) since
1282 Farm Road September 1996. Vice President, Corporate Development,
Berwyn, Pennsylvania Berwind Corporation (diversified
manufacturing and financial company) from 1990 to September 1996.
Deborah D. Dorsi (42) Director of The Berwyn Fund, Inc. since
April 1998. Retired
Director Industry Executive since 1994.
Director Worldwide Customer
2801 Stanbridge Street Support, Kulick Soffa Industries, Inc.
(Semi Conductor
Norristown, Pennsylvania Equipment Manfacturer) from 1993-1994
Corporate Account
Manager for Kulick & Soffa Industries,
Inc. prior to 1993.
*Kevin M. Ryan (50) President, Treasurer, Director and
Shareholder of Berwyn
Secretary-Treasurer Financial Services Corp. since October
1991. Director of the
1199 Lancaster Avenue Fund from December 1986 to January
1995. Secretary, Treasurer
Berwyn, Pennsylvania and Director of The Berwyn Fund, Inc.,
since February 1983.
Legal Counsel to the Adviser 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
Investment Company Act of 1940, as amended (the "1940 Act") and Robert
E. Killen, Anthony N. Carrelli, and Edward A. Killen II are the
"Interested Directors" of the Fund. Robert E. Killen is an Officer,
Director and Sole Shareholder of the Adviser. 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. Edward A. Killen II is an Officer and
Director of the Adviser. 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.
- -7-
Mr. Conlon and Ms. Dorsi are the Directors of the Fund who are not
"interested persons" of the Fund as defined in the 1940 Act (the
"Independent Directors") and are paid a fee of $400 for each Board or
Committee meeting attended and are reimbursed for any travel expenses
by the Fund. If a Board and Committee meeting are held on the same
date, the Independent Directors receive only one fee. Mr. Conlon and
Ms. Dorsi also serve as Independent Directors of The Berwyn Fund, Inc.
(another registered investment company managed by the Adviser). The
Fund has not adopted a pension or retirement plan or any other plan
that would afford benefits to its Directors.
Ms. Dorsi was elected to the Board in April 1998 by a vote of the
Board of Directors. She replaces William H. Vonier who served as an
Independent Director on the Board from June 1992 until April 1998. In
1997, the Fund paid aggregate compensation of $1,600 to Mr. Conlon and
$1,600 to Mr. Vonier. The total compensation from the Fund Complex,
consisting of the Fund and The Berwyn Fund, Inc., was $3,200 for Mr.
Conlon and $3,200 for Mr. Vonier.
Officers of the Fund are not paid compensation by the Fund or the Fund
Complex for their work as officers and no fees are paid by the Fund or
the Fund Complex to the Directors that are not Independent 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.)
OWNERSHIP OF THE FUND
As of March 31, 1998 there were 14,287,713 shares of the Fund
outstanding. Charles Schwab & Co. ("Schwab"), 101 Montgomery Street,
San Francisco, CA was the record owner of 47% of the outstanding
shares. Although Schwab 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 in nominee name for its customers
and does not have the power to vote 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 9% of the Fund's
outstanding shares. National Financial Services Corp. holds the
shares for its customers and does not have the power to vote the
shares or 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 31, 1998, the Directors and Officers of the Fund, as a group,
owned beneficially and of record 155,426 shares of the Fund. This
amount constitutes 1% of the outstanding shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Subject to policy established by the Fund's Board of Directors,
the Adviser is responsible for the Fund's portfolio decisions and the
buying and selling of the Fund's portfolio securities. In executing
such securities, 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 and capabilities 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
- -8-
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 shares 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, 1996, and 1997 the Fund used an affiliated broker,
Berwyn Financial Services Corp. ("BFS").
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 1997, the Fund paid a total of $193,023 in commissions to
BFS. This figure represents 77% 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 74%.
In 1996, the Fund paid a total of $126,520 in commissions to
BFS. This figure represents 88% 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 90%. In 1995, the Fund paid a total of $199,302 in commissions 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%.
The Fund paid brokerage commissions of $247,987 in 1997,
$144,128 in 1996, and $229,668 in 1995. The Fund was reopened to
investors on January 21, 1997. As a result the sale of Fund shares
increased in 1997. There was more trading than in 1996 and the amount
of commissions paid increased.
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
- -9-
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 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 York Stock Exchange (the "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
(See also "Share Purchases" in the Propsectus.)
The Fund's 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 or a broker authorized by the Fund to receive orders
for the purchase of shares. There is no sales load and the value of
shares can be expected to fluctuate daily.
The minimum initial investment is $10,000 per investor. This
investment may be divided by a single investor among different
investment accounts in the Fund that total $10,000 in the aggregate or
between accounts in the Fund and The Berwyn Fund, Inc. Subsequent
investments must be at least $250 per account. The minimum initial
investment for Individual Retirement Accounts ("IRAs") is $1,000. The
minimum is $250 for a spousal IRA. Subsequent investments in IRAs
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
(See also "Distribution" in the Prospectus.)
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
- -10-
July 25, 1994 (the "Selling Agreement"). Under the Selling Agreement,
BFS is the non-exclusive agent in certain jurisdictions for the Fund's
continuous offering 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
from 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
Selling 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 under the 1940
Act, under which the Fund is obligated to redeem the shares of any
shareholder solely in cash up 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 redemptions 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 that receives and sells
such portfolio 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 portfolio securities will not be less than the value
used in computing net asset value for the purpose of such redemptions.
CALCULATION OF PERFORMANCE DATA
Yield
The Fund's yield for the month ended December 31, 1997 was
6.62%.
The yield was determined based upon the net investment income
per share for the period December 1 to December 31, 1997. 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, 1997 are listed
below:
One Year: 13.4%
Five Years: 12.6%
Ten Years: 12.9%
- -11-
The period of time for one year's performance is from January 1,
1997 to December 31, 1997. The dates for the five-year period are
January 1, 1993 to December 31, 1997 and for the ten year period are
from January 1, 1988 to December 31, 1997. 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, 1995, 1996 and 1997:
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%
January 1, 1996 - December 31, 1996
14.0%
January 1, 1997 - December 31, 1997
13.4%
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 100,000,000 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.)
- -12-
Custodian
PNC Bank, 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809
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.)
Litigation
The Fund is not involved in any litigation or other legal
proceedings.
FINANCIAL STATEMENTS
The Fund's audited financial statements and notes thereto for the
year ended December 31, 1997 and the unqualified report of Price
Waterhouse LLP, the Fund's Independent Accountants, on such financial
statements (the "Report"), included in the Fund's 1997 Annual Report
to Shareholders (the "Annual Report") are incorporated by reference in
this SAI. A copy of the Annual Report accompanies this SAI and an
investor may obtain a copy of the Annual Report by writing to the
Fund's or calling (800) 992-6757. The Report follows on the next
page.
- -13-
Report of Independent Accountants
February 6, 1998
To the Board of Directors and Shareholders of
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, 1997, the
results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended, 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 of
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, 1997 by correspondence with the custodian and the application of
alternative auditing procedures where securities purchased had not
been settled, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
APPENDIX A
DEFINITIONS OF STANDARD & POOR'S BOND RATINGS
Standard & Poor's Ratings Group 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.
AA Debt 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.
D Debt rated D is in default, and payment of
interest and/or repayment of
principal is in arrears.
- -14-
APPENDIX B
MOODY'S BOND RATINGS
Moody's Investors Service, Inc. 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 ratings of Caa or
better.
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.
- -15-
PART C
Item 24
(a) Financial Statements:
The Financial Statements and Financial Highlights and the notea
thereon in the 1997 Annual Report to Shareholders are incorporated by
reference into Part A and Part B of this Registration Statement. The
Financial Statements incorporated by reference 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. The Financial Highlights of the
Fund are also included in Part A and the Report of the Independent
Accountants is included in Part B.
(b) Exhibits:
1. A copy of the amended Articles of Incorporation is included
herein as Exhibit #1.
2. A copy of the amended bylaws is included herein as Exhibit
#2.
3. Not applicable.
4. Not applicable.
5. A copy of the amended Investment Avisory Contract is included
herein as Exhibit #5.
6. A copy of the Selling Agreement between the Fund and Berwyn
Financial Services Corp. is included herein as Exhibit #6.
7. Not applicable.
8. A copy of the new Custodian Agreement is included herein
Exhibit #8.
9. Not applicable.
10. A copy of the opinion and consent of counsel was filed with
the Fund's Rule 24f-2 notice on 4/08/98 and is incorporated
herein by this reference.
11. The consent of Price Waterhouse LLP is included herein as
Exhibit #11.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Schedules for computation of each performance figure are
included herein.
17. Financial Data Schedule.
18. Not applicable
C-1
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 31, 1998:
(1) (2)
Title of Class Number of Record Holders
Common Stock 1,764
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 foregoing referred to as "Disabling Conduct"). 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
were 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
Chairman and CEO of The Killen Group, Inc., the adviser (the
"Adviser") to the Registrant. Mr. Killen is President and a Director
of The Berwyn Fund, Inc., a registered investment company having the
same investment adviser as the Fund. He is a Director and Shareholder
of Berwyn Financial Services Corp. ("BFS"), a registered broker-
dealer.
Edward A. Killen II is Vice President and a Director of the
Adviser and a Director of Berwyn Income Fund, Inc. He is also a
Director, Officer and Shareholder of BFS, a registered broker-dealer.
For information as to any other business, profession, vocation
or employment of a substantial nature in which each director or
officer of The Killen Group, Inc. (the "Adviser") is or engaged for
his own account or in the capacity of director, officer, employee,
partner or
C-2
trustee, reference is made to the Adviser's Form ADV (File #801-18770)
currently on file with the Commissions as required by the Invesmtnet
Advisers Act of 1940, as amended.
Item 29
(a) Berwyn Financial Services Corp. also serves as the
distributor for The Berwyn Fund, Inc., in certain jurisdictions.
(b)
Positions & Office
Name & Principal w/Berwyn Financial
Positions & Office
Business Address Services Corp.
with the Fund
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 Investment Company Act of 1940,
as amended, 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.
C-3
3) The Articles of Incorporation, the bylaws, the minutes of
shareholders and directors' meetings will be maintained under
the control 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 under the
control 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 under the control of Kevin M. Ryan, 1189
Lancaster Avenue, Berwyn, Pennsylvania 19312.
6) Records required to be maintained by the investment adviser
will be under the control 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 of
the Form N-1A 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.
C-
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 30th day of April 1998.
Berwyn Income Fund, Inc.
Registrant
BY: /S/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
/S/ Robert E. Killen President and Director 4/30/98
Robert E. Killen
/S/ Kevin M. Ryan Secretary and
Treasurer 4/30/98
Kevin M. Ryan
/S/ Anthony N. Carrelli Director 4/30/98
Anthony N. Carrelli
/S/ Denis P. Conlon Director 4/30/98
Denis P. Conlon
/S/ Deborah Dorsi Director 4/30/98
Deborah Dorsi
/S/ Edward A. Killen II Director 4/30/98
Edward A. Killen II
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 30th day of April 1998.
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 4/30/98
Robert E. Killen
Secretary and Treasurer 4/30/98
Kevin M. Ryan
Director 4/30/98
Anthony N. Carrelli
Director 4/30/98
Denis P. Conlon
Director 4/30/98
Deborah Dorsi
Director 4/30/98
Edward A. Killen II
EXHIBIT INDEX
EDGAR EXHIBIT NUMBER FORM N-1A
EXHIBIT NUMBER
EX-99.B1 Charter Exhibit
#24(b)1
EX-99.B2 Bylaws Exhibit
#24(b)2
EX-99.B5 Advisory Contract Exhibit
#24(b)5
EX-99.B6 Distribution Contract Exhibit
#24(b)6
EX-99.B8 Custodian Contract Exhibit
#24(b)8
EX-99.B11 Consent of Price Waterhouse, LLP Exhibit
#24(b)11
EX-99.B14 Retirement Plans Exhibit
#24(b)14
EX-99.B16 Performance Quotations Exhibit
#24(b)16
EX-27 Financial Data Schedule Exhibit
#24(b)17
EXHIBIT #24(b)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. 13 to the registration statement
on Form N-1A (the "Registration Statement") of our report dated
February 19, 1998, relating to the financial statements and financial
highlights of appearing in the December 31, 1997 Annual Report to
Shareholders, which are also incorporated by reference into the
Registration Statement. We also consent to the reference to us under
the heading Financial Highlights" in the Prospectus and to the
reference to us under the heading"Independent Accountants" in the
Statement of Additional Information "
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
March 24, 1998
EXHIBIT #24(b)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, 1997
P equals $1,000
T equals .__________
n equals 1 year
ERV equals $1,400
For the five years ending December 31, 1997
P equals $1,000
T equals .142
n equals 5 years
ERV equals $1,941
For the ten years ending December 31, 1997
P equals $1,000
T equals .12
n equals 9 1/4 years
ERV equals $2,868
b) Yield quotation for one month ending December 31, 1997 was 6.95%.
The formula used is Yield=2[a-b + 1)6-1]
cd
a = interest and dividends for period and that was
$1,028,473
b = expenses accrued and that equals $85,667
c = average daily number shares outstanding entitled to
receive dividends and that was 13,839,231
d = the maximum offering price per share on last day of the
period and that was
$12.51 1,028,473 - 85,667 +1 = 1.00544569
173,128.780
raised to 6th power = 1.03312221
minus 1 and multiplied by 2 = 0.05524442
1-3
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.
For the year ended December 31, 1988:
P equals $1,000
T equals .113
n equals 1
ERV equals $1,113
For the year ended December 31, 1989:
P equals $1,000
T equals .119
n equals 1
ERV equals $1,119
For the year ended December 31, 1990:
P equals $1,000
T equals -.0013
n equals $998.70
For the year ended December 31, 1991:
P equals $1,000
T equals .23
n equals 1
ERV equals $1,230
For the year ended December 31, 1992:
P equals $1,000
T equals .217
n equals 1
ERV equals $1,217
For the year ended December 31, 1993:
P equals $1,000
T equals .169
n equals 1
ERV equals $1,169
For the year ended December 31, 1994:
P equals $1,000
T equals -.011
n equals 1
ERV equals $989
2-3
For the year ended December 31, 1995:
P equals $1,000
T equals .210
n equals 1
ERV equals $1,210
For the year ending December 31, 1996
P equals $1,000
T equals .1140
n equals 1
ERV equals $1400
For the year ending December 31, 1997:
P equals $1,000
T equals .1340
n equals 1
ERV equals $1340
3-3
1
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 171,676,957
<INVESTMENTS-AT-VALUE> 180,695,469
<RECEIVABLES> 2,034,090
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 182,729,559
<PAYABLE-FOR-SECURITIES> 810,704
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,095,090
<TOTAL-LIABILITIES> 1,905,794
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157,022,171
<SHARES-COMMON-STOCK> 14,453,123
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 286,592
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 43,367
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,018,512
<NET-ASSETS> 180,823,765
<DIVIDEND-INCOME> 3,680,066
<INTEREST-INCOME> 7,294,647
<OTHER-INCOME> 0
<EXPENSES-NET> 1,050,895
<NET-INVESTMENT-INCOME> 9,923,818
<REALIZED-GAINS-CURRENT> 8,770,212
<APPREC-INCREASE-CURRENT> 1,268,334
<NET-CHANGE-FROM-OPS> 19,962,364
<EQUALIZATION> 42,333,211
<DISTRIBUTIONS-OF-INCOME> 9,850,406
<DISTRIBUTIONS-OF-GAINS> 8,787,456
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,409,414
<NUMBER-OF-SHARES-REDEEMED> 37,836,437
<SHARES-REINVESTED> 14,760,234
<NET-CHANGE-IN-ASSETS> 43,657,713
<ACCUMULATED-NII-PRIOR> 158,963
<ACCUMULATED-GAINS-PRIOR> 112,202
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 806,436
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,050,895
<AVERAGE-NET-ASSETS> 161,320,698
<PER-SHARE-NAV-BEGIN> 12.31
<PER-SHARE-NII> .77
<PER-SHARE-GAIN-APPREC> .84
<PER-SHARE-DIVIDEND> .77
<PER-SHARE-DISTRIBUTIONS> .64
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.51
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Articles of Incorporation
Filed: December 26, 1986
Articles of Amendment Filed:
April 13, 1998
Domestic Business Corporation
A
Commonwealth of Pennsylvania
Department of State
Corporation Bureau
In compliance with the requirements of section 204 of the
Business Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S.
1204) the undersigned, desiring to be incorporated as a business
corporation, hereby certifies (certify) that:
1. The name of the corporation is: THE BERWYN INCOME FUND, INC.
2. The location and post office address of the initial registered
office of the corporation in this Commonwealth is:
1039 Beaumont Road, Berwyn, PA 19312 (Chester County)
Amended: 1189 Lancaster Avenue, Berywn, PA 19312 (Chester
County)
3. The corporation is incorporated under the Business Corporation Law
of the Commonwealth of Pennsylvania for the following purpose or
purposes:
an open end investment company as defined in the Investment
Company Act of 1940 and to have unlimited power to engage in
activities to the foregoing purpose.
4. The term for which the corporation is to exist is: PERPETUAL
5. The aggregate number of shares which the corporation shall have
authority to issue is:
Twenty million (20,000,000) share of common stock with a part
value of One Dollar ($1.00) per share.
Amended: The aggregate number of shares, classes of shares and
par value of shares which the corporation shall have the authority
to issues: 100,000,000 shares with a stated par value per share
of $1.00 par.
The amendment was adopted by the shareholders (or members)
pursuant to 15 Pa. C.S. 1914(a) and (b)
6. The name(s) and post office address(es) of each incorporator(s)
and the number and class of shares subscribed by such
incorporator(s) is (are):
ROBERT E. KILLEN 1039 Beaumont Road
Number of Class of Share
Berwyn, PA 19312
1 (one)
AMENDED BY-LAWS OF
THE BERWYN FUND, INC.
ARTICLE I - OFFICES
1. The registered office of the corporation shall be at
1039 Beaumont Road, Berwyn, Pennsylvania, 19312.
2. The corporation may also have offices at such other
places as the Board of Directors may from time to time appoint or the
business of the Corporation may require.
ARTICLE II - SEAL
1. The corporation seal shall have inscribed thereon the
name of the corporation, the year of its origination and the words
"Corporate Seal Pennsylvania."
ARTICLE III - SHAREHOLDERS MEETING
1. Meetings of the shareholders shall be held at the
registered office of the corporation or at such other place or places,
either within or without the Commonwealth of Pennsylvania, as may from
time to time be selected.
2. The annual meeting of the shareholders shall be held on
the fourth Friday of March in each year if not a legal holiday, and if
a legal holiday, then on the next secular day following at 10:00 a.m.,
when they shall elect a Board of Directors, and transact such other
business as may properly be brought before the meeting. If the annual
meeting shall not be called and held during the calendar year, any
shareholder may call such meeting at any time thereafter.
3. The presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all
shareholders are entitled to cast on the particular matter shall
constitute a quorum for the purpose of considering such matter, and,
unless otherwise provided by statute the acts, at a duly organized
meeting, of the shareholders present, in person or by proxy, entitled
to cast at least a majority of the votes which all shareholders
present are entitled to cast shall be the acts of the shareholders.
The shareholders present at a duly organized meeting can continue to
do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. Adjournment or
adjournments of any annual or special meeting may be taken, but any
meeting at which directors are to be elected shall be adjourned only
from day to day, or for such longer periods not exceeding fifteen days
each, as may be directed by shareholders who are present in person or
by proxy and who are entitled to cast at least a majority of the votes
which all such shareholders would be entitled to cast at an election
of directors until such directors have been elected. If a meeting
cannot be organized because a quorum has not attended, those present
may, except as otherwise provided by statute, adjourn the meeting to
such time and place as they may determine, but in the case of any
meeting called for the election of directors, those who attend the
second of such adjourned meetings, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing
directors.
4. Every shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to
act for him by proxy. Every proxy shall be executed in writing by the
shareholders, or by his duly authorized attorney in fact, and filed
with the Secretary of the Corporation. A proxy, unless coupled with
an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has
been given to the Secretary of the corporation. No unrevoked proxy
shall be valid after eleven months from the date of its execution,
unless a longer time is expressly provided therein, but in no event
shall a proxy, unless coupled with an interest, be voted on after
three years from the date of its execution. A proxy shall not be
revoked by the death or incapacity of the maker unless before the vote
is counted or the authority is exercised, written notice of such death
or incapacity is given to the Secretary of the corporation. A
shareholder shall not sell his vote or execute a proxy to any person
for any sum of money or anything of value. A proxy coupled with an
interest shall include an unrevoked proxy in favor of a creditor of a
shareholder and such proxy shall be valid so long as the debt owed by
him to the creditor remains unpaid. Elections for directors need not
be by ballot, except upon demand made by a shareholder at the election
and before the voting begins. In an election of directors no
cumulative voting shall be allowed. No share shall be voted at any
meeting upon which any installment is due and unpaid.
5. Written notice of the annual meeting shall be given to
each shareholder entitled to vote thereat not less than fourteen nor
more than thirty days.
6. In advance of any meeting of shareholders, the Board of
Directors may appoint judges of election, who need not be
shareholders, to act at such meeting or any adjournment thereof. If
judges of election be not so appointed, the chairman of any such
meeting may, and on the request of any shareholder or his proxy shall,
make such appointment at any meeting. The number of judges shall be
one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares present and entitled
to vote shall determine whether one or three judges are to be
appointed. On request of the chairman of the meeting, or any
shareholder or his proxy, the judges shall make a report in writing of
any challenge or question or matter determined by them, and execute a
certificate of any fact found by them. No person who is a candidate
for office shall act as judge.
7. Special meetings of the shareholders may be called at
any time by the President, or the Board of Directors, or shareholders
entitled to cast at least one-tenth of the votes which all
shareholders are entitled to cast at the particular meeting. At any
time, upon written request of any person or persons who have duly
called a special meeting, it shall be the duty of the Secretary to fix
the date of the meeting, to be held not more than sixty days after
receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and
give notice thereof, the person or persons calling the meeting may do
so.
8. Business transacted at all special meetings shall be
confined to the objects stated in the call and matters germane
thereto, unless all shareholders entitled to vote are present and
consent.
9. Written notice of a special meeting of the shareholders
stating the time and place and object thereof, shall be given to each
shareholder entitled to vote thereat at least ten days before such
meeting, unless a greater period of notice is required by statute in a
particular case.
10. The officer or agent having charge of the transfer
books shall make at least five days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at
the meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list shall be subject to
inspection by any shareholder at any time during usual business hours.
Such list shall also be produced and kept open at the time and place
of the meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share
ledger or transfer book, or duplicate thereof kept in this
Commonwealth, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer
book, or to vote in person or by proxy at any meeting of shareholders.
ARTICLE IV - DIRECTORS
1. The business of this corporation shall be managed by
its Board of Directors, five (5) in number. The directors need not be
resident of this Commonwealth or shareholders in the corporation.
They shall be elected by the shareholders at the annual meeting of
shareholders of the corporation, and each director shall be elected
for the term of one year, and until his successor shall be elected and
shall qualify. Whenever all of the shares of the corporation are
owned beneficially and of record by either one or two shareholders,
the number of directors may be less than three but not more less than
the number of shareholders, there must be at least three directors.
2. In addition to the powers and authorities by these By-
Laws expressly conferred upon them, the Board may exercise all such
powers of the corporation and do all such lawful acts and things as
are not by statute or by the Articles or by these By-Laws directed or
required to be exercised or done by the shareholders.
3. The meetings of the Board of Directors may be held at
such place within this Commonwealth, or elsewhere, as a majority of
the directors may from time to time appoint, or as may be designated
in the notice calling the meeting.
4. Each newly elected Board may meet at such place and
time as shall be fixed by the shareholders at the meeting at which
such directors are elected and no notice shall be necessary to the
newly elected directors in order legally to constitute the meeting, or
they may meet at such place and time as may be fixed by the consent in
writing of all the directors.
5. Regular meetings of the Board shall be held without
notice immediately following the annual shareholders' meeting, at the
registered office of the corporation, or at such other time and place
as shall be determined by the Board.
6. Special meetings of the Board may be called by the
President on two days notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the President
or Secretary in like manner and on like notice on the written request
of a majority of the directors in office.
7. A majority of the directors in office shall be
necessary to constitute a quorum for the transaction of business, and
the acts of a majority of the directors present at a meeting at which
a quorum is present shall be the acts of the Board of Directors. Any
action which may be taken at a meeting of the directors may be taken
without a meeting if a consent or consents in writing, setting forth
the action so taken, shall be signed by all the directors and shall be
filed with the Secretary of the corporation.
8. Directors, as such, shall not receive any stated salary
for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board provided, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE V - OFFICERS
1. The executive officers of the corporation shall be
chosen by the directors and shall be a President, Secretary and
Treasurer. The Board of Directors may also choose a Vice President
and such other officers and agents as it shall deem necessary, who
shall hold their offices for such terms and shall have such authority
and shall perform such duties as from time to time shall be prescribed
by the Board. Any number of offices may be held by the same person.
It shall not be necessary for the officers to be directors.
2. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
3. The officers of the corporation shall hold office for
one year and until their successors are chosen and have qualified. Any
officer or agent elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best
interests of the corporation will be served thereby.
4. The powers and duties of the several officers shall be
as provided from time to time by resolution or other directive of the
Board of Directors. In the absence of such provisions, the respective
officers shall have the powers and shall discharge the duties
customarily and usually held and performed by like officers of
corporations similar in organization and business purposes to this
corporation.
ARTICLE VI - VACANCIES
1. If the office of any officer or agent, one or more,
becomes vacant for any reason, the Board of Directors may choose a
successor or successors, who shall hold office for the unexpired term
in respect of which such vacancy occurred.
2. Vacancies in the Board of Directors shall be filled by
a vote of the majority of the remaining members of the Board, and each
person so elected shall be a director until his successor is elected
by the shareholders, who may make such election at the next annual
meeting of the shareholders or at any special meeting duly called for
that purpose and held prior thereto. The above procedure for filling
vacancies shall be followed in situations where immediately after the
vacancy has been filled, two-thirds of the Board of Directors have
been elected by the shareholders. If at any time, less than
two-thirds of the Board of Directors have been elected by the
shareholders, the Board shall call a special meeting of the
shareholders within 45 days for the purpose of filling the vacancies
on the Board. If, at any time, less than a majority of the Board has
been elected by the shareholders, the Board will call a special
meeting of the shareholders immediately for the purpose of electing
new directors. Said meeting shall be held within 30 days.
ARTICLE VII - CORPORATE RECORDS
1. There shall be kept at the registered office or
principal place of business of the corporation an original or
duplicate record of the proceedings of the shareholders and of the
directors, and the original or a copy of its By-Laws, including all
amendments or alterations thereto to date, certified by the Secretary
of the corporation. An original or duplicate share register shall
also be kept at the registered office or principal place of business
or at the office of a transfer agent or registrar, giving names of the
shareholders, their respective addresses and the number of classes of
shares held by each.
2. Every shareholder shall, upon written demand under oath
stating the purpose thereof, have a right to examine, in person or by
agent or attorney, during the usual hours for business for any proper
purpose, the share register, books or records of account, and records
of the proceedings of the shareholders and directors, and make copies
or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a shareholder. In
every instance where any attorney or other agent shall be the person
who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which
authorized the attorney or other agent to so act on behalf of the
shareholder. The demand under oath shall be directed to the
corporation at its registered office in this Commonwealth or at its
principal place of business.
ARTICLE VIII - SHARE CERTIFICATES, DIVIDENDS, ETC.
1. The share certificates of the corporation shall be
numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall bear the corporate seal and
shall be signed by the President and the Secretary.
2. Transfer of shares shall be made on the books of the
corporation upon surrender of the certificates therefor, endorsed by
the person named in the certificate or by attorney, lawfully
constituted in writing. No transfer shall be made which is
inconsistent with law.
3. The Board of Directors may fix a time, not more than
fifty days, prior to the date of any meeting of shareholders, or the
date fixed for the payment of any dividend or distribution, or the
date for the allotment of rights, or the date when any change or
conversion or exchange of share will be made or go into effect, as a
record date for the determination of the shareholders entitled to
notice of, or to vote at, any such meeting, or entitled to receive
payment of any such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in respect to any such
change, conversion, or exchange or shares. In such case, only such
shareholders as shall be shareholders of record on the date so fixed
shall be entitled to notice of, or to vote at, such meeting or to
receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed as aforesaid. The Board of
Directors may close the books of the corporation against transfers of
shares during the whole or any part of such period, and in such case,
written or printed notice thereof shall be mailed at least ten days
before the closing thereof to each shareholder or record at the
address appearing on the records of the corporation or supplied by him
to the corporation for the purpose of notice. While the stock
transfer books of the corporation are closed, no transfer of shares
shall be made thereon. If no record date is fixed for the
determination of shareholders' entitled to receive notice of, or vote
at, the shareholder meeting, transferees of shares which are
transferred on the books of the corporation within ten days next
preceding the date of such meeting shall not be entitled to notice of
or to vote at such meeting.
4. In the vent that a share certificate shall be lost,
destroyed or mutilated, a new certificate may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors
may prescribe.
5. The Board of Directors may declare and pay dividends
upon the outstanding shares of the corporation, from time to time and
to such extent as they deem advisable, in the manner and upon the
terms and conditions provided by statute and the Articles of
Incorporation.
6. Before payment of any dividend there may be set aside
out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think
conducive to the interests of the corporation, and the directors may
abolish any such reserve in the manner in which it was created.
7. The registered holders of shares of the corporation may
require the corporation to redeem these shares by delivering to the
corporation, at its designated place of business, a written request
for redemption in a form satisfactory to the Board of Directors
together with the certificate for or evidence of ownership of such
stock, if any, being properly signed and endorsed. The corporation,
upon receipt of such request and surrender of such certificate or
evidence of ownership, shall promptly pay to or upon the order of the
registered holder thereof the redemption price as hereinafter defined;
provided, however, that the Board of Directors or any duly authorized
committee thereof or any officer or officers of the corporation duly
authorized by such board or committee may defer payment of the
redemption price for a period not exceeding seven days after receipt
of such request and surrender of the certificate for evidence of
ownership. In all cases, shares shall be redeemed at the asset values
thereof as provided in Article Ten
of these By-Laws. Furthermore, the Board may designate the custodian
and transfer agent to act as the agent of the corporation in the
redemption.
ARTICLE IX - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
2. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its
name unless authorized by a resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
3. All checks, drafts, or other orders for the payment of
money, notes, or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to
time be determined by resolution of the Board of Directors.
4. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, or other depositories as the Board of
Directors may select.
5. To the extent permitted by law, the Board of Directors
may from time to time deposit for safekeeping with one or more banks,
trust companies, or other financial institutions in the United States
or elsewhere selected by the board, any securities owned by the
corporation and not otherwise deposited or pledged as security.
Securities so deposited may be withdrawn from time to time only by
such officer of the corporation, together with such additional
officers and responsible employees, as the Board of Directors may
designate by resolution for that purpose.
ARTICLE X - NET ASSET VALUE; GROSS ASSETS
1. The net asset value of any share of stock of the
corporation outstanding on any day shall be the proportionate interest
in the corporation at the close of business on such day and shall be
determined by or pursuant to the direction of the Board of Directors,
by dividing:
(a) The value of the gross assets at the close of business
on such day (securities being taken at their market value determined
as hereinafter provided) less the amount determined by or pursuant to
the direction of the Board of Directors of all debts, obligations and
liabilities of the corporation (which debts, obligations and
liabilities shall include, without limitation of the generality of any
of the foregoing, any or all debts, obligations, liabilities or
claims, of any and every kind and nature, fixed, accrued, unmatured or
contingent, whether for taxes, expenses, contingencies or otherwise)
but excluding the corporation's liability upon its capital stock and
surplus; by
(b) The total number of shares of capital stock of the
corporation outstanding (exclusive of any shares to be issued and any
shares of treasury stock) as of the close of business on the day of
such determination.
In determining, for the purposes of this article, the value of
gross assets of the corporation as of the close of business on any
day;
(a) the market value of each security which shall be listed
or traded in upon a national securities exchange shall be determined
by the closing sales price on the exchange where primarily traded on
the date and the time as which assets were valued. If there were no
sale of such security on the day of such determination, then the
security shall be valued at the last current bid price.
(b) An unlisted security for which over-the-counter market
quotations are readily available is valued on the basis of the last
current bid price.
(c) The market value of any security, no provision for the
valuation of which is contained in either (a) or (b) above, shall be
determined by the best readily available market quotation or if there
be none then by a method approved or authorized by the Board of
Directors.
(d) Dividends declared but not yet received, or rights, in
respect of securities which are quoted ex-dividend or ex-rights, shall
be included at the value thereof as determined by or pursuant to the
direction of the Board of Directors.
(e) The value of any other assets of the corporation shall
be determined in such manner and by such person or persons as may be
approved from time to time by or pursuant to the direction of the
Board of Directors.
(f) If the sales of shares issued by the corporation shall
at any time be discontinued, the Board of Directors may in its
discretion, pursuant to resolution, deduct from the value of the
assets listed in (a), (b), (c), (d) and (e) above, an amount equal to
the brokerage commissions, transfer taxes, and charges, if any, which
would be payable on the sale of such securities if they were then
being sold.
ARTICLE XI - RESTRICTIONS ON INVESTMENTS,
INDEBTEDNESS, AND LOANS
1. The corporation shall be a non-diversified, open-end
management investment company as defined under the Investment Company
Act, and it intends to qualify for tax purposes under Subchapter M of
the Internal Revenue Code of 1954. The following restrictions shall
apply to the investment of the assets of the corporation:
(a) With respect to 50% of its assets, the corporation will
not at time of purchase invest more than 5% of its gross assets, at
market value, in the securities of any one issuer (except the
securities of the United States government).
(b) With respect to the other 50% of its assets, the
corporation will not invest at the time of purchase more than 15% of
the market value of its total assets in any single issuer.
(c) The corporation will not purchase more than 10% of the
outstanding voting securities of a single issuer.
(d) The corporation will not invest more than 25% of its
assets in any one industry.
(e) The corporation will not lend money, provided that for
purposes of this restriction the acquisition of bonds, debentures, or
other corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of deposit and
bankers' acceptances shall not be deemed to be the making of a loan
(the acquisition of bonds, debentures, or other corporate debt
securities which are not publicly distributed is considered to be the
making of a loan under the Investment Company Act of 1940).
(f) The corporation will not purchase securities on margin
and will not make short sales.
(g) The corporation will not buy or sell land, commodities,
commodity futures contracts, puts and calls, and straddles.
(h) The corporation will not underwrite securities, except
for securities of the corporation, and will not issue senior
securities.
(i) The corporation will not invest for the purposes of
exercising control or management.
(j) The corporation will not invest more than 5% of its
total assets in securities of other investment companies or purchase
more than 3% of any other investment company's securities.
(k) The corporation will not participate in a joint
investment account.
(l) The corporation will not invest in restricted
securities that must be registered under the Securities Act of 1933,
as amended, before they may be offered and sold to the public.
2. The corporation shall not borrow amounts in excess of
5% of the gross assets of the corporation taken at cost determined in
accordance with a good accounting practice, and no borrowing shall be
undertaken except as a temporary measure or for emergency purposes as
determined by the Board of Directors.
3. The corporation shall not loan any part of its assets
to its investment adviser, to the corporation's officers or directors,
or to any officer or director of its investment adviser.
4. The investment objective of the Fund is to seek long-
term capital appreciation by investing in equity and fixed income
securities.
ARTICLE XII - RESTRICTIONS ON ACTIONS OF
OFFICERS AND DIRECTORS
The officers and directors of the corporation shall not deal
for or on behalf of the corporation with themselves as principal or
agent or with any corporation or partnership in which they have a
financial interest, except that this paragraph shall not prohibit:
(1) officers or directors of the corporation from having a
financial interest in the corporation or in its investment adviser; or
(2) the purchase of securities for the corporation or the
sale of securities owned by the corporation through a security broker
or dealer, one or more of whose partners, officers, or directors is an
officer or director of the corporation, provided that such
transactions are handled in the capacity of broker only and that
commissions charged do not exceed customary brokerage charges for such
service.
No officer or director of the corporation shall take a long or
short position in the securities of the corporation, except that this
paragraph shall not prohibit the purchase from the corporation of its
shares by officers or directors of the corporation at not less than
their asset value at the time of purchase provided that such purchases
are made for investment purposes only.
ARTICLE XIII - MISCELLANEOUS PROVISIONS
1. The fiscal year of the corporation shall be the
calendar year.
2. Whenever written notice is required to be given to any
person, it may be given so such person, either personally or by
sending a copy thereof through the mail, or by telegram, charges
prepaid, to his address appearing on the books of the corporation, or
supplied by him to the corporation for the purpose of notice. If the
notice is sent by mail or by telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in the United
States mail or with a telegraph office for transmission to
such person. Such notice shall specify the place, day and hour of the
meeting and, in the case of a special meeting of shareholders, the
general nature of the business to be transacted.
3. Whenever any written notice is required by statute, or by
the Articles or By-Laws of this corporation, a waiver thereof, in
writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Except in the case of a
special meeting of shareholders, neither the business to be transacted
at nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of a person, either in person or by
proxy, at any meeting shall constitute a waiver of notice of such
meeting, except where a person attends a meeting for the express
purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.
4. One or more directors or shareholders may participate in a
meeting of the Board, or a committee of the Board or of the
shareholders, by means of conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other. However, directors will attend in
person all meetings of the Board dealing with advisory and
distribution contracts.
5. Except as otherwise provided in the Articles or By-Laws of
this corporation, any action which may be taken at a meeting of the
shareholders or of a class of shareholders may be taken without a
meeting, if a consent or consents in writing, setting forth the action
so taken, shall be signed by all of the shareholders who would be
entitled to vote at a meeting for such purpose and shall be filed with
the Secretary of the corporation.
6. Any payments made to an officer or employee of the
corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be
disallowed in whole or in part as a deductible expense by the Internal
Revenue Service, shall be reimbursed by such officer or employee to
the corporation to the full extent of such disallowance. It shall be
the duty of the directors, as a Board, to enforce payment of each such
amount disallowed. In lieu of payment by the officer or employee,
subject to the determination of the directors, proportionate amounts
may be withheld from his future compensation payments until the amount
owed to the corporation has been recovered.
ARTICLE XIV - ANNUAL STATEMENT
1. The President and Board of Directors shall present at
each annual meeting a full and complete statement of the business and
affairs of the corporation for the preceding year. Such statement
shall be prepared and presented in whatever manner the Board of
Directors shall deem advisable and need not be verified by a certified
public accountant.
ARTICLE XV - AMENDMENTS
1. These By-Laws may be amended or repealed by the vote of
shareholders entitled to cast at least a majority of the votes which
all shareholders are entitled to cast thereon, at any regular or
special meeting of the shareholders, duly convened after notice to the
shareholders of that purpose.
ARTICLE XVI
No director or officer of the corporation shall be indemnified
from any 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 corporation will advance to
any director or officer money to pay attorneys' fees and other
expenses incurred in defending a proceeding. The money will be
advanced as an interest free loan. The director or officer receiving
said money will agree to be personally liable for said loan and to
repay if it is ultimately determined that said director or officer is
not entitled to indemnification.
The following items will be those used to determine if a
director or officer is entitled to indemnification;
1) a final decision on the merits by a court or other body
before whom the proceeding was brought that the director or officer to
be indemnified is not liable or is liable only as a result of ordinary
negligence; or
2) a reasonable determination, based upon a review of the
facts, by independent legal counsel in a written opinion, that the
director or officer to be indemnified was not liable by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
6
CONTRACT FOR
INVESTMENT ADVISORY SERVICES
Agreement made on May 14, 1993 between The Berwyn Fund, Inc., a
Pennsylvania corporation, having its principal place of business at
1189 Lancaster Avenue, Berwyn, Pennsylvania, herein referred to as
the Fund, and The Killen Group, Inc., a Pennsylvania corporation,
having its principal place of business at 1189 Lancaster Avenue,
Berwyn, Pennsylvania, herein referred to as the Adviser.
l. The Fund shall register with the Securities and Exchange
Commission as a non-diversified, open-end management investment
company under the provisions of the Investment Company Act of
1940 and shall qualify to engage in business under said act and
other applicable federal and state statutes.
2. The Adviser is registered under the Investment Advisers Act and
is engaged in the business of acting as an Investment Adviser
and rendering research and Advisory services.
3. The Fund desires to retain the Adviser to render such services
to the Fund in the manner and on the terms and conditions
hereinafter set forth.
4. Nothing contained herein shall be deemed to require the Fund to
take any action contrary to its certificate of incorporation or
any applicable statute or regulation, or to relieve or deprive
the Board of Directors of the Fund of its responsibility for,
and control of, the conduct of the affairs of the Fund.
For the reasons recited above, and in consideration of the mutual
promises contained herein, the Fund and Adviser agree as follows:
SECTION ONE
INVESTMENT ADVICE AND OTHER SERVICES
a. Adviser shall to the extent reasonably required in the
conduct of the business of the Fund, place at the disposal of the
Fund, its judgment and experience and furnish to the Fund advice and
recommendations with respect to investments, investment policies, the
purchase and sale of securities, and the management of its resources.
Adviser shall also, from time to time, furnish to or place at the
disposal of the Fund such reports and information relating to
industries, businesses, corporations or securities as may be
reasonably required by the Fund or as Adviser may deem to be helpful
to the Fund in the administration of its investments.
b. Adviser agrees to use its best efforts in the furnishing
of such advice and recom-mendations and in the preparation of such
reports and information, and for this purpose Adviser shall at all
times maintain a staff of Officers and other trained personnel for
the performance of its obligations under this agreement. Adviser,
may at its expense, employ other persons to furnish to Adviser
statistical and other factual information, advice regarding economic
factors and trends, information with respect to technical and
scientific developments and such other information, and advice and
assistance as Adviser may desire.
c. The Fund will from time to time furnish to Adviser
detailed statements of the investments and resources of the Fund and
information as to its investment problems, and will make available to
Adviser such financial reports, proxy statements, and legal and other
information relating to its investments as may be in possession of
the Fund or available to it.
SECTION TWO
COMPENSATION TO INVESTMENT ADVISER
a. The Fund agrees to pay to Adviser and Adviser agrees to
accept, as full compensation for all services rendered and as full
reimbursement for all expenses assumed by Adviser hereunder, an
annual fee equal to l.0% of the average daily net assets of the Fund.
The fee will be paid monthly.
b. Adviser agrees that neither it nor any of its Officers or
Directors shall take any long or short position in the capital stock
of the Fund; but this prohibition shall not prevent the purchase by
or for Adviser or any of its Officers or Directors of shares of the
capital stock of the Fund at the price at which such shares are
available to the public at the moment of purchase provided that (1)
such purchase be made for investment purposes only and (2) if any
shares of stock so purchased are resold within two months after the
date of purchase, such fact will be immediately reported to the Fund.
SECTION THREE
PAYMENT OF EXPENSES
The Adviser shall provide and furnish office space to the Fund and
provide personnel to administer the Fund's operations. The Adviser
shall pay all expenses associated with the sales promotion of the
Fund. The Fund will pay all other expenses incurred in the operation
of the Fund.
The Adviser hereby agrees to reduce its fee 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 Adviser, but inclusive of the Adviser's
fee) from exceeding 2%
of the net assets of the Fund. When the net assets of the Fund
exceed $100 million, the Adviser agrees to reduce its fee 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 Adviser, but
inclusive of the Adviser's fee) from exceeding 1-1/2% of the net
assets of the Fund.
SECTION FOUR
DURATION; TERMINATION
a. The term of this agreement shall begin on May 14, l993,
and this agreement shall continue from year to year thereafter,
subject to the provisions for termination and all of the other terms
and conditions hereof, if (1) such continuation shall be specifically
approved at least annually by vote of a majority of the outstanding
voting securities of the Fund; and (2) Adviser shall not have
notified the Fund, in writing, at least sixty days prior to the date
of the Annual Shareholders Meeting of any year, that it does not
desire such continuation.
b. This agreement may be terminated by the Fund on 60 days
notice in writing to Adviser, without the payment of any penalty,
provided such termination be authorized by resolution of the Board of
Directors of the Fund or by vote of a majority of its outstanding
voting securities.
SECTION FIVE
AMENDMENT OF AGREEMENT
This agreement may not be amended, transferred, assigned, sold or in
any manner hypothecated or pledged without the affirmative vote or
written consent of the holders of a majority of the outstanding
voting securities of the Fund; and this agreement shall automatically
and immediately terminate in the event of its assignment by Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be signed by their respective Officers thereunto duly authorized and
their respective corporate seals to be hereunto affixed, the day and
year first above written.
THE BERWYN FUND, INC. THE
KILLEN GROUP, INC.
by: Kevin M. Ryan by:
Robert E. Killen
Secretary-Treasurer
President
SELLING AGREEMENT
BETWEEN
THE BERWYN FUND, INC.
AND
BERWYN FINANCIAL SERVICES
THIS AGREEMENT entered into the 24th day of September, 1993 by
and between The Berwyn Fund, Inc., a Pennsylvania Corporation with its
principal office located at 1189 Lancaster Avenue, Berwyn,
Pennsylvania 19312 (the "Fund") and Berwyn Financial Services, Inc., a
Pennsylvania corporation with its principal office located at 1199
Lancaster Avenue, Berwyn Pennsylvania 19312 (the "Distributor").
W I T N E S S E T H :
In consideration of the mutual convenants and agreements of the
parties hereto, the parties intending to be bound, mutually covenant
and agree with each other as follows:
1. The Fund hereby appoints the Distributor as agent of
the Fund to effect the sale and public distribution of shares of the
capital stock of the Fund.
2. The Distributor shall not be the exclusive agent for
the Fund in sale of its shares. The Distributor shall be a selling
agent for the Fund in all jurisdictions that require the shares of the
Fund to be sold through broker-dealers and/or issuer-dealers. In
those jurisdictions, however, the Fund may also sell shares through
other broker-dealers. Also, where permitted by law the Fund will sell
its shares directly to the public.
3. The Fund hereby authorizes the Distributor to sell its
shares in accordance with the following schedule of prices;
The applicable price will be the net asset value per share next
effective after receipt and acceptance by the Fund of a proper
offer to purchase, determined in accordance with the Articles
of Incorporation, By-Laws, Registration Statement and
Prospectus of the Fund.
4. Orders for the purchase of shares placed by the
Distributor shall be subject to the provisions of paragraphs (f) and
(g) of Section 26 of the Rules of Fair Practice of the NASD, the
provisions of which are hereby incorporated by reference.
5. The Fund agrees to prepare and file registration
statements with the Securities and Exchange Commission and the
Securities Departments of the various states and other jurisdictions
in which the shares may be offered, at its own expense, and do such
other things and to take such other actions as may be mutually agreed
upon by and between the parties as shall be reasonably necessary in
order to effect the registration and the sale of the Fund's shares.
The Distributor shall cooperate with the Fund in the Preparation and
filing of applications for registration and qualification of the
shares under applicable law.
6. At its own expense, the Fund shall print and provide
the Distributor with such quantities of its current Prospectus,
Statements of Additional Information and reports to stockholders as
the Distributor may reasonably request in connection with its
responsibilities under this Agreement.
7. Normally, the Fund shall not exercise any direction or
control over the time and place of solicitation, the persons to be
solicited, or the manner of solicitation; but the Distributor agrees
that solicitations shall be in a form acceptabe to the Fund and shall
be subject to such terms and conditions as may be prescribed from time
to time by the Fund, the Registration Statement, the Prospectus, the
Articles of Incorporation, and By-Laws, and shall not violate any
provision of the laws of the Untied States or any jurisdictions to
which solicitations are subject, or violate any rule or regulation
promulgated by any lawfully constituted authority to which the Fund or
Distributor may be subject.
8. (a) The Fund appoints and designates the Distributor
as agent of the Fund and the Distributor accepts such appointment as
such agent, to repurchase shares of the Fund in accordance with the
provisions of the Articles of Incorporation and its By-Laws. The
Distributor shall not be the exclusive agent for repurchase of shares.
(b) In connection with such redemptions or
repurchases the Fund authorizes and designates the Distributor to take
any action, to make any adjustments in net asset value, and to make
any arrangements for the payment of the redemption or repurchase price
authorized or permitted to be taken or made in accordance with the
Investment Company Act of 1940 and as set forth in the By-Laws and
then current Prospectus.
(c) The authority of the Distributor under this
paragraph 8 may, with the consent of the Fund, be redelegated in whole
or in party to another person or firm.
(d) The authority granted in this paragraph 8 may be
suspended by the Fund at any time or from time to time pursuant to the
provisions of its Articles of Incorporation until further notice to
the Distributor. The President or Secretary of the Fund shall have
the power granted by said provisions. After any such suspension the
authority granted to the Distributor by this paragraph 8 shall be
reinstated only by a written instrument executed by the Fund's
President or Secretary.
9. The Distributor shall keep and maintain adequate
records in respect of its activities which further the sale of shares.
10. The Distributor agrees that it will not place orders
for more shares than are required to fill the requests received by it
as agent of the Fund and that it will expeditiously transmit all such
orders to the Fund.
11. This Agreement shall become effective January 2, 1994
and shall continue in effect for a period of more than one year from
its effective date only as long as such continuance is approved, at
least annually, by the Board of Directors of the Fund, including a
majority of those Directors who are not "interested persons" of any
party to this Agreement voting person at a meeting called for the
purpose of voting or such approval. This Agreement may be terminated
by either party hereto upon thirty (30) days' written notice to the
other party. This Agreement shall automatically terminate in the
event of its assignment by the Distributor unless the United States
Securities and Exchange Commission has issued an order exempting the
Fund and Distributor from the provisions of the Investment Company Act
of 1940, as amended, which would otherwise have effected the
termination of this Agreement.
12. No amendment to this Agreement shall be executed or
become effective unless its terms have been approved: (a) by a
majority of the directors of the Fund or by the vote of a majority of
the outstanding voting securities of the Fund, and (b) by a majority
of those directors who are not interested persons of the Fund or of
any party to this Agreement.
13. The Fund and the Distributor hereby each agree that all
literature and publicity issued by either of them referring directly
or indirectly to the Fund or to the Distributor shall be submitted and
receive the approval of the Fund and the Distributor before the same
may be used by either party.
14. The Distributor agrees to use its best efforts in
effecting the sale and public distribution of the shares of the Fund
and to perform its duties in redeeming the shares of the Fund, but
nothing contained in this Agreement shall make the Distributor or any
of its officers and directors or shareholders liable for any loss
sustained by the Fund or the Fund's officers, directors or
shareholders, or by any other person on account of any act done or
omitted to be done by the Distributor under this Agreement; provided,
that nothing herein contained shall protect the Distributor against
any liability to the Fund or to any of its shareholders to which the
Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its
duties as Distributor or gross negligence in the performance of its
duties as Distributor or by reason of its reckless disregard of its
obligations or duties as Distributor under this Agreement. Nothing in
this Agreement shall protect the Distributor from any liabilities
which it may have under the Securities Act of 1933 or the Investment
Company Act of 1940.
15. As used in this Agreement the terms `interested
persons," "assignment," and "majority of the outstanding voting
securities" shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect.
16. This Agreement shall be construed in accordance with
the Laws of the Commonwealth of Pennsylvania, except to the extent
such laws are preempted by the Investment Company Act of 1940.
17. Any notice required to be given thereunder shall be
sent via first class mail to the address of the party as set forth
above.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers of the day and year
above written.
Attest: The Berwyn Fund,
Inc.
Kevin M. Ryan
Robert E. Killen
Secretary President
Attest: Berwyn Financial
Services, Inc.
Edward A. Killen
Kevin M. Ryan
Secretary President
BFS/sellagr
4
BERWYN FUND, INC.
WILMINGTON TRUST COMPANY
CUSTODY AGREEMENT
This Agreement is made as of the 17th day of February, 1994, between
Berwyn Fund, Inc., a corporation organized under the laws of the
Commonwealth of Pennsylvania (the "Fund"), having its principal place
of business in Berwyn, Pennsylvania, and Wilmington Trust Company, a
Delaware corporation (the "Custodian"), having its principal place of
business in Wilmington, Delaware.
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "1940 Act") as an open-end management
investment company and offers for public sale a distinct series of
shares of common stock, par value $1.00 per share;
WHEREAS, each share of common stock represents an undivided
interest in the assets of the Fund, subject to the liabilities;
WHEREAS, the Fund desires to employ the Custodian to provide
custodian services; and
WHEREAS, the Custodian is willing to furnish such services to
the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and intending to be legally bound, the
parties hereto agree as follows:
I. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its
assets pursuant to the provisions of its Articles of Incorporation.
The Fund agrees to deliver to the Custodian substantially all
securities and cash owned by the Fund from time to time and
substantially all payments of income, payments of principal or capital
distributions received by it with respect to substantially all
securities owned by the Fund from time to time, and the cash
consideration received by the Fund for such new or treasury shares of
beneficial interest ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any
property of the Fund held or received by the Fund and not delivered to
the Custodian.
II. Duties of the Custodian with Respect to Property of the Fund
Held by the
Custodian
A. Holding Securities
The Custodian shall hold, earmark and physically segregate for
the account of the Fund all non-cash property, including all
securities owned by the Fund, other than securities which are
maintained pursuant to Section J of this Article II in a clearing
agency which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as a "Securities System."
B. Delivery of Securities
The Custodian shall release and deliver securities held by the
Custodian or in a Securities System account of the Custodian only upon
receipt of proper instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1. Upon sale of such securities for the account of the Fund
and receipt of payment therefor;
2. Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by the
Fund;
3. In the case of a sale effected through a Securities System,
in accordance with the provisions of Section J of this Article II;
4. To the depository agent in connection with tenders or other
similar offers for securities of the Fund;
5. To the issuer thereof, or its agent, when such securities
are called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6. To the issuer thereof, or its agent, for registration or
re-registration pursuant to the provisions of Section C of this
Article II; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7. To the broker selling the securities for examination in
accordance with the "street delivery" custom; provided that the
Custodian shall maintain procedures to ensure their prompt return to
the Custodian in the event the broker elects not to accept them;
8. For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and
cash. if any, are to be delivered to the Custodian;
9. In the case of warrants, rights or similar securities, the
surrender thereof in the exercise, of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such case,
the new securities and cash, if any, are to be delivered to the
Custodian;
10. For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate collateral, as
agreed upon from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities;
11. For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund against receipt
of amounts borrowed;
12. Upon receipt of instructions from the transfer agent for
the Fund (the "Transfer Agent"), for delivery to the Transfer Agent or
to holders of Shares in connection with distributions in kind in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
13. For any other proper corporate purposes, but only upon
receipt of, in addition to proper instructions, a certified copy of a
resolution of the Board of Directors signed by an officer of the Fund
and certified by the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purposes to be proper
corporate purposes, and naming the persons to whom delivery of such
securities shall be made.
C. Registration of Securities
Securities held by the Custodian (other than bearer securities) shall
be registered in the name of the Fund, or in the name of any nominee
of the Fund, or of any nominee of the Custodian or in the name or
nominee name of any agent or sub-custodian appointed pursuant to
Section I of Article II hereof provided the Custodian maintains a
mechanism for identifying all securities belonging to the Fund,
wherever held or registered. All securities accepted by the Custodian
on behalf of the Fund under the terms of this Agreement shall be in
"street name" or other good delivery form.
D. Bank Accounts
Upon request by the Fund, the Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms
of this Agreement, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund in a bank
account established and used in accordance with Rule l7f-3 under the
1940 Act.
E. Payment for Shares
The Custodian shall receive from the distributor of the Fund's Shares
or from the Transfer Agent and deposit into the Fund's custodian
account such payments as are received for Shares issued or sold from
time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it
of cash payments for Shares.
F. Collection of Income
The Custodian shall collect on a timely basis all income and other
payments with respect to securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the
securities business and shall credit such income, as collected, to the
Fund's custodian account.
G. Payment of Fund Moneys
Upon receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out moneys on behalf of the Fund in the following cases
only:
1. Upon the purchase of securities for the account of the
Fund, but only (a) against the delivery of such securities to the
Custodian (or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Fund or by the
Custodian as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Custodian referred to in
Section C of Article II hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section J of Article II
hereof or; (c) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, (i) against
delivery of securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank with
such securities and with an indication on the books of the Custodian
that such securities are held for the benefit of the Fund and (ii)
against delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian or other bank along with written
evidence of the agreement by the Custodian or other bank to repurchase
such securities from the Fund;
2. In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section B of Article II
hereof,
3. For the redemption or repurchase of Shares as set forth in
Section H of Article II hereof,
4. For the payment of any expense or liability incurred by the
Fund, including, but not limited to, the following payments for the
accounts of the Fund: interest, dividend disbursements, taxes, trade
association dues, advisory, administration, accounting, transfer agent
and legal fees, and operating expenses allocated to the Fund whether
or not such expenses are to be in whole or part capitalized or treated
as deferred expenses;
5. For the payment of any dividend declared pursuant to the
governing documents of the Fund; and
6. For any other proper corporate purposes, but only upon
receipt of, in addition to proper instructions, a certified copy of a
resolution of the Board of Directors of the Fund signed by an officer
of the Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom
such payment is to be made.
H. Payments for Repurchase or Redemptions of Shares of the Fund
From funds as may be available, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment
to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection
with the redemption or repurchase of Shares, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to
wire funds to a commercial bank designated by the redeeming
shareholders.
I. Appointment of Agents
The Custodian may at any time in its discretion appoint, but only in
accordance with an applicable vote by the Directors of the Fund, and
may at any time remove any other bank or trust company, which is
itself qualified under the 1940 Act to act as a custodian, as its
agent or sub-custodian to carry out such of the provisions of this
Article 11 as the Custodian may from time to time direct; provided,
however, that the appointment of any such agent or sub-custodian shall
not relieve the Custodian of any of its responsibilities or
liabilities hereunder.
J. Deposit of Fund Assets in Securities System
The Custodian may deposit and/or maintain securities owned by the Fund
in a clearing agency registered with the Securities and Exchange
Commission (the "SEC") under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository, or in the book-
entry system authorized by the U.S. Department of the Treasury and
certain federal agencies (collectively referred to herein as a
"Securities System") in accordance with applicable Federal Reserve
Board and SEC rules and regulations, if any, and subject to the
following provisions:
1. The Custodian may keep securities of the Fund in a
Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System which
shall not include any assets of the Custodian other than assets held
as a fiduciary, custodian, or otherwise for customers;
2. The records of the Custodian with respect to securities of
the Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;
3. The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The Custodian
shall transfer securities sold for the account of the Fund upon (i)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of
any entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. The Custodian shall furnish the
Fund a monthly account statement which shall include each transfer to
or from the account of the Fund, including those processed through the
Securities System for the account of the Fund;
4. The Custodian shall have received the certificate required
by Article IX hereof; and
5. The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and
6. The Custodian shall be liable to the Fund for any direct
loss or damage to the Fund resulting from use of the Securities System
to the extent caused by the negligence, misfeasance or misconduct of
the Custodian or any of its agents or of any of its or their
employees. In no event shall the Custodian be liable for any indirect,
special, consequential or punitive damages.
K. Segregated Accounts for Futures Commission Merchants
The Custodian may enter into separate custodial agreements with
various Futures Commission Merchants ("FCM's") which the Fund uses
(each an "FCM agreement"), pursuant to which the Fund's margin
deposits in certain transactions involving futures contracts and
options on futures contracts will be held by the Custodian in accounts
(each an "FCM account") subject to the disposition by the FCM involved
in such contracts in accordance with the customer contract between FCM
and the Fund ("FCM contract"), SEC rules governing such segregated
accounts, Commodities Futures Trading Commission ("CFTC") rules and
the rules of applicable securities or commodities exchanges. Such
custodial agreements shall only be entered into upon receipt of
written instructions from the Fund which state that (a) a customer
agreement between the FCM and the Fund has been entered into, and (b)
the Fund is in compliance with all the rules and regulations of the
CFTC.
Transfers of initial margin shall be made into an FCM account only
upon written instructions; transfers of premium and variation margin
may be made into an FCM account pursuant to oral instructions.
Transfers of funds from an FCM account to the FCM for which the
Custodian holds such an account may only occur upon certification by
the FCM to the Custodian that pursuant to the FCM agreement and the
FCM contract, all conditions precedent to its right to give the
Custodian such instructions have been satisfied.
L. Ownership Certificates for Tax Purposes
The Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with
receipt of income or other payments with respect to securities of the
Fund held by it and in connection with transfers of securities.
M. Proxies
The Custodian shall, with respect to the securities held by it
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund's investment advisor (the
"Advisor") such proxies, all proxy soliciting materials and all
notices relating to such securities.
N. Communications Relating to Fund Securities
The Custodian shall transmit promptly to the Advisor all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
held for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Advisor all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or its agents)
making the tender or exchange offer. If the Advisor desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Advisor shall notify the Custodian at least
five business days prior to the date on which the Custodian is to take
such action.
0. Proper Instructions
"Proper instructions" as used throughout this Article II mean a
writing signed or initialed by one or more person or persons in such
manner as the Directors shall have from time to time authorized. Each
such writing shall set forth the transaction involved, including a
specific statement of the purpose for which such action is requested.
Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed
promptly in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Directors of the
Fund accompanied by a detailed description of procedures approved by
the Directors, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided
that the Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the assets of the Funds. All
references to actions of or by Directors or the Board of Directors
herein shall require action by such Directors acting as a board or
formally constituted group and not individually.
P. Actions Permitted Without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1. make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties
under this Agreement, provided that all such payments shall be
accounted for to the Fund;
2. surrender securities in temporary form for securities in
definitive form;
3. endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4. in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of the Fund except
as otherwise directed by the Fund or the Board of Directors of the
Fund.
Q. Evidence of Authority
The Custodian shall be protected in acting upon any instruction,
notice, request, consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Board of Directors of the
Fund as conclusive evidence (a) of the authority of any person to act
in accordance with such vote, or (b) of any determination or of any
action by the Board of Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian
of written notice to the contrary.
III. Duties of Custodian with Remect to Books of Respect
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors to keep the
books of account of the Fund. If so instructed in writing, which
written instructions shall be transmitted to the Custodian reasonably
in advance of the date on which it is to act, the Custodian shall
supply quotations for all portfolio securities, to the extent
reasonably available, to the entity or entities appointed by the Board
of Directors to compute the net asset value per share of the
outstanding shares of the Fund on each day on which such net asset
value per share is to be computed under the Fund's Articles of
Incorporation.
IV. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will
meet the obligations of the Fund under the 1940 Act, including,
without limitation, Section 31 thereof and Rules 3la-1 and 3la-2
thereunder. All such records shall be property of the Fund and shall
at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the SEC. The Custodian shall,
at the Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when requested
to do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in
such tabulations.
V. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action to obtain from year to
year favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the preparation
of the Fund's Form N-lA, as the Fund may from time to time request,
and the Fund's Form N-SAR or other annual or semiannual reports to the
SEC and with respect to any other requirements of the SEC.
VI. Reports to Fund by Auditors
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by its internal or independent
auditors on the accounting system, internal accounting control and
procedures for safeguarding securities, including reports as are
available on securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this
Agreement; such reports, which shall be of sufficient scope and in
sufficient detail as may reasonably be required by the Fund, to
provide reasonable assurance that any material inadequacies would be
disclosed, shall state in detail material inadequacies disclosed by
such examination, and if there are no such inadequacies, shall so
state.
VII. Compensation of Custodian
For the services the Custodian provides under this Custody Agreement,
the Custodian shall be entitled to reasonable compensation as agreed
to between the Fund and the Custodian from time to time. Until agreed
otherwise, the compensation shall be as set forth on Schedule A
attached hereto and made part hereof, as such schedule may be amended
from time to time.
Provided that this Agreement is continued in accordance with Article
IX hereof, the fee schedule set forth in Schedule A hereto is subject
to an annual review and adjustment process. In no event, however, will
the rate of any fee determined solely by the Custodian as set forth on
Schedule A be increased in excess of ten percent (10%) per annum.
Because the Custodian has no control over costs and fees paid for
certain out-of-pocket expenses for services and/or products provided
by outside vendors, the Custodian cannot represent that those expenses
will not increase in excess of ten percent (10%) per annum.
VIII. Responsibility of Custodian/Indemnification
So long as and to the extent that it has exercised reasonable care,
the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this Agreement and shall be held
harmless in acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties.
The Custodian shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be held to the exercise of reasonable care in
carrying out the provisions of this Agreement but shall be liable only
for its own negligent or bad faith acts or failures to act. The Fund
shall indemnify the Custodian and hold it harmless from and against
all claims, liabilities and expenses (including attorneys' fees) which
the Custodian may suffer or incur on account of being Custodian
hereunder, except to the extent such claims, liabilities and expenses
are caused by the Custodian's own negligence or bad faith.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be constructed to modify the standards of
care and responsibility set forth in Section I of Article II hereof
with respect to subcustodians and in Section J(6) of Article II hereof
with respect to the Securities System. The provisions of this
paragraph shall survive termination of this Agreement.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee being liable for the payment of money or
incurring liability of some other form, the Fund, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity
to the Custodian in an amount and form satisfactory to it.
IX. Effective Period, Termination and Amendment
This Agreement shall become effective as of the date hereof, and
unless terminated as provided, shall continue in force for one (1)
year from the date of its execution and thereafter from year to year,
provided continuance after the one (1) year period is approved at
least annually by either the vote of a majority of the Directors of
the Fund or by the vote of a majority of the outstanding voting
securities of the Fund. As used in this Article IX, the term "vote of
a majority of the outstanding voting securities" shall have the
meaning specified in the 1940 Act and the rules enacted thereunder as
now in effect or as hereafter amended. This Agreement may at any time
be terminated on ninety (90) days' written notice by either party;
provided that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any
provision of the Articles of Incorporation, and further provided, that
the Fund may at any time by action of its Directors (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver
for the Custodian by the applicable federal regulator or, (iii) upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay the Custodian
any fees due and owing and any fees incurred as a result of the
termination transfer of assets, and shall reimburse the Custodian for
all costs, expenses and disbursements that are due as of the date of
such termination. The provisions of this paragraph shall survive
termination of this Agreement.
X. Successor Custodian
If a successor custodian is appointed by the Directors of the Fund,
the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities and other assets of the Fund then
held by it hereunder. The Custodian shall also deliver to such
successor custodian copies of such books and records relating to the
Fund as the Fund and Custodian may mutually agree.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Directors shall have been
delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company doing business in either the state
in which the Fund or the Custodian maintains its principal place of
business, and having an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement. Thereafter,
such bank or trust company shall be the successor of the Custodian
under this Agreement. The Custodian shall, in like manner, upon
receipt of a certified copy of a vote of the Directors of the Fund,
deliver at the office of the Custodian such securities, funds and
other properties in accordance with such vote.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Fund to procure the certified copy of vote referred
to, or of the Board of Directors to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian and retain possession of such
securities, funds and other properties and the provisions of this
Agreement relating to the duties and obligations of the Custodian
shall remain in fall force and effect.
X1. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Fund may from time to time agree on such provisions interpretive
of, or in addition to, the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in
writing signed by both parties and shall be annexed hereto, provided
that no such interpretive or additional provisions shall contravene
any applicable federal or state regulations or any provision of the
Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
XII. Delaware Law to Apply
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefits of the
parties hereto and their respective successors.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and on behalf by its duly authorized
representative and its seal to be hereunder affixed as of the date
first written above.
BERWYN FUND, INC.
By: Robert
E. Killen
President
WILMINGTON TRUST COMPANY
By: David
P. Fontello
Vice President
SCHEDULE A
BERWYN FUND, INC.
FEE SCHEDULE
For the services Wilmington Trust Company (the "Custodian")
provides under this Custody Agreement, the Fund agrees to pay the
Custodian a fee payable monthly expressed as follows:
Berwyn Fund, Inc. An annual fee based upon the
daily average net
assets as follows:
.02 % on the first $50 million
.015% on the assets in excess of
$50 million
subject to a minimum fee of $500
per month,
plus $15 per purchase, sale or
maturity of a
portfolio security,
plus all out-of-pocket expenses.
2
ASSIGNMENT AGREEMENT
This Agreement is entered into as of February 1, 1998 by
and among The Berwyn Fund, Inc. (the "Fund"), Wilmington Trust Company
("WTC") and PNC Bank, N.A. ("PNC").
WHEREAS, the Fund and WTC entered into a Custody Agreement (the
"Fund Agreement") as of _______________ pursuant to which WTC provides
certain services to the Fund as described therein;
WHEREAS, WTC wishes to assign its right, title and interest in
and under the Fund Agreement and its duties and obligations under the
Fund Agreement to PNC, and such assignment is acceptable to the Fund;
NOW THEREFORE, the parties hereto, in consideration of the
premises and agreements contained herein, and intending to be legally
bound hereby, agree as follows:
1. Assignment. WTC hereby assigns all of its right, title
and interest in and under the Fund Agreement, and its duties and
obligations under the Fund Agreement arising form the date hereof, to
PNC. PNC hereby accepts such assignment.
2. Acceptance by Fund. The Fund hereby accepts and agrees to
the assignment described in Section 1 hereof.
3. Fund Agreement. The Fund agreement shall remain unchanged
expect as is consistent with the provisions hereof.
4. Governing Law. This Agreement shall be governed by
Delaware law, without regard to principles of conflicts of the law.
5. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
6. Execution. This Agreement maybe executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The
facsimile signature of any party to this Agreement shall constitute
the valid and binding execution hereof by such party.
7. Further Actions. Each party agrees to perform such acts
and execute such further documents as may be necessary to effectuate
the purposes hereof.
IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be executed as of the day and year first above
written.
THE BERWYN FUND, INC. WILMINGTON TRUST
COMPANY
By: Kevin M. Ryan By:
Robert
Title: Secretary-Treasurer Title:
Vice President
PNC BANK, N.A.
By: Joseph
Title: Senior Vice President
98-
rpt.asgnagr
THE BERWYN FUNDS
Traditional Individual Retirement Account
THE BERWYN FUNDS
Traditional Individual Retirement Account
Application Instructions 11
IRA Disclosure Statement 12
Custodial Account Agreement 15
Application, Adoption Agreement
& Beneficiary Designation 11
Transfer Authorization Form 13
Rollover Certification Form 15
APPLICATION INSTRUCTIONS
DO NOT USE THIS FORM TO ESTABLISH AN EDUCATION, ROTH, OR SIMPLE IRA.
1 HOW TO COMPLETE THE ENCLOSED FORMS:
If you are opening an IRA which will not contain contributions that
have been transferred from another IRA or qualified retirement plan:
* To establish an IRA, please complete the "Application, Adoption
Agreement and Beneficiary Designation" (Application). Please note
that the Applicant's name must be that of an individual, not a
business.
* If you are opening an IRA for your spouse who is unemployed or earns
less than you earn, a separate Application must be completed by your
spouse.
* The maximum allowable contribution to your IRA for each tax year is
the lesser of (a) $2,000 or (b) 100% of your compensation or earnings
from self-employment. If your spouse is not employed or earns less
than you earn, your spouse may also contribute to an IRA. The maximum
contribution to your spouse's IRA for each tax year is the lesser of
(a) $2,000, or (b) the combined compensation of both spouses, minus
the dollar amount of the IRA contribution made by the compensated (or
more highly compensated) spouse. The total contribution to each
individual's IRAs (deductible, non-deductible and Roth) combined
cannot exceed these limits.
* The minimum initial investment per Fund is $1,000. If you are
dividing your contribution between IRAs for yourself and your spouse,
the amounts invested per Fund in each account will be combined for the
purpose of satisfying the minimum initial investment. Prospectuses for
the Funds may be obtained from the Fund at 1-800-992-6757. Please be
sure to read the prospectus carefully before investing.
* Please be sure to read carefully the "Terms and Conditions of the
IRA Adoption Agreement" in Section 5 of the Application. There is a
$10.00 annual custodial maintenance fee on each account in the Fund.
* Please make checks payable to THE BERWYN FUNDS. If you are dividing
your contribution between IRAs for yourself and your spouse, only one
check, with instructions on how to allocate the contribution between
accounts, needs to be included with both Applications.
If you are opening an IRA which will contain contributions which have
been transferred from another IRA or qualified retirement plan:
* Please read and follow the general instructions above for
establishing an IRA. Be sure to note on the Application that your
contribution is a transfer or rollover from another IRA or qualified
retirement plan.
* To transfer the distribution from your current IRA or qualified
retirement plan directly from that plan to your BERWYN FUNDS IRA,
please complete a "Transfer Authorization/Direct Rollover Form."
Please note that if an eligible rollover distribution from a qualified
plan is not transferred directly to another qualified plan or an IRA,
the IRS mandatory 20% withholding amount will be withheld from the
distribution.
* To certify that the contribution you are making to the IRA is a
rollover from an IRA or a qualified retirement plan, please complete
the "Rollover Certification Form." Rollovers must be completed within
60 calendar days of the date you receive the distribution.
2 MAIL THE COMPLETED APPLICATION AND CHECK (IF APPLICABLE) TO:
First Class Mail: Overnight
Express:
THE BERWYN FUNDS THE BERWYN FUNDS
Attn: THE BERWYN FUNDS IRA Attn: THE BERWYN
FUNDS IRA
PO Box 8987 400 Bellevue Pkwy
Suite 108
Wilmington, DE 19899-8987 Wilmington, DE
19809-3710
1-800-992-6757
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following information is the disclosure statement required by
federal tax regulations. You should read this disclosure statement,
the Custodial Account Agreement, and the prospectuses for the Funds in
which your BERWYN FUNDS Individual Retirement Account (IRA)
contributions will be invested.
REVOCATION OF YOUR IRA
You have the right to revoke your BERWYN FUNDS IRA and receive the
entire amount of your initial contribution by notifying PNC Bank,
National Association, the Custodian of your BERWYN FUNDS IRA, in
writing within seven (7) days of establishment of your IRA. If you
revoke your IRA within seven days, you are entitled to a return of the
entire amount paid by you, without adjustment for such items as sales
commission, administrative expenses, or fluctuations in market value.
If you decide to revoke your IRA, notice should be delivered or mailed
to:
First Class Mail: Overnight
Express:
PNC Bank, National Association PNC Bank,
National Association
c/o PFPC Inc. c/o PFPC Inc.
Attn: THE BERWYN FUNDS IRA Attn: THE BERWYN
FUNDS IRA
PO Box 8987 400 Bellevue Pkwy
Suite 108
Wilmington, DE 19899-8987 Wilmington, DE
19809-3710
1-800-992-6757
This notice should be signed by you and include the following:
1. The date;
2. A statement that you elect to revoke your
BERWYN FUNDS IRA;
3. Your BERWYN FUNDS IRA account number;
4. The date your BERWYN FUNDS IRA was established;
5. Your signature and your printed or typed name.
Mailed notice will be deemed given on the date that it is postmarked,
if it is deposited in the United States mail, first class postage
prepaid and properly addressed. This means that if you mail your
notice it must be postmarked on or before the seventh day after your
BERWYN FUNDS IRA was opened. A revoked IRA will be reported to the
Internal Revenue Service and the depositor on Forms 1099-R and 5498.
YOUR INDIVIDUAL RETIREMENT ACCOUNT
You have opened a BERWYN FUNDS Individual Retirement Account which is
an account for the exclusive benefit of you and your beneficiaries,
created by a written instrument (the Custodial Account Agreement).
The following requirements apply to your BERWYN FUNDS IRA:
1. Contributions, transfers and rollovers may be
made only in "cash" by check, draft, or other form acceptable to the
Custodian;
2. The Custodian must be a bank;
3. No part may be invested in life insurance;
4. Your interest must be nonforfeitable;
5. The assets of the custodial account may not be
mixed with other property except in a common investment fund; and
6. You must begin receiving distributions from
your account no later than April 1 of the year following the year in
which you become 70-1/2 years old; and distributions must be completed
over a period that is not longer than the joint life expectancy of you
and your beneficiary.
CONTRIBUTIONS
The maximum allowable contribution to your IRAs (deductible, non-
deductible and Roth) for each tax year is the lesser of (a) $2,000 or
(b) 100% of your compensation or earnings from self-employment. If
your spouse is not employed or earns less than you earn, your spouse
may also contribute to an IRA. The maximum contribution to your
spouse's IRA for each tax year is the lesser of (a) $2,000, or (b) the
combined compensation of both spouses, minus the dollar amount of the
IRA contribution made by the compensated (or more highly compensated)
spouse. The total combined contribution to each individual's IRAs
(deductible, non-deductible and Roth) cannot exceed these limits.
EXCESS CONTRIBUTIONS
Amounts contributed to your BERWYN FUNDS IRA in excess of the
allowable limit will be subject to a non-deductible excise tax of 6%
for each year until the excess is used up as an allowable contribution
(in a subsequent year) or returned to you. A distribution of excess
contributions must be included in your taxable income when
distributed, and may also be subject to the 10% excise tax on early
distributions discussed below. The 6% excise tax will not apply if the
excess contribution and earnings applicable to it are distributed by
the due date for your federal income tax return, including extensions.
If such a distribution is made by the due date of your tax return,
only the earnings are taxable.
INCOME TAX DEDUCTION
Your contribution may be deductible on your federal income tax teturn.
However, there is a phase-out of the IRA deduction if you are an
active participant in an employer-sponsored retirement plan. The IRA
deduction is reduced proportionately as adjusted gross income (for the
1998 tax year) increases from $30,000 to $40,000 for a single
individual, $50,000 to $60,000 for a married couple filing a joint
return, or from $0 to $10,000 for a married individual who is an
active participant and files a separate return. The amount of the
reduction is equal to 20% of the amount by which your adjusted gross
income exceeds the $30,000, $50,000, and $0 amounts, respectively.
The adjusted gross income limits will increase each year until the
year 2005 when the IRA deductions will phase-out between $50,000 to
$60,000 for single returns, and the year 2007 when the IRA deduction
will phase-out between $80,000 to $100,000 for joint returns. Your
contributions in excess of the permitted deduction will be non-
deductible contributions.
A deductible IRA contribution can be made to your spouse's IRA even if
you are an active participant in an employer-sponsored retirement
plan, if your joint adjusted gross income for the tax year does not
exceed $150,000, beginning in 1998. The IRA deduction is reduced
proportionally as your joint adjusted gross income increases from
$150,001 to $160,000.
TAXATION OF DISTRIBUTIONS
The income of your BERWYN FUNDS IRA is not taxed until the money is
distributed to you. Distributions are taxable as ordinary income when
received except that the amount of any distribution representing non-
deducted contributions or the return of an excess is not taxed.
In general, you may "rollover" a distribution from another IRA, an
eligible rollover distribution from your employer's qualified plan, or
distributions from certain tax deferred annuities or accounts. If a
distribution is rolled over, i.e. deposited to your BERWYN FUNDS IRA
within 60 calendar days of receipt, the amount rolled over is not
taxable. The IRS enforces the 60-day time limit strictly. You may
rollover a portion of a distribution in which case the remainder will
be subject to tax. The IRS requires 20% of any distribution from your
employer's qualified plan to be withheld for federal income tax unless
your money is transferred in a direct asset transfer to an eligible
retirement plan such as another qualified plan or IRA. The rules
regarding rollovers are complex and you should consult your tax
adviser prior to rolling over all or part of a distribution.
Beginning in 1998, you may also "convert" all or a portion of your IRA
to a Roth IRA if your adjusted gross income (joint or individual) does
not exceed $100,000 for the tax year but not if the depositor is
married and files a separate return. A conversion is a type of
distribution and is not tax-free. Distributions are taxable as
ordinary income when received except that the amount of any
distribution representing non-deducted contributions is not taxed.
For 1998 conversions, the amount that would be includable in your
gross income is required to be spread over four years for federal
income tax purposes. The 10% penalty tax on early distributions does
not apply to conversions.
Distributions under $10 will not be reported to you on IRS Form 1099-R
after December 31, 1996, as allowed under IRS regulations. However,
you must still report these distributions to the IRS on IRS Form 1040
as well as other forms which may be required to properly file your tax
return.
PENALTY TAX ON CERTAIN TRANSACTIONS
Excess Contributions
If you make an excess contribution to your IRA and it is not corrected
on a timely basis, an excise tax of 6% is imposed on the excess
amount. This tax will apply each year to any part or all of the
excess which remains in your account.
Early Distributions
Your receipt or use of any portion of your account (excluding any
amount representing a return of non-deducted contributions) before you
attain age 59-1/2 is considered an early distribution. The
distribution is subject to a penalty tax equal to 10% of the
distribution unless the distribution is a result of one of the
following exceptions:
1. due to death, or
2. made because you became disabled, or
3. used specifically for deductible medical expenses which exceed 7.5%
of your adjusted gross income, or
4. used for health insurance cost due to your unemployment, or
5. used for higher education defined in section 529(e)(3) of the
Internal Revenue Code, or
6. used to cover expenses of first time home purchase up to $10,000,
or
7. part of a scheduled series of substantially equal payments over
your life, or over the joint life expectancy of you and a beneficiary.
If you request a distribution in the form of a series of substantially
equal payments, and you modify the payments before 5 years have
elapsed and before attaining age 59-1/2, the penalty tax will apply
retroactively to the year payments began through the year of such
modification.
The 10% penalty tax is in addition to any federal income tax that is
owed at distribution. For more information on the 10% penalty tax and
the exceptions listed above, consult IRS Publication 590.
Required Distributions
You are required to begin receiving minimum distributions from your
IRA no later than April 1 following the calendar year in which you
reach the age of 70-1/2. The distribution may be paid either in
installments, or in a lump sum. The installments
may be paid over your life, or over the joint and last survivor life
expectancy of you and your designated beneficiary. If the amount
distributed during a taxable year is less than the minimum amount
required to be distributed, the recipient is subject to a penalty tax
equal to 50% of the difference between the amount distributed and the
amount required to be distributed.
Excess Distributions
The 15% excess distribution and accumulation taxes have been
permanently repealed. The repeal applies to all excess distributions
received after December 31, 1996, and all estates of decedents dying
after December 31, 1996. You should consult a qualified tax adviser
to ensure you are exempt from these taxes.
ADDITIONAL INFORMATION ON DISTRIBUTIONS
An IRA distribution request form is available from the Custodian, and
should be obtained and used to request any distribution from your IRA.
PROHIBITED TRANSACTIONS
If you or your beneficiary engage in any prohibited transaction (such
as any sale, exchange, borrowing, or leasing of any property between
you and your IRA; or any other interference with the independent
status of the account), the account will lose its exemption from tax
and be treated as having been distributed to you. The value of the
entire account will be includable in your gross income. If you are
under age 59-1/2, you would also be subject to the 10% penalty tax on
early distributions.
If you or your beneficiary use (pledge) all or any part of your IRA as
security for a loan, then the portion so pledged will be treated as if
distributed to you, and will be taxable to you as ordinary income and
subject to a 10% penalty tax if you have not attained age 59-1/2
during the year which you make such a pledge.
INCOME TAX WITHHOLDING
The Custodian is required to withhold income tax from any distribution
from your IRA to you at the rate of 10% unless you choose not to have
tax withheld. You may elect out of withholding by advising the
Custodian in writing, prior to the distribution, that you do not want
tax withheld from the distribution. This election may be made on IRS
Form W-4P, or any other form acceptable to the Custodian. If you do
not elect out of tax withholding, you may direct the Custodian to
withhold an additional amount of tax in excess of 10%, but not more
than 90%.
ADDITIONAL INFORMATION
For more detailed information, you may obtain Publication 590,
Individual Retirement Arrangements (IRAs) from any district office of
the Internal Revenue Service or by calling 1-800-TAX-FORM.
Any IRA transaction may have tax consequences; consult your tax
adviser to obtain information about the tax consequences in connection
with your particular circumstances.
INFORMATION ABOUT YOUR INVESTMENTS
A mutual fund investment involves investment risks, including possible
loss of principal. In addition, growth in the value of your account
is neither guaranteed nor projected due to the characteristics of a
mutual fund investment. Detailed information about the shares of each
mutual fund available for investment by your BERWYN FUNDS IRA must be
furnished to you in the form of a prospectus. The method for
computing and allocating annual earnings is set forth in the
prospectus. (See prospectus section entitled "DIVIDENDS.") If you
made an initial contribution of $1,000 on the first day of a calendar
year and no further investment during that year, your contribution
would also be subject to certain costs and expenses which would reduce
any yield you might obtain from your investment. (See the prospectus
section entitled "EXPENSE TABLE" and the sections referred to
therein.) For further information regarding expenses, earnings, and
distributions, see the fund's financial statements, prospectus and/or
statement of additional information.
FEES AND CHARGES
The charges in connection with your BERWYN FUNDS IRA are set forth in
the Application. The Custodian may also charge a service fee in
connection with any distribution from your IRA.
IRS APPROVED FORM
Your BERWYN FUNDS IRA is the Internal Revenue Service's model
custodial account contained in IRS Form 5305-A. Certain additions
have been added in Article VIII of the form. By following this form,
your BERWYN FUNDS IRA meets the requirements of the Internal Revenue
Code. However, the IRS has not endorsed the merits of the investments
allowed under the IRA. Form 5305-A may also be used by qualifying
employers in conjunction with Form 5305-SEP to establish a simplified
employee pension plan (SEP) on behalf of employees. If your IRA is
part of a SEP, details regarding SEPs should also be provided by your
employer. This form cannot be used with Education, Roth or SIMPLE
IRAs.
CUSTODIAL ACCOUNT AGREEMENT
(Under section 408(a) of the Internal Revenue Code - Form 5305-A
(Revised January 1998))
The depositor whose name appears in the accompanying Application is
establishing an individual retirement account (IRA) under section
408(a) to provide for his or her retirement and for the support of his
or her beneficiaries after death. The custodian, PNC Bank, National
Association (PNC Bank), has given the depositor the disclosure
statement required under Regulations section 1.408-6.
The depositor and the custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of
the depositor for a tax year of the depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in section 402(c),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a
simplified employee pension plan as described in section 408(k).
ARTICLE II
The depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled
with other property except in a common trust fund or common investment
fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m)) except as otherwise permitted
by section 408(m)(3), which provides an exception for certain gold,
silver and platinum coins, coins issued under the laws of any state
and certain bullion.
ARTICLE IV
1. Not withstanding any provision of this agreement to the contrary,
the distribution of the depositor's interest in the custodial account
shall be made in accordance with the following requirements and shall
otherwise comply with section 408(a)(6) and Proposed Regulations
section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations section 1.401(a)(9)-2, the provisions of which
are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the depositor under paragraph 3, or to the surviving spouse
under paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the depositor and the surviving spouse and shall
apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
3. The depositor's entire interest in the custodial account must be,
or begin to be, distributed by the depositor's required beginning
date, April 1 following the calendar year end in which the depositor
reaches age 70 1/2. By that date, the depositor may elect, in a
manner acceptable to the custodian, to have the balance in the
custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last survivor
expectancy of the depositor and his or her designated beneficiary.
4. If the depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of the
depositor or, if the depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
depositor's death. If, however, the beneficiary is the depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the depositor would have
reached age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the depositor (or the joint
life and last survivor expectancy of the depositor and the depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the depositor and
designated beneficiary as of their birthdays in the year the depositor
reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age
of the designated beneficiary as of the beneficiary's birthday in the
year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use
the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirement described above. This
method permits an individual to satisfy these requirements by taking
from one individual retirement account the amount required to satisfy
the requirement for another.
ARTICLE V
1. The depositor agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under
sections 408(i) and Regulations sections 1.408-5 and 1.408-6.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the depositor as prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated,
the provisions of Articles I through III and this sentence will be
controlling. Any additional articles that are not consistent with
section 408(a) and the related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may
be made with the consent of the depositor and the custodian.
ARTICLE VIII
1. All funds in the custodial account (including earnings)
shall be invested in shares of beneficial interest of any one or more
of the regulated investment companies managed by the company listed on
the Application Form ("company") contained in this package or any of
its subsidiaries or affiliates, and which have been designated by such
company as eligible for investment under this custodial account, which
investment companies shall be collectively referred to as "the Funds"
and which shares shall be collectively referred to as "Fund Shares".
Fund Shares shall be purchased at the public offering value for Fund
Shares next to be determined after receipt of the contribution by the
custodian or its agent.
2. The shareholder of record of all Fund Shares shall be
the custodian or its nominee.
3. The depositor shall, from time to time, direct the
custodian to invest the funds of his/her custodial account in Fund
Shares. Any funds which are not directed as to investment will be
returned to the depositor without being deemed to have been
contributed to his/her custodial account. The depositor shall be the
beneficial owner of all Fund Shares held in the custodial account, and
the custodian shall not vote any such shares except upon written
direction of the depositor.
4. The custodian agrees to forward, or to cause to be
forwarded, to every depositor the then-current prospectus(es) of the
Funds, as applicable, which have been designated by the company as
eligible for investment under the custodial account and selected by
the depositor for such investment, and all notices, proxies and
related proxy soliciting materials applicable to said Fund Shares
received by it.
5. Each depositor shall have the right by written notice
to the custodian to designate or to change a beneficiary to receive
any benefit to which such depositor may be entitled in the event of
his/her death prior to the complete distribution of such benefit. If
no such designation is in effect on the depositor's death, or if the
designated beneficiary has predeceased the depositor, the beneficiary
shall be the depositor's estate.
6. (a) The custodian shall have the right to receive
rollover contributions as described in Article I of this Agreement.
The custodian reserves the right to refuse to accept any property
which is not in the form of cash.
(b) The custodian, upon written direction of the
depositor and after submission to the custodian of such documents as
it may reasonably require, shall transfer the assets held under this
Agreement (reduced by (1) any amounts referred to in paragraph 8 of
this Article VIII and (2) any amounts required to be distributed
during the calendar year of transfer) to a qualified retirement plan,
to a successor individual retirement account, to an individual
retirement annuity for the depositor's benefit, or directly to the
depositor.
Any amounts received or transferred by the custodian under this
paragraph 6 shall be accompanied by such records and other documents
as the custodian deems necessary to establish the nature, value and
extent of the assets and of the various interests therein.
7. Without in any way limiting the foregoing, the
depositor hereby irrevocably delegates to the custodian the right and
power to amend at any time and from time to time the terms and
provisions of this Agreement and hereby consents to such amendments,
provided they shall comply with all applicable provisions of the Code,
the Treasury regulations thereunder and with any other governmental
law, regulation or ruling. Any such amendments shall be effective
when the notice of such amendments is mailed to the address of the
depositor indicated by the custodian's records.
8. Any income taxes or other taxes of any kind whatsoever
levied or assessed upon or in respect of the assets of the custodial
account or the income arising therefrom, any transfer taxes incurred,
all other administrative expenses incurred, all other administrative
expenses incurred by the custodian in the performance of its duties
including fees for legal services rendered to the custodian, and the
custodian's compensation may be paid by the depositor and, unless so
paid within such time period as the custodian may establish, shall be
paid from the depositor's custodial account. The custodian reserves
the right to change or adjust its compensation upon 30 days advance
notice to the depositor.
9. The benefits provided hereunder shall not be subject to
alienation, assignment, garnishment, attachment, execution, or levy of
any kind, and any attempt to cause such benefits to be so subjected
shall not be recognized, except to such extent as may be required by
law.
10. The custodian may rely upon any statement by the
depositor (or the depositor's beneficiary if the depositor is
deceased) when taking any action or determining any fact or question
which may arise under this Custodial Agreement. The depositor hereby
agrees that the custodian will not be liable for any loss or expense
resulting from any action taken or determination made in reliance on
such statement. The depositor assumes sole responsibility for
assuring that contributions to the custodial account satisfy the
limits specified in the appropriate provisions of the Code.
11. The custodian may resign at any time upon 30 days
written notice to the depositor and may be removed by the depositor at
any time upon 30 days written notice to the custodian. Upon the
resignation or removal of the custodian, a successor custodian shall
be appointed within 30 days of such resignation notice and in the
absence of such appointment, the custodian shall appoint a successor
unless the Agreement be sooner terminated. Any successor custodian
shall be a bank (as defined in section 408(n) of the Code) or such
other person found qualified to act as a custodian under an individual
account plan by the Secretary of the Treasury or his delegate. The
appointment of a successor custodian shall be effective upon receipt
by the custodian of such successor's written acceptance which shall be
submitted to the custodian and the depositor. Within 30 days of the
effective date of a successor custodian's appointment, the custodian
shall transfer and deliver to the successor custodian applicable
account records and assets of the custodial account (reduced by any
unpaid amounts referred to in paragraph 8 of this Article VIII). The
successor custodian (or any successor thereto) shall be subject to the
provisions of this Agreement on the effective date of its appointment.
12. The custodian shall, from time to time, in accordance
with instructions in writing from the depositor (or the depositor's
beneficiary if the depositor is deceased), make distributions out of
the custodial account in the manner and amounts as may be specified in
such instructions (reduced by any amounts referred to in Article VIII,
paragraph 8). An IRA Withdrawal Authorization form is available from
the custodian, and should be obtained and used to request any
distribution from your IRA. Notwithstanding the provisions of Article
IV above, the custodian assumes (and shall have) no responsibility to
make any distribution from the custodial account unless and until such
written instructions specify the occasion for such distribution and
the elected manner of distribution, except as set forth in the second
part of this paragraph (12) below, with respect to age 70 1/2
distributions. Prior to making any such distribution from the
custodial account, the custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the custodian, but the
custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if
not satisfied such instructions are genuine, and assumes no duty of
further inquiry. Upon receipt of proper written instructions as
required above, the custodian shall cause the assets of the custodial
account to be distributed in cash and/or in kind, as specified in such
written instructions.
The depositor may select as a method of distribution under Article IV,
paragraph 3, option (a), (d), or (e); but may not select option (b) or
(c), notwithstanding description of such in Article IV. If the
depositor requests age 70 1/2 distribution by timely written
instruction but does not choose any of the methods of distribution
described above by the April 1st following the calendar year in which
he or she reaches age 70 1/2, distribution to the depositor will be
made in accordance with Article IV, paragraph 3, option (d). If the
depositor does not request age 70 1/2 distribution from the custodial
account by timely written instruction, or does not specify a method of
calculating the amount of the age 70 1/2 distribution which the
depositor will be taking from another IRA(s), calculation of the
current year Required Minimum Distribution amount which can not be
transferred or rolled over to another IRA will be made in accordance
with Article IV, paragraph 3, option (d).
13. Distribution of the assets of the custodial account
shall be made in accordance with the provisions of Article IV as the
depositor (or the depositor's beneficiary if the depositor is
deceased) shall elect by written instructions to the custodian;
subject, however, to the provisions of sections 401(a)(9), 408(a)(6)
and 403(b)(10) of the Code, the regulations promulgated thereunder,
and the following:
(i) The recalculation of life expectancy of the
depositor and/or the depositor's spouse may be made only at the
written election of the depositor. The recalculation of life
expectancy of the surviving spouse shall only be made at the written
election of the surviving spouse.
(ii) If the depositor dies before his/her entire
interest in the custodial account has been distributed, and if the
designated beneficiary of the depositor is the depositor's surviving
spouse, the spouse may treat the custodial account as his/her own
individual retirement arrangement. This election will be deemed to
have been made if the surviving spouse makes a regular IRA
contribution to the custodial account, makes a rollover to or from
such custodial account, or fails to receive a payment from the
custodial account within the appropriate time period applicable to the
deceased depositor under section 401(a)(9)(B) of the Code.
(iii) If the depositor's designated beneficiary is
not his/her spouse, then distributions to the beneficiary commencing
with the depositor's required beginning date shall comply with the
minimum distribution incidental benefit requirement.
The provisions of this paragraph (13) of Article VIII
shall prevail over the provisions of Article IV to the extent the
provisions of this paragraph (13) are permissible under proposed
and/or final regulations promulgated by the Internal Revenue Service.
14. In the event any amounts remain in the custodial
account after the death of the depositor, the rights of the depositor
hereunder shall thereafter be exercised by his or her beneficiary.
15. The custodian is authorized to hire agents (including
any transfer agent for Fund Shares) to perform certain duties
hereunder.
16. This Agreement shall terminate coincident with the
complete distribution of the assets of the depositor's account.
17. All notices to be given by the custodian to the
depositor shall be deemed to have been given when mailed to the
address of the depositor indicated by the custodian's records.
18. The custodian shall not be responsible for any losses,
penalties or other consequences to the depositor or any other person
arising out of the making of, or the failure to make, any contribution
or withdrawal.
19. In addition to the reports required by paragraph (2) of
Article V, the custodian shall periodically cause to be mailed to the
depositor in respect of each such period an account of all
transactions affecting the custodial account during such period and a
statement showing the custodial account as of the end of such period.
If, within 60 days after such mailing, the depositor has not given the
custodian written notice of any exception or objection thereto, the
periodic accounting shall be deemed to have been approved and, in such
case or upon the written approval of the depositor, the custodian
shall be released, relieved and discharged with respect to all matters
and statements set forth in such accounting as though the account had
been settled by judgment or decree of a court of competent
jurisdiction.
20. In performing the duties conferred upon the custodian
by the depositor hereunder, the custodian shall act as the agent of
the depositor. The parties do not intend to confer any fiduciary
duties on the custodian and none shall be implied. The custodian
shall not be liable (and does not assume any responsibility) for the
collection of contributions, the deductibility or the propriety of any
contribution under this Agreement, the selection of any Fund Shares
for this custodial account, or the purpose or propriety of any
distribution made in accordance with Article IV and Paragraph 12 or 13
of Article VIII, which matters are the sole responsibility of the
depositor or the depositor's beneficiary, as the case may be.
21. The custodian shall be responsible solely for the
performance of those duties expressly assigned to it in this Agreement
and by operation of law. The custodian shall have no duty to account
for deductible contributions separately from nondeductible
contributions, unless required to do so by applicable law. In
determining the taxable amount of a distribution, the depositor shall
rely only on his or her Federal tax records, and the custodian shall
withhold Federal income tax from any distribution from the custodial
account as if the total amount of the distribution is includable in
the depositor's income.
22. Except to the extent superseded by Federal law, this Agreement
shall be governed by, and construed, administered and enforced
according to, the laws of the Commonwealth of Pennsylvania, and all
contributions shall be deemed made in Pennsylvania.
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless
otherwise noted.)
Purpose of Form
Form 5305-A is a model custodial account agreement that meets the
requirements of section 408(a) and has been automatically approved by
the IRS. An individual retirement account (IRA) is established after
the form is fully executed by both the individual (depositor) and the
custodian and must be completed no later than the due date of the
individual's income tax return for the tax year (without regard to
extensions). This account must be created in the United States for
the exclusive benefit of the depositor or his or her beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to
the extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your
records.
For more information on IRAs, including the required disclosures the
custodian must give the depositor, get Pub. 590, Individual Retirement
Arrangements (IRAs).
Definitions
Custodian. The custodian must be a bank or savings and loan
association, as defined in section 408(n), or any person who has the
approval of the IRS to act as custodian.
Depositor. The depositor is the person who establishes the custodial
account.
Identifying Number
The depositor's social security number will serve as the
identification number of his or her IRA. An employer identification
number (EIN) is required only for an IRA for which a return is filed
to report unrelated business taxable income. An EIN is required for a
common fund created for IRAs.
IRA for Nonworking Spouse
Form 5305-A may be used to establish the IRA custodial account for a
nonworking spouse.
Contributions to an IRA custodial account for a nonworking spouse must
be made to a separate IRA custodial account established by the
nonworking spouse.
SPECIFIC INSTRUCTIONS
Article IV. - Distributions made under this article may be made in a
single sum, periodic payment, or a combination of both. The
distribution option should be reviewed in the year the depositor
reaches age 70 1/2 to ensure that the requirements of section
408(a)(6) have been met.
Article VIII. - Article VIII and any that follow it may incorporate
additional provisions that are agreed to by the depositor and
custodian to complete the agreement. They may include, for example,
definitions, investment powers, voting rights, exculpatory provisions,
amendment and termination, removal of the custodian, custodian's fees,
state law requirements, beginning date of distributions, accepting
only cash, treatment of excess contributions, prohibited transactions
with the depositor, etc. Use additional pages if necessary and attach
them to this form.
Note: Form 5305-A may be reproduced and reduced in size.
THE BERWYN FUNDS IRA APPLICATION
c/o PFPC Inc. PO Box 8987 ADOPTION AGREEMENT &
Wilmington DE 19899-8987 BENEFICIARY DESIGNATION
Page 1 of 2
For assistance in completing this form please call 1-800-992-6757.
Both pages must be completed.
1. Please tell us about yourself: This information is required in
order to establish your account.
- - - .
First Middle Last Name
Social Security Number
/ / .
Street
Date of Birth
( ) .
City State
Zip Code Telephone
2. Please tell us how to invest your funds. Please indicate the
percentage of your contribution you wish to invest in each Fund. The
initial investment must be at least $1,000.
Please indicate type of account you are opening: Regular IRA
IRA Rollover SEP IRA
CONTRIBUTION - This contribution applies to the tax year 19_______.
(Regular and SEP-IRAs ONLY. Contributions will be considered CURRENT
year if not marked.)
ROLLOVER - This contribution is a ROLLOVER or DIRECT ROLLOVER from
either a qualified retirement plan or another IRA which has been
completed within 60 days of receipt of the funds. If a Direct
Rollover please attach proper documents to transfer funds, otherwise
complete the Rollover Certification Form.
TRANSFER OF ASSETS - The initial contribution to this account is a
TRANSFER OF ASSETS. I have attached a completed "Transfer of
Assets/Direct Rollover" form.
THE BERWYN FUND $ OR
% ________________
BERWYN INCOME FUND $ OR
% ________________
$
OR % ________________
$
OR % ________________
3. BENEFICIARY DESIGNATION
Complete this section to designate Primary and Contingent
Beneficiary(ies) to receive, in the event of your death, any benefits
which may be payable under your IRA. A beneficiary must survive you
to receive anything. If your Primary Beneficiary(ies) do not survive
you, your Contingent Beneficiary(ies) will receive the funds. If more
than one person is named and no percentage is indicated, a joint
tenancy with the right of survivorship will be deemed to have been
created. If the beneficiary is a trust, please indicate the date of
the trust and the trustee(s) name. You may change your beneficiaries
at any time by giving written notice to the custodian.
Participant's Designation: In the event of my death, I hereby
designate the following individuals as the Primary and Contingent
Beneficiary(ies) to receive all benefits that may become due and
payable under my BERWYN FUNDS IRA.
Consent of Participant's Spouse: Spousal consent is required in
community property and marital property states where an IRA depositor
wishes to name a beneficiary other than, or in addition to, the
spouse. Spouses of Participants who reside in community property or
marital property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI) must sign
the consent below.
I hereby consent to and join in the designation of beneficiary(ies)
below. I give to the depositor any interest I have in the funds
deposited in this account.
______________________________________________________________________
_______________________________
Signature of Participant's Spouse (if applicable)
Date
(over)
THE BERWYN FUNDS IRA APPLICATION
Page 2 of 2 ADOPTION AGREEMENT &
BENEFICIARY DESIGNATION
Primary Beneficiary(ies): Please check here if you have attached a
separate sheet with additional Primary Beneficiaries. Sign and date
the sheet.
____________________________________________________
____________________________________________________
Name % of Distribution
Name % of Distribution
____________________________________________________
____________________________________________________
Street Street
____________________________________________________
____________________________________________________
City State Zip Code
City State Zip Code
____________________________________________________
____________________________________________________
Birth Date Relationship Birth Date
Relationship
___________________________________(______)__________
__________________________________(_______)__________
Social Security Number Telephone
Social Security Number Telephone
Contingent Beneficiary(ies): Please check here if you have attached
a separate sheet with additional Contingent Beneficiaries. Sign and
date the sheet.
____________________________________________________ ___
_______________________________________________
Name % of Distribution
Name % of Distribution
____________________________________________________
____________________________________________________
Street Street
____________________________________________________
____________________________________________________
City State Zip Code
City State Zip Code
____________________________________________________
____________________________________________________
Birth Date Relationship Birth Date
Relationship
___________________________________(______)__________
__________________________________(______)__________
Social Security Number Telephone Social
Security Number Telephone
TERMS AND CONDITIONS OF THE IRA ADOPTION AGREEMENT
Please sign and date this IRA Application Agreement & Beneficiary
Designation form "Application". You, the depositor, acknowledge that
you have received and read the current Prospectus for each Fund which
you have designated for investment.
All subsequent contributions will be invested as indicated by you in
the "Investment" section of this form. All dividends and
distributions from the Fund shares held in your Account will be
reinvested in shares of the Fund from which received. The custodian,
upon written instructions from you, may exchange any BERWYN FUNDS
shares for any other BERWYN FUNDS shares in accordance with the then
current prospectus.
Custodial Fees: $10.00 annual maintenance fee per account. The annual
maintenance fee may be paid by the depositor in addition to the
maximum annual contribution to his or her IRA. If the fee is not
included, the custodian will deduct the fee from the Account at year-
end or at the time the Account is closed.
The custodian reserves the right to change the custodian fee, but will
give at least 30 days written notice to the depositor of any fee
changes. The custodian will keep those records, identify and file
returns and provide other information concerning your Account as
required of custodians by the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department of the
United States.
I (the depositor) hereby establish an IRA under the terms and
conditions contained in the accompanying Custodial Account Agreement,
which is incorporated herein by reference. The combined instrument is
hereinafter referred to as the "Agreement." This IRA becomes
effective upon written acceptance of this Application by the
custodian, PNC Bank, National Association, which written acceptance
shall consist of a confirmation of transaction statement issued by the
custodian. The depositor understands and agrees that the custodian is
not responsible for any assets until received.
I (the depositor) certify under penalties of perjury that my Social
Security Number is true, correct and complete and that this number is
my Taxpayer Identification Number.
Owner's
Signature_____________________________________________________________
___________ Date________________________
Acceptance by custodian shall consist of a confirmation of transaction
statement issued by the custodian: PNC Bank, National Association, C/O
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
FOR DEALER USE ONLY
_______________________________________________________
________________________________________________________________
Broker/Dealer Number
Representative's Number
__________________________________________________________
__ _____________________________________________________________
Broker/Dealer Number
Representative's Number
rev 3/97
THE BERWYN FUNDS Transfer of Assets/Direct Rollover
Page 1 of 2 IRA and SEP-IRA Plans
Instructions for completing this form are provided on page 2
1. Please tell us about yourself:
/ / .
Name (Exactly as it appears on your current retirement account)
Date of Birth
- - - .
Street
Social Security Number
( ) .
City State
Zip Code Daytime Telephone
2. Please tell us where to invest. Complete items A, B, C and D.
A. I am opening a new account(s) and have attached the C.
Type of Account: IRA SEP-IRA
required application or documents.
Deposit the proceeds into my existing retirement account
D. Type of Request: Transfer of Assets (like plans)
Direct Rollover QRP to IRA
B. Please purchase into the following funds or account:.
403(b) to IRA
THE BERWYN FUND $ OR
% ________________
BERWYN INCOME FUND $ OR
% ________________
$
OR % ________________
$
OR % ________________
3. Please tell us about your current plan and authorize the transfer
from your current custodian.
* Check with your current custodian for the correct address and if
they need a signature guarantee to avoid delays.
* Attach a copy of a current statement if possible.
Type of Account you are transferring from (check one):
IRA SEP-IRA 403(b) Qualified Plan
________________________________________________________
Name of current Custodian or Agent
________________________________________________________
Address of current Custodian or Agent
________________________________________________________
City State Zip Code
( ) Telephone
Number of Custodian
I authorize the transfer of assets or direct rollover as noted above
to my BERWYN FUNDS IRA and authorize THE BERWYN FUNDS and PNC Bank,
N.A. to process this request on my behalf. I understand it is my
responsibility to assure the prompt transfer of assets by the current
custodian. I have read and understand all information in the
instructions and hereby provide the applicable direct rollover
certification.
________________________________________________________
Signature of IRA Depositor (Required) Date
________________________________________________________
Signature Guarantee Stamp and Signature
(If required by your current custodian or transfer agent)
Please transfer the following investments to PNC Bank, N.A. as
custodian for THE BERWYN FUNDS retirement plans.
For Certificate of Deposits Immediately At Maturity __________
Date
1._______________________________________________________
Fund Name or Type of Investment to be transferred
_________________________________________________________
Account Number for Investment 1
Entire Account Partial $____________________
2 _______________________________________________________
Fund Name or Type of Investment to be transferred
_________________________________________________________
Account Number for Investment 2
Entire Account Partial $____________________
TO BE COMPLETED BY PNC BANK CUSTODIAN ONLY
ISSUE CHECK PAYABLE TO:
THE BERWYN FUNDS FBO:________________________________
Account No:__________________________________________
SSN: _______________________________________________
(over)
THE BERWYN FUNDS Transfer of Assets/Direct Rollover
Page 2 of 2 IRA and SEP-IRA Plans
INSTRUCTIONS TO THE SHAREHOLDER (PLEASE READ CAREFULLY):
This form will be used by THE BERWYN FUNDS to initiate a transfer of
assets or direct rollover on your behalf from an existing Retirement
Plan account as designated on this form to your IRA plan at THE BERWYN
FUNDS. If you are over 70 1/2 please advise us if you wish to take
required distributions from this account and what your distribution
election is; otherwise no action will be taken on our part. Please
remember that TRANSFER OF ASSETS can only occur between the SAME type
of retirement plans, example IRA to IRA. If you are requesting a
DIRECT ROLLOVER, please read the section below. For certificate of
deposits please indicate if you wish to have the funds transferred
immediately, which may incur a redemption penalty if they have not
matured, or at maturity. We cannot accept requests to transfer assets
from certificates more than 60 days prior to their maturity. When
completed, please return the signed form, a copy of your current
custodian's account statement, and the appropriate new account
application for your IRA if required to:
First Class Mail Overnight Mail:
THE BERWYN FUNDS THE BERWYN FUNDS
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8987 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8987 Wilmington DE 19809-3710
Insufficient information or incorrect forms will result in delays in
processing your instructions. If you need assistance in completing
this form please contact our Customer Service Representatives at 1-
800-992-6757. We would be happy to help you. If you need additional
forms please call 1-800-992-6757.
DIRECT ROLLOVER INFORMATION - CERTIFICATION (PLEASE READ CAREFULLY):
If this contribution is a Direct Rollover from a Qualified Plan, I
understand that by signing the front of this form I am acknowledging
that the contribution is an irrevocable election and is no longer
eligible for special tax treatments which may be accorded to
distributions from Qualified Plans. If this contribution is a Direct
Rollover from a conduit/rollover IRA, by signing this form, I certify
that I have maintained the conduit/rollover status of the account by
not commingling it with any other assets.
You may want to contact your current plan administrator or custodian
to ensure that you have completed any documents they may require in
order to complete your request as well as the timing of the
distribution. THE BERWYN FUNDS can only accept Direct Rollovers from
a Qualified Plan to an IRA in the form of cash.
INSTRUCTIONS TO RESIGNING CUSTODIAN/TRANSFER AGENT:
Please liquidate the Depositor's account(s) as specified in section 3.
Issue a check payable as indicated in section 3 and mail along with
any other instructions to:
First Class Mail Overnight Mail:
THE BERWYN FUNDS THE BERWYN FUNDS
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8987 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8987 Wilmington DE 19809-3710
ACCEPTANCE BY PNC BANK, NATIONAL ASSOCIATION AS CUSTODIAN:
PNC Bank, National Association, accepts its appointment as custodian
of the above referenced IRA account and has established an IRA as
indicated by the shareholder on the front of this form under the
relevant IRS guidelines for IRAs under the shareholder's name in
BERWYN FUNDS. BERWYN FUNDS and PNC Bank, N.A., as custodian, cannot
accept assets other than cash. Upon receipt of the check, the
proceeds will be credited to the named shareholder's account.
Accepted by PNC Bank, N.A., as custodian for THE BERWYN FUNDS.
__________________________________________________
_____________________
Authorized Representative of PNC Bank, N.A.
Date
THE BERWYN FUNDS ROLLOVER CERTIFICATION FORM
Use this form to certify a rollover distribution from your current IRA
or eligible distribution from a qualified retirement plan to your
BERWYN FUNDS IRA. You must complete the rollover within 60 calendar
days of your receipt of that distribution.
PLEASE NOTE: 20% withholding is required on any eligible rollover
distribution from a qualified retirement plan unless the distribution
is transferred directly to an IRA or other qualified plan. To
transfer your distribution directly, please complete the "Transfer
Authorization/Direct Rollover Form" included with this Application.
- - - .
First Middle Last Name
Social Security Number
/ / .
Street
Date of Birth
( ) .
City State
Zip Code Telephone
TYPE OF ROLLOVER CONTRIBUTION (Please check one)
IRA Rollover - Note that 365 days must have passed since you
last received a rollover distribution from the distributing IRA.
Eligible Rollover Distribution - A distribution from a
qualified retirement plan of all or part of your plan balance, other
than the portion of any distribution which is nontaxable. Your
employer's benefits or personnel office should be able to tell you
what portion of your distribution is an "eligible distribution."
Qualified Domestic Relations Order Distribution.
70 1/2 ROLLOVER RESTRICTIONS (Please Check One)
I am not nor will be 70 1/2 or older in this calendar year.
I am or will be 70 1/2 or older in this calendar year. I
understand that I may not rollover any amounts required to be
distributed under Internal Revenue Code Sections 408(a)(6) and
401(a)(9).
CERTIFICATION
I certify that the contribution described above is an eligible IRA
rollover contribution and that I am rolling over this contribution
within 60 calendar days of my receipt of that distribution. I
understand that this rollover is irrevocable and involves important
tax considerations. Specifically, I understand that a rollover
contribution from a qualified retirement plan will no longer be
eligible for the special averaging, capital gains and separate tax
treatment that may be available for distributions from such plans.
Other tax considerations may also apply.
I agree that I am solely responsible for all tax consequences of this
rollover contribution. I also agree that the IRA custodian shall have
no responsibility for any tax consequences.
I understand that if I commingle a qualified retirement plan rollover
with annual IRA contributions, I will not be eligible to rollover the
amount to another qualified plan in the future. Other restrictions
regarding subsequent rollovers of the contribution may also apply.
I have read and understand and agree to be legally bound by the terms
of this form. I also understand that the IRA custodian will rely on
this form when accepting my rollover contribution. I understand that
this rollover is irrevocable and may not be reversed in the future. I
also understand that I am responsible for the movement of the rollover
to my successor IRA, and that PNC Bank, National Association and PFPC
Inc. have no duty to enforce the collection of any assets to be rolled
over to my BERWYN FUNDS IRA.
______________________________________________________________________
___________________________
Depositor's Signature
Date
THE BERWYN FUNDS INDIVIDUAL RETIREMENT ACCOUNT
c/o PFPC Retirement Plan Services WITHDRAWAL AUTHORIZATION
PO Box 8987 Wilmington DE 19899-8987 AND INSTRUCTIONS FOR
DISTRIBUTION
Page 1 of 2
Please tell us about yourself:
This form is not to be used for age 70 1/2 required minimum
distributions. Please call the Funds customer service number for the
correct form.
NAME:_________________________________________________________________
______________________________________
(PLEASE PRINT FULL NAME)
SOCIAL SECURITY NUMBER:_________-_______-_________
DATE OF BIRTH _________/_________/_________
mm dd yy
ADDRESS:______________________________________________________________
______________________________________
STREET ADDRESS
CITY STATE
ZIP
FUND : ______________________________________________ ACCOUNT
NUMBER: ______________________________________
Reason For Distribution - Check the box that applies
Under age 59 1/2 (Premature - IRS Penalty Imposed)
Under Age 59 1/2 - (Premature Exception*)
Age 59 1/2 or older (Normal)
Divorce or Legal Separation
Disability
Death
The proper documentation must be received or attached for each
distribution type before the request will be processed. All legal
documents must be a certified copy and signature guarantees are
required for the IRA owner/beneficiary or spouse. *Premature exception
requires you to take a specific amount each year based on a life
expectancy. This amount must be specified by you each year and will
not be calculated for you.
Payout Method
Partial Withdrawal / Amount:_______________________________________
DOLLARS / SHARES (CIRCLE ONE)
Total Distribution of Account
Mail to my address currently on file.
Mail to the following address:
Purchase funds into my existing
non-retirement mutual fund account: _______________________
__________________________
Account Number _________________________________________
_______________________________________________________
Fund___________________________________________________
Financial Institution Name:_________________________________
NEW ACCOUNT; check here and attach completed application to
Account Number:_________________________________________
purchase funds into a new mutual fund account.
(to be used if check going to another Financial
Institution)
(over)
THE BERWYN FUNDS INDIVIDUAL RETIREMENT ACCOUNT
Page 2 of 2 WITHDRAWAL AUTHORIZATION
AND INSTRUCTIONS FOR DISTRIBUTION
WITHHOLDING ELECTION (Form W-4P OMB#1545-0415)
Federal income tax will be withheld from payments from IRAs unless you
elect otherwise. You can use Form W-4P, or a substitute form such as
this one, to instruct the fund to withhold no tax from your IRA
payment or to revoke this election. Generally, non-periodic payments
must have tax withheld at a rate of 10%. You can elect to have no
income tax withheld from a nonperiodic payment by filing Form W-4P or
this substitute with the fund and check the appropriate box on the
form. Your election will remain in effect for any subsequent
distributions unless you change or revoke your election by completing
a new W-4P or substitute form, and submit it to the fund.
Number of allowances on which withholding is to be
computed ________.
_____ I elect not to have federal income tax withheld from my
distribution.
_____ I elect to have federal income tax withheld from my
distribution. If you want a percentage exceeding the current rate,
please indicate
the percentage _________% (not more than 90%).
_____ I want the following additional amount withheld from each
distribution $__________.
Caution: Remember you are liable for the payment of Federal income tax
on the taxable amount of your distribution(s) and there are penalties
for not paying enough tax during the year, either through withholding
or estimated tax payments.
SIGNATURE
I certify that I am the depositor authorized to make these elections
and that all information provided is true and accurate. I further
certify that no tax or legal advice has been given to me by the
custodian, THE BERWYN FUNDS, or any agent of either of them, and that
all decisions regarding the elections made
on this form are my own. The custodian is hereby authorized and
directed to distribute funds from my account in the manner requested.
The custodian
may conclusively rely on this certification and authorization without
further investigation or inquiry. I expressly assume responsibility
for any adverse consequences which may arise from the Election(s) and
agree that the custodian, THE BERWYN FUNDS, and their agents shall in
no way be responsible, and shall be indemnified and held harmless, for
any tax, legal or other consequences of the Election(s) made on this
form. This form MAY ONLY be used for one account. If you have
another account from which you wish to take distributions, please fill
out a separate form.
X________________________________________________________________
Date______________________
Depositor's Signature (or beneficiary's signature if Depositor
is deceased.)
____________________________________________
Signature Guarantee - Medallion Stamp*
7/97
*(The medallion signature guarantee may be executed by banks, broker
dealers, credit unions, national securities exchanges and savings
associations which participate in STAMP, SEMP or NYSE-MSP. A notary
public is not a substitute for a Signature Guarantee. The medallion
signature guarantee stamp must include the words "SIGNATURE
GUARANTEED, MEDALLION GUARANTEED" and otherwise comply with the
medallion program requirements. Please check your fund prospectus or
with your fund as to whether a signature guarantee is required.)
First Class Mail:
Overnight Express:
THE BERWYN FUNDS
THE BERWYN FUNDS
Attn: THE BERWYN FUNDS IRA
Attn: THE BERWYN FUNDS IRA
PO Box 8987
400 Bellevue Pkwy Suite 108
Wilmington, DE 19899-8987
Wilmington, DE 19809-3710
1-800-992-6757
10
16
10
17
THE BERWYN FUNDS
ROTH Individual Retirement Account
THE BERWYN FUNDS
ROTH Individual Retirement Account
Application Instructions 1
Roth IRA Disclosure Statement 2
Custodial Account Agreement 6
Application, Adoption Agreement
& Beneficiary Designation 11
Transfer Authorization Form 13
Rollover/Conversion Certification Form 15
APPLICATION INSTRUCTIONS
DO NOT USE THIS FORM FOR EDUCATION, SEP, SIMPLE OR TRADITIONAL IRAs.
1 HOW TO COMPLETE THE ENCLOSED FORMS:
If you are opening a Roth IRA which will not contain contributions
that have been transferred from another Roth IRA or a Traditional IRA:
* To establish a Roth IRA, please complete the "Application, Adoption
Agreement and Beneficiary Designation" (Application). Please note
that the Applicant's name must be that of an individual, not a
business.
* If you are opening a Roth IRA for your spouse who is unemployed or
earns less than you earn, a separate Application must be completed by
your spouse.
* The maximum allowable contribution to your Roth IRA is the lesser of
(a) $2,000 or (b) 100% of your compensation or earnings from self-
employment. If your spouse is not employed or earns less than you
earn, your spouse may also contribute to a Roth IRA. The maximum
contribution to your spouse's Roth IRA is the lesser of (a) $2,000, or
(b) the combined compensation of both spouses, minus the dollar amount
of the IRA contribution made by the compensated (or more highly
compensated) spouse. The total contribution to each individual's IRAs
(deductible, non-deductible and Roth) combined cannot exceed these
limits. There is a phase-out of eligibility to make a Roth IRA
contribution if your adjusted gross income (AGI) is between $95,000
and $110,000 for single filers, between $150,000 and $160,000 for
married joint filers and between $0 and $10,000 for a married separate
filer.
* The minimum initial investment per Fund is $1,000. If you are
dividing your contribution between Roth IRAs for yourself and your
spouse, the amounts invested per Fund in each account will be combined
for the purpose of satisfying the minimum initial investment.
Prospectuses for the Funds may be obtained from the Fund at 1-800-992-
6757. Please be sure to read the prospectus carefully before
investing.
* Please be sure to read carefully the "Terms and Conditions of the
Roth IRA Adoption Agreement" in Section 5 of the Application. There
is a $10.00 annual custodial maintenance fee on each account in the
Fund.
* Please make checks payable to THE BERWYN FUNDS. If you are dividing
your contribution between yourself and your spouse's Roth IRA, only
one check, with instructions on how to allocate the contribution
between accounts, needs to be included with both Applications.
If you are opening a Roth IRA which will contain contributions which
have been transferred from another Roth IRA or a Traditional IRA:
* Please read and follow the general instructions above for
establishing a Roth IRA. Be sure to note on the Application that your
contribution is a transfer, a rollover from another Roth IRA, or a
Conversion Roth IRA.
* You may not establish a Conversion Roth IRA in any tax year in which
your adjusted gross income exceeds $100,000, or if you are married and
filing separately.
* To transfer the distribution from your current Roth IRA directly
from that plan to your BERWYN FUNDS Roth IRA, please complete a
"Transfer Authorization Form".
* To certify that the contribution you are making to the Roth IRA is a
rollover from a Roth IRA or a converted Traditional IRA, please
complete the "Rollover/Conversion Certification Form." Rollovers and
Conversions must be completed within 60 calendar days of the date you
receive the distribution.
2 MAIL THE COMPLETED APPLICATION AND CHECK (IF APPLICABLE) TO:
First Class Mail: Overnight
Express:
THE BERWYN FUNDS THE BERWYN FUNDS
Attn: THE BERWYN FUNDS IRA Attn: THE BERWYN
FUNDS IRA
PO Box 8987 400 Bellevue Pkwy
Suite 108
Wilmington, DE 19899-8987 Wilmington, DE
19809-3710
1-800-992-6757
ROTH INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following information is the disclosure statement required by
Federal Tax regulations. You should read this disclosure statement,
the Custodial Account Agreement, and the prospectuses for the Funds in
which your BERWYN FUNDS Roth Individual Retirement Account (Roth IRA)
contributions will be invested.
REVOCATION OF YOUR ROTH IRA
You have the right to revoke your BERWYN FUNDS Roth IRA and receive
the entire amount of your initial contribution by notifying PNC Bank,
National Association, the Custodian of your BERWYN FUNDS Roth IRA, in
writing within seven (7) days of establishment of your Roth IRA. If
you revoke your Roth IRA within seven days, you are entitled to a
return of the entire amount paid by you, without adjustment for such
items as sales commission, administrative expenses, or fluctuations in
market value. If you decide to revoke your Roth IRA, notice should be
delivered or mailed to:
First Class Mail: Overnight
Express:
PNC Bank, National Association PNC Bank,
National Association
c/o PFPC Inc. c/o PFPC Inc.
Attn: THE BERWYN FUNDS Roth IRA Attn: THE BERWYN
FUNDS Roth IRA
PO Box 8987 400 Bellevue Pkwy
Suite 108
Wilmington, DE 19899-8987 Wilmington, DE
19809-3710
1-800-992-6757
This notice should be signed by you and include the following:
1. The date;
2. A statement that you elect to revoke your
BERWYN FUNDS Roth IRA;
3. Your BERWYN FUNDS Roth IRA account number;
4. The date your BERWYN FUNDS Roth IRA was
established;
5. Your signature and your printed or typed name.
Mailed notice will be deemed given on the date that it is postmarked,
if it is deposited in the United States mail, first class postage
prepaid and properly addressed. This means that if you mail your
notice it must be postmarked on or before the seventh day after your
BERWYN FUNDS Roth IRA was opened. A revoked Roth IRA will be reported
to the Internal Revenue Service and the Depositor on Forms 1099-R and
5498.
YOUR ROTH INDIVIDUAL RETIREMENT ACCOUNT
You have opened a BERWYN FUNDS Roth Individual Retirement Account
which is an account for the exclusive benefit of you and your
beneficiaries, created by a written instrument (the Custodial Account
Agreement). The following requirements apply to your BERWYN FUNDS
Roth IRA:
1. Contributions, transfers and rollovers may be
made only in "cash" by check, draft, or other form acceptable to the
Custodian;
2. The Custodian must be a bank;
3. No part may be invested in life insurance;
4. Your interest must be nonforfeitable;
5. The assets of the custodial account may not be
mixed with other property except in a common investment fund;
6. There is no age limit on contributions as long
as you have earned income;
7. Your adjusted gross income must be within the
eligibility limits (discussed under "Contributions" below); and
8. There are no mandatory withdrawals during your
lifetime.
CONTRIBUTIONS
The maximum allowable contribution to your Roth IRA is the lesser of
(a) $2,000 or (b) 100% of your compensation or earnings from self-
employment. If your spouse is not employed or earns less than you
earn, your spouse may also contribute to a Roth IRA. The maximum
contribution to your spouse's Roth IRA is the lesser of (a) $2,000, or
(b) the combined compensation of both spouses, minus the dollar amount
of the IRA contribution made by the compensated (or more highly
compensated) spouse. The total contribution to each individual's IRAs
(deductible, non-deductible and Roth) combined cannot exceed these
limits.
Contributions can be made to a Roth IRA past age 70 -1/2 as long as
the above requirements of earned income are met.
There is a phase-out of eligibility to make a Roth IRA contribution if
your adjusted gross income (AGI) is between certain levels.
For a single depositor, the $2,000 maximum annual contribution is
phased out to zero between AGI of $95,000 and $110,000; for a married
depositor who files jointly, between AGI of $150,000 and $160,000; and
for a married depositor who files separately, between $0 and $10,000.
Single filers with AGI above $110,000, joint filers with AGI above
$160,000 and married separate filers with AGI above $10,000 in 1998
may not contribute to a Roth IRA.
Conversion IRA Rollovers
You may only convert a Traditional IRA into a Conversion Roth IRA if
your AGI (single or joint) does not exceed $100,000 and you do not
file married and separately. If a distribution is converted from a
Traditional IRA, i.e. deposited to your BERWYN FUNDS Roth IRA within
60 calendar days of receipt, the amount converted will be taxed as
ordinary income, except that the amount of any distribution from the
Traditional IRA which represents non-deductible contributions is not
taxed. The IRS enforces the 60-day time limit strictly. The 10%
penalty for distributions under age 59-1/2 will not apply to the
amount converted if held in your Conversion Roth IRA for at least five
years and certain other criteria are met. See the section on Taxation
of Distributions below. The rules regarding conversions to Roth IRAs
are complex and you should consult your tax advisor prior to rolling
over all or any part of a distribution.
EXCESS CONTRIBUTIONS
Amounts contributed to your BERWYN FUNDS Roth IRA in excess of the
allowable limit will be subject to a non-deductible excise tax of 6%
for each year until the excess is used up as an allowable contribution
(in a subsequent year) or returned to you. A distribution of excess
contributions may be subject to the 10% excise tax on early
distributions discussed below. The 6% excise tax will not apply if the
excess contribution and earnings applicable to it are distributed by
the due date for your Federal Income Tax Return, including extensions.
INCOME TAX DEDUCTION
Your contribution is not deductible on your Federal Income Tax Return.
TAXATION OF DISTRIBUTIONS
Contributory Roth IRAs
Any distribution, or portion of any distribution, which consists of
the return of contributions you made to your BERWYN FUNDS Roth IRA is
not subject to federal income tax. For federal income tax purposes,
contributions are presumed to be withdrawn first. The earnings on
your contributions will not be subject to federal income tax when
withdrawn if the assets being withdrawn have been in your Roth IRA for
at least five (5) years, and any one of the following criteria is also
met:
1. you are over the age of 59-1/2, or
2. used to purchase a first home, up to $10,000, or
3. made because you became disabled, or
4. due to your death.
All distributions made prior to the five-year holding period,
regardless of the reason, are subject to ordinary income tax on the
earnings plus a 10% penalty tax on early distributions. Exceptions to
the 10% penalty are described below in the section on Early
Distributions under Penalty Tax on Certain Transactions.
Rollovers from one Roth IRA to another Roth IRA are permitted within
the 60 calendar day period after receipt. The amount rolled over
within 60 days will not be taxable. The IRS enforces the 60-day time
limit strictly. Rollovers from a Roth IRA to a Regular IRA are not
permitted.
Conversion Roth IRAs
The five-year holding period applies separately to each year's
converted IRA funds. For example, a conversion in 1998 and a second
conversion in 2000 would have two different five-year periods, one
ending in 2003 and one ending in 2005, with non-taxable distributions
being available if the other criteria above are met beginning in the
sixth year after the conversion. IRS penalties, in addition to the
10% premature distribution penalty which applies if you are under age
59-1/2, may apply if you withdraw from a Conversion Roth IRA prior to
the five-year period.
Distributions under $10 will not be reported to you on IRS Form 1099-R
as allowed under IRS regulations. However, you must still report
these distributions to the IRS on IRS Form 1040 as well as other forms
which may be required to properly file your tax return.
PENALTY TAX ON CERTAIN TRANSACTIONS
Excess Contributions
If you make an excess contribution to your Roth IRA and it is not
corrected on a timely basis, an excise tax of 6% is imposed on the
excess amount. This tax will apply each year to any part or all of
the excess which remains in your account.
Early Distributions
All distributions made prior to the five-year holding period,
regardless of the reason, are subject to ordinary income tax on the
earnings plus the 10% penalty tax on early distributions. The
distribution is subject to the penalty tax unless the distribution is
the result of one of the following exceptions:
1. you are over age 59-1/2, or
2. due to death, or
3. made because you became disabled, or
4. used specifically for deductible medical expenses which exceed 7.5%
of your adjusted gross income, or
5. used for health insurance cost due to your unemployment, or
6. used for higher education defined in section 529(e)(3) of the
Internal Revenue Code, or
7. used to cover expenses of first time home purchase up to $10,000,
or
8. part of a scheduled series of substantially equal payments over
your life, or over the joint life expectancy of you and a beneficiary.
If you request a distribution in the form of a series of substantially
equal payments, and you modify the payments before 5 years have
elapsed and before attaining age 59-1/2, the penalty tax will apply
retroactively to the year payments began through the year of such
modification.
The 10% penalty tax is in addition to any federal income tax that is
owed at distribution. For more information on the 10% penalty tax and
the exceptions listed above, consult IRS Publication 590.
Required Distributions
You are not required to take distributions from your Roth IRA during
your lifetime.
ADDITIONAL INFORMATION ON DISTRIBUTIONS
A Roth IRA distribution request form is available from the Custodian,
and should be obtained and used to request any distribution from your
Roth IRA.
PROHIBITED TRANSACTIONS
If you or your beneficiary engage in any prohibited transaction (such
as any sale, exchange, borrowing, or leasing of any property between
you and your Roth IRA; or any other interference with the independent
status of the account), the account will lose its exemption from tax
and be treated as having been distributed to you. The value of the
earnings on your account will be includable in your gross income. If
you are under age 59-1/2, you would also be subject to the 10% penalty
tax on early distributions.
If you or your beneficiary use (pledge) all or any part of your Roth
IRA as security for a loan, then the portion so pledged will be
treated as if distributed to you, and will be taxable to you as a
nonqualified distribution, and subject to a 10% penalty tax on the
taxable portion of such distribution if you have not attained age 59-
1/2 during the year which you make such a pledge.
INCOME TAX WITHHOLDING
The Custodian is required to withhold income tax from any distribution
from your Roth IRA to you at the rate of 10% unless you choose not to
have tax withheld. You may elect out of withholding by advising the
Custodian in writing, prior to the distribution, that you do not want
tax withheld from the distribution. This election may be made on IRS
Form W-4P, or any other form acceptable to the Custodian. If you do
not elect out of tax withholding, you may direct the Custodian to
withhold an additional amount of tax in excess of 10%, but not more
than 90%.
ADDITIONAL INFORMATION
For more detailed information, you may obtain Publication 590,
Individual Retirement Arrangements (IRAs) from any district office of
the Internal Revenue Service or by calling 1-800-TAX-FORM.
Any Roth IRA transaction may have tax consequences; consult your tax
adviser to obtain information about the tax consequences in connection
with your particular circumstances.
INFORMATION ABOUT YOUR INVESTMENTS
A mutual fund investment involves investment risks, including possible
loss of principal. In addition, growth in the value of your account
is neither guaranteed nor projected due to the characteristics of a
mutual fund investment. Detailed information about the shares of each
mutual fund available for investment by your BERWYN FUNDS Roth IRA
must be furnished to you in the form of a prospectus. The method for
computing and allocating annual earnings is set forth in the
prospectus. (See prospectus section entitled "DIVIDENDS.") If you
made an initial contribution of $1,000 on the first day of a calendar
year and no further investment during that year, your contribution
would also be subject to certain costs and expenses which would reduce
any yield you might obtain from your investment. (See the prospectus
section entitled "EXPENSE TABLE" and the sections referred to
therein.) For further information regarding expenses, earnings, and
distributions, see the fund's financial statements, prospectus and/or
statement of additional information.
FEES AND CHARGES
The charges in connection with your BERWYN FUNDS Roth IRA are set
forth in the Application. The Custodian may also charge a service fee
in connection with any distribution from your Roth IRA.
IRS APPROVED FORM
Your BERWYN FUNDS Roth IRA is the Internal Revenue Service's model
custodial account contained in IRS Form 5305-RA. Certain additions
have been added in Article IX of the form. By following this form,
your BERWYN FUNDS Roth IRA meets the requirements of the Internal
Revenue Code. However, the IRS has not endorsed the merits of the
investments allowed under the Roth IRA. This form cannot be used with
Education, SEP, SIMPLE or Traditional IRAs.
CUSTODIAL ACCOUNT AGREEMENT
(Under section 408A of the Internal Revenue Code - Form 5305-RA
(January 1998))
The depositor whose name appears in the accompanying Application is
establishing a Roth individual retirement account (Roth IRA) under
section 408A to provide for his or her retirement and for the support
of his or her beneficiaries after death.
The custodian, PNC Bank, National Association (PNC Bank), has given
the depositor the disclosure statement required under Regulations
section 1.408-6.
The depositor and the custodian make the following agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in section
408A(e), the custodian will accept only cash contributions and only up
to a maximum amount of $2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the
same tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0
between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly,
between AGI of $150,000 and $160,000; and for a married depositor who
files separately, between $0 and $10,000. In the case of a
conversion, the custodian will not accept IRA Conversion Contributions
in a tax year if the depositor's AGI for that tax year exceeds
$100,000 or if the depositor is married and files a separate return.
Adjusted gross income is defined in section 408A(c)(3) and does not
include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled
with other property except in a common trust fund or common investment
fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m)) except as otherwise permitted
by section 408(m)(3), which provides an exception for certain gold,
silver, and platinum coins, coins issued under the laws of any state,
and certain bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not
the sole beneficiary, the entire remaining interest will, at the
election of the depositor or, if the depositor has not so elected, at
the election of the beneficiary or beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following
the year of the depositor's death.
If distributions do not begin by the date described in
(b), distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the
minimum annual payment for each year, divide the grantor's entire
interest in the trust as of the close of business on December 31 of
the preceding year by the life expectancy of the designated
beneficiary using the attained age of the designated beneficiary as of
the beneficiary's birthday in the year distributions are required to
commence and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
ARTICLE VI
1. The depositor agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under
sections 408(i) and 408A(d)(3)(E), Regulations sections 1.408-5 and
1.408-6, and under guidance published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the depositor as prescribed by the Internal Revenue
Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated,
the provisions of Articles I through IV and this sentence will be
controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance
will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with the
provisions of the Code, related regulations, and other published
guidance. Other amendments may be made with the consent of the
depositor and the custodian.
ARTICLE IX
1. All funds in the custodial account (including earnings)
shall be invested in shares of beneficial interest of any one or more
of the regulated investment companies managed by the company listed on
the Application Form ("company") contained in this package or any of
its subsidiaries or affiliates, and which have been designated by such
company as eligible for investment under this custodial account, which
investment companies shall be collectively referred to as "the Funds"
and which shares shall be collectively referred to as "Fund Shares".
Fund Shares shall be purchased at the public offering value for Fund
Shares next to be determined after receipt of the contribution by the
custodian or its agent.
2. The shareholder of record of all Fund Shares shall be
the custodian or its nominee.
3. The depositor shall, from time to time, direct the
custodian to invest the funds of his/her custodian account in Fund
Shares. Any funds which are not directed as to investment will be
returned to the depositor without being deemed to have been
contributed to his/her custodial account. The depositor shall be the
beneficial owner of all Fund Shares held in the custodial account, and
the custodian shall not vote any such shares except upon written
direction of the depositor.
4. The custodian agrees to forward, or to cause to be
forwarded, to every depositor the then-current prospectus(es) of the
Funds, as applicable, which have been designated by the company as
eligible for investment under the custodial account and selected by
the depositor for such investment, and all notices, proxies and
related proxy soliciting materials applicable to said Fund Shares
received by it.
5. Each depositor shall have the right by written notice
to the custodian to designate or to change a beneficiary to receive
any benefit to which such depositor may be entitled in the event of
his/her death prior to the complete distribution of such benefit. If
no such designation is in effect on the depositor's death, or if the
designated beneficiary has predeceased the depositor, the beneficiary
shall be the depositor's estate.
6. (a) The custodian shall have the right to receive
rollover and conversion contributions as allowed under IRS Code
Section 408A, however it is the depositor's responsibility to ensure
that such rollovers and conversions are eligible to be contributed to
this Roth IRA. The custodian reserves the right to refuse to accept
any property which is not in the form of cash.
(b) The custodian, upon written direction of the
depositor and after submission to the custodian of such documents as
it may reasonably require, shall transfer the assets held under this
Agreement (reduced by any amounts referred to in paragraph 8 of this
Article IX) to a successor Roth Individual Retirement Account or
directly to the depositor.
Any amounts received or transferred by the custodian under this
paragraph 6 shall be accompanied by such records and other documents
as the custodian deems necessary to establish the nature, value and
extent of the assets and of the various interests therein.
7. Without in any way limiting the foregoing, the
depositor hereby irrevocably delegates to the custodian the right and
power to amend at any time and from time to time the terms and
provisions of this Agreement and hereby consents to such amendments,
provided they shall comply with all applicable provisions of the Code,
the Treasury regulations thereunder and with any other governmental
law, regulation or ruling. Any such amendments shall be effective
when the notice of such amendments is mailed to the address of the
depositor indicated by the custodian's records.
8. Any income taxes or other taxes of any kind whatsoever
levied or assessed upon or in respect of the assets of the custodial
account or the income arising therefrom, any transfer taxes incurred,
all other administrative expenses incurred, all other administrative
expenses incurred by the custodian in the performance of its duties
including fees for legal services rendered to the custodian, and the
custodian's compensation may be paid by the depositor and, unless so
paid within such time period as the custodian may establish, shall be
paid from the depositor's custodial account. The custodian reserves
the right to change or adjust its compensation upon 30 days advance
notice to the depositor.
9. The benefits provided hereunder shall not be subject to
alienation, assignment, garnishment, attachment, execution or levy of
any kind, and any attempt to cause such benefits to be so subjected
shall not be recognized, except to such extent as may be required by
law.
10. The custodian may rely upon any statement by the
depositor when taking any action or determining any fact or question
which may arise under this Custodial Agreement. The depositor hereby
agrees that the custodian will not be liable for any loss or expense
resulting from any action taken or determination made in reliance on
such statement. The depositor assumes sole responsibility for
assuring that contributions to the custodial account satisfy the
limits specified in the appropriate provisions of the Code.
11. The custodian may resign at any time upon 30 days
written notice to the depositor and may be removed by the depositor at
any time upon 30 days written notice to the custodian. Upon the
resignation or removal of the custodian, a successor custodian shall
be appointed within 30 days of such resignation notice and in the
absence of such appointment, the custodian shall appoint a successor
unless the Agreement be sooner terminated. Any successor custodian
shall be a bank (as defined in section 408(n) of the Code) or such
other person found qualified to act as a custodian under an individual
account plan by the Secretary of the Treasury or his delegate. The
appointment of a successor custodian shall be effective upon receipt
by the custodian of such successor's written acceptance which shall be
submitted to the custodian and the depositor. Within 30 days of the
effective date of a successor custodian's appointment, the custodian
shall transfer and deliver to the successor custodian applicable
account records and assets of the custodial account (reduced by any
unpaid amounts referred to in paragraph 8 of this Article IX). The
successor custodian shall be subject to the provisions of this
Agreement (or any successor thereto) on the effective date of its
appointment.
12. The custodian shall, from time to time, in accordance
with instructions in writing from the depositor, make distributions
out of the custodial account to the depositor in the manner and
amounts as may be specified in such instructions (reduced by any
amounts referred to in Article IX, paragraph 8). A Roth IRA
Withdrawal Authorization form is available from the custodian, and
should be obtained and used to request any distribution from your Roth
IRA. The custodian assumes (and shall have) no responsibility to make
any distribution to the depositor (or the depositor's beneficiary if
the depositor is deceased) unless and until such written instructions
specify the occasion for such distribution and the elected manner of
distribution. Prior to making any such distribution from the
custodial account, the custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the custodian, but the
custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply if
not satisfied such instructions are genuine, and assumes no duty of
further inquiry. Upon receipt of proper written instructions as
required above, the custodian shall cause the assets of the custodial
account to be distributed in cash and/or in kind, as specified in such
written instructions.
13. No distributions are required to be taken from the Roth
IRA during the lifetime of the depositor. If the depositor desires to
take distributions from the Roth IRA, such distributions of the assets
of the custodial account shall be made as the depositor shall elect by
written instructions to the custodian. The recalculation of life
expectancy of the depositor and/or the depositor's spouse beneficiary
may be made only at the written election of the depositor. The
recalculation of life expectancy of the spouse beneficiary shall only
be made at the written election of the surviving spouse beneficiary.
14. The custodian is authorized to hire agents (including
any transfer agent for Fund Shares) to perform certain duties
thereunder.
15. This Agreement shall terminate coincident with the
complete distribution of the assets of the depositor's account.
16. All notices to be given by the custodian to the
depositor shall be deemed to have been given when mailed to the
address of the depositor indicated by the custodian's records.
17. The custodian shall not be responsible for any losses,
penalties or other consequences to the depositor or any other person
arising out of the making of, or the failure to make, any contribution
or withdrawal.
18. In addition to the reports required by paragraph (2) of
Article VI, the custodian shall periodically cause to be mailed to the
depositor in respect of each such period an account of all
transactions affecting the custodial account during such period and a
statement showing the custodial account as of the end of such period.
If, within 60 days after such mailing, the depositor has not given the
custodian written notice of any exception or objection thereto, the
periodic accounting shall be deemed to have been approved and, in such
case or upon the written approval of the depositor, the custodian
shall be released, relieved and discharged with respect to all matters
and statements set forth in such accounting as though the account had
been settled by judgment or decree of a court of competent
jurisdiction.
19. In performing the duties conferred upon the custodian
by the depositor hereunder, the custodian shall act as the agent of
the depositor. The parties do not intend to confer any fiduciary
duties on the custodian and none shall be implied. The custodian
shall not be liable (and does not assume any responsibility) for the
collection of contributions, the propriety of any contribution under
this Agreement, the selection of any Fund Shares for this custodial
account, or the purpose or propriety of any distribution made, which
matters are the sole responsibility of the depositor or the
depositor's beneficiary, as the case may be.
20. The custodian shall be responsible solely for the
performance of those duties expressly assigned to it in this Agreement
and by operation of law. In determining the taxable amount of a
distribution, the depositor shall rely only on his or her Federal tax
records, and the custodian shall withhold Federal income tax from any
distribution from the custodial account as if the total amount of the
distribution is includable in the depositor's income.
21. Except to the extent superseded by Federal law, this
Agreement shall be governed by, and construed, administered and
enforced according to, the laws of the Commonwealth of Pennsylvania,
and all contributions shall be deemed made in Pennsylvania.
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise
noted.)
Purpose of Form
Form 5305-RA is a model custodial account agreement that meets the
requirements of section 408A and has been automatically approved by
the IRS. A Roth individual retirement account (Roth IRA) is
established after the form is fully executed by both the individual
(depositor) and the custodian. This account must be created in the
United States for the exclusive benefit of the depositor or his or her
beneficiaries.
Do not file Form 5305-RA with the IRS. Instead, keep it for your
records.
Unlike contributions to traditional individual retirement
arrangements, contributions to a Roth IRA are not deductible from the
grantor's gross income; and distributions after 5 years that are made
when the grantor is 59 1/2 years of age or older or on account of
death, disability, or the purchase of a home by a first-time homebuyer
(limited to $10,000), are not includible in gross income. For more
information on Roth IRAs, including the required disclosure the
depositor can get from the custodian, get Pub. 590, Individual
Retirement Arrangements (IRAs).
This Roth IRA can be used by a depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth
IRA, and annual cash contributions of up to $2,000 from the depositor;
or (2) if designated as a Roth Conversion IRA (by checking the box on
the application), only IRA Conversion Contributions for the same tax
year.
To simplify the identification of funds distributed from Roth IRAs,
depositors are encouraged to maintain IRA Conversion Contributions for
each tax year in a separate Roth IRA.
Definitions
Roth Conversion IRA. A Roth Conversion IRA is a Roth IRA that accepts
only IRA Conversion Contributions made during the same tax year.
IRA Conversion Contributions. IRA Conversion Contributions are
amounts rolled over, transferred, or considered transferred from a
nonRoth IRA to a Roth IRA. A nonRoth IRA is an individual retirement
account or annuity described in section 408(a) or 408(b), other than a
Roth IRA.
Custodian. The custodian must be a bank or savings and loan
association, as defined in section 408(n), or any person who has the
approval of the IRS to act as custodian.
Depositor. The depositor is the person who establishes the custodial
account.
SPECIFIC INSTRUCTIONS
Article I. The depositor may be subject to a 6 percent tax on excess
contributions if (1) contributions to other individual retirement
arrangements of the depositor have been made for the same tax year,
(2) the depositor's adjusted gross income exceeds the applicable
limits in Article II for the tax year, or (3) the depositor's and
spouse's compensation does not exceed the amount contributed for them
for the tax year. The depositor should see the disclosure statement
or Pub. 590 for more information.
Article IX. - Article IX and any that follow it may incorporate
additional provisions that are agreed to by the depositor and
custodian to complete the agreement. They may include, for example,
definitions, investment powers, voting rights, exculpatory provisions,
amendment and termination, removal of the custodian, custodian's fees,
state law requirements, beginning date of distributions, accepting
only cash, treatment of excess contributions, prohibited transactions
with the depositor, etc. Use additional pages if necessary and attach
them to this form.
Note: Form 5305-RA may be reproduced and reduced in size.
THE BERWYN FUNDS Roth IRA APPLICATION
c/o PFPC Inc. PO Box 8987 ADOPTION AGREEMENT &
Wilmington DE 19899-8987 BENEFICIARY DESIGNATION
Page 1 of 2
For assistance in completing this form please
call 1-800-992-6757.
th pages must be completed.
1. Please tell us about yourself: This information is required in
order to establish your account.
-
First Middle Last Name
Social Security Number
______________________________________________________________________
________________/______/______
Street
Date of Birth
______________________________________________________________________
______________(____)__________
City State
Zip Code Telephone
2. Please tell us about your contribution in A. Please indicate the
dollar amount or percentage of your contribution you wish to invest in
each Fund in section B. The initial investment must be at least
$1,000 in each fund.
A. TYPE OF ROTH: (Specify Contributory or Conversion and the type of
contribution)
CONTRIBUTORY ROTH
CONTRIBUTION - CURRENT YEAR $____________. PRIOR
YEAR $__________. (No more than $2,000 per year)
ROLLOVER - This contribution is a ROLLOVER from a Contributory ROTH
IRA which has been completed within 60 days of receipt of the funds.
Tax year original Roth Established: _______________.
TRANSFER OF ASSETS - This contribution is a TRANSFER OF ASSETS from
another Contributory ROTH IRA. I have attached a completed
"Transfer of Assets" form. Tax Year Original Roth Established
________________.
CONVERSION ROTH: My income for the current tax year is under
$100,000 and I am not married filing separately.
ROLLOVER - This contribution is a CONVERSION from a
TRADITIONAL IRA which has been completed within 60 days of receipt of
the funds. I realize I must pay ordinary income taxes on the amount
being converted from the Traditional IRA to the CONVERSION ROTH IRA.
TRANSFER OF ASSETS - This contribution is a Transfer
of Assets from a CONVERSION ROTH IRA. Date of conversion:_________.
B. INVESTMENT: (Contributions will be considered CURRENT year if not
designated above.)
THE BERWYN FUND $ OR
% ________________
BERWYN INCOME FUND $ OR
% ________________
$
OR % ________________
$
OR % ________________
3. BENEFICIARY DESIGNATION
Complete this section to designate Primary and Contingent
Beneficiary(ies) to receive, in the event of your death, any benefits
which may be payable under your Roth IRA. A beneficiary must survive
you to receive anything. If your Primary Beneficiary(ies) do not
survive you, your Contingent Beneficiary(ies) will receive the funds.
If more than one person is named and no percentage is indicated, a
joint tenancy with the right of survivorship will be deemed to have
been created. If the beneficiary is a trust, please indicate the date
of the trust and the trustee(s) name. You may change your
beneficiaries at any time by giving written notice to the custodian.
Participant's Designation: In the event of my death, I hereby
designate the following individuals as the Primary and Contingent
Beneficiary(ies) to receive all benefits that may become due and
payable under my BERWYN FUNDS Roth IRA.
Consent of Participant's Spouse: Spousal consent is required in
community property and marital property states where a Roth IRA
Depositor wishes to name a beneficiary other than, or in addition to,
the spouse. Spouses of Participants who reside in community property
or marital property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI) must
sign the consent below.
I hereby consent to and join in the designation of beneficiary(ies)
below. I give to the Depositor any interest I have in the funds
deposited in this account.
______________________________________________________________________
_____________________
Signature of Participant's Spouse (if applicable)
Date
(over)
THE BERWYN FUNDS Roth IRA APPLICATION
Page 2 of 2 ADOPTION AGREEMENT &
BENEFICIARY DESIGNATION
Primary Beneficiary(ies): Please check here if you have attached a
separate sheet with additional Primary Beneficiaries. Sign and date
the sheet.
____________________________________________________
____________________________________________________
Name % of Distribution
Name % of Distribution
____________________________________________________
____________________________________________________
Street Street
____________________________________________________
____________________________________________________
City State Zip Code
City State Zip Code
____________________________________________________
____________________________________________________
Birth Date Relationship Birth Date
Relationship
___________________________________(______)__________
_________________________________(_______)__________
Social Security Number Telephone
Social Security Number Telephone
Contingent Beneficiary(ies): Please check here if you have attached
a separate sheet with additional Contingent Beneficiaries. Sign and
date the sheet.
____________________________________________________
____________________________________________________
Name % of Distribution
Name % of Distribution
____________________________________________________
____________________________________________________
Street Street
____________________________________________________
____________________________________________________
City State Zip Code
City State Zip Code
____________________________________________________
____________________________________________________
Birth Date Relationship Birth Date
Relationship
___________________________________(______)__________
__________________________________(______)__________
Social Security Number Telephone Social
Security Number Telephone
TERMS AND CONDITIONS OF THE Roth IRA ADOPTION AGREEMENT
Please sign and date this Roth IRA Application Agreement & Beneficiary
Designation form "Application". You, the Depositor, acknowledge that
you have received and read the current Prospectus for each Fund which
you have designated for investment.
All subsequent contributions will be invested as indicated by you in
the "Investment" section of this form. All dividends and
distributions from the Fund shares held in your Account will be
reinvested in shares of the Fund from which received. The custodian,
upon written instructions from you, may exchange any BERWYN FUNDS
shares for any other BERWYN FUNDS shares in accordance with the then
current prospectus.
Custodial Fees: $10.00 annual maintenance fee per account. The annual
maintenance fee may be paid by the Depositor in addition to the
maximum annual contribution to his or her Roth IRA. If the fee is not
included, the custodian will deduct the fee from the Account at year-
end or at the time the Account is closed.
The custodian reserves the right to change the custodian fee, but will
give at least 30 days written notice to the Depositor of any fee
changes. The custodian will keep those records, identify and file
returns and provide other information concerning your Account as
required of custodians by the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department of the
United States.
I (the Depositor) hereby establish a Roth IRA under the terms and
conditions contained in the accompanying Custodial Account Agreement,
which is incorporated herein by reference. The combined instrument is
hereinafter referred to as the "Agreement." This Roth IRA becomes
effective upon written acceptance of this Application by the
custodian, PNC Bank, National Association, which written acceptance
shall consist of a confirmation of transaction statement issued by the
custodian. The Depositor understands and agrees that the custodian is
not responsible for any assets until received. The Depositor
understands the eligibility requirements for contributing to a Roth
IRA and assumes all responsibility for each years' contribution,
ensuring that the contributions are within the limits set forth in
section 408A and any tax consequences of any type of contribution
(rollover, conversion or contributory) or distribution from the Roth
IRA.
I (the Depositor) certify under penalties of perjury that my Social
Security Number is true, correct and complete and that this number is
my Taxpayer Identification Number.
Owner's
Signature_____________________________________________________________
___________ Date________________________
Acceptance by custodian shall consist of a confirmation of transaction
statement issued by the custodian: PNC Bank, National Association, C/O
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
FOR DEALER USE ONLY
_____________________________________________________________________
__________________________________________________________________
Broker/Dealer Number
Representative's Number
THE BERWYN FUNDS Transfer of Assets
Page 1 of 2 Roth IRA
Instructions for
completing this form are provided on page 2
1. Please tell us about yourself:
/ / .
Name (Exactly as it appears on your current retirement account)
Date of Birth
- - - .
Street
Social Security Number
( ) .
City State
Zip Code Daytime Telephone
2. Please tell us where to invest. Complete items A, B and C.
A. I am opening a new account(s) and have attached the C.
These are funds from CONVERSION ROTH IRA.
required application or documents.
Date Converted: ________________
Deposit the proceeds into my existing Roth IRA.
These are Roth Contribution monies.
B. Please purchase into the following funds or account:.
Tax Year of First Contribution: ______________.
THE BERWYN FUND $ OR
% ________________
BERWYN INCOME FUND $ OR
% ________________
$
OR % ________________
$
OR % ________________
3. Please tell us about your current plan and authorize the transfer
from your current custodian.
* Check with your current custodian for the correct address and if
they need a signature guarantee to avoid delays.
* Attach a copy of a current statement if possible.
TRANSFER OF ASSETS CAN ONLY OCCUR BETWEEN ROTH IRAs.
________________________________________________________
Name of current Custodian or Agent
________________________________________________________
Address of current Custodian or Agent
________________________________________________________
City State Zip Code
( ) Telephone
Number of Custodian
I authorize the transfer of assets as noted above to my BERWYN FUNDS
Roth IRA and authorize THE BERWYN FUNDS and PNC Bank, N.A. to process
this request on my behalf. I understand it is my responsibility to
assure the prompt transfer of assets by the current custodian. I have
read and understand all information in the instructions.
________________________________________________________
Signature of Roth IRA Depositor (Required) Date
________________________________________________________
Signature Guarantee Stamp and Signature
(If required by your current custodian or transfer agent)
Please transfer the following investments to PNC Bank, N.A. as
custodian for THE BERWYN FUNDS Roth IRA.
For Certificate of Deposits Immediately At Maturity __________
Date
1._______________________________________________________
Fund Name or Type of Investment to be transferred
_________________________________________________________
Account Number for Investment 1
Entire Account Partial $____________________
2 _______________________________________________________
Fund Name or Type of Investment to be transferred
_________________________________________________________
Account Number for Investment 1
Entire Account Partial $____________________
TO BE COMPLETED BY PNC BANK CUSTODIAN ONLY
ISSUE CHECK PAYABLE TO:
THE BERWYN FUNDS FBO:_________________________________
Account No:_______________________________________________
SSN: ____________________________________________________
(over)
THE BERWYN FUNDS Transfer of Assets
Page 2 of 2 Roth IRA
INSTRUCTIONS TO THE SHAREHOLDER (PLEASE READ CAREFULLY):
This form will be used by BERWYN FUNDS to initiate a transfer of
assets on your behalf from an existing Roth IRA as designated on this
form to your Roth IRA plan at BERWYN FUNDS. Please remember that a
TRANSFER OF ASSETS can only occur between two ROTH IRAs. If you are
requesting a ROLLOVER or a Conversion IRA, please complete the
ROLLOVER CERTIFICATION FORM. For certificate of deposits please
indicate if you wish to have the funds transferred immediately, which
may incur a redemption penalty if they have not matured, or at
maturity. We can not accept requests to transfer assets from
certificates more than 60 days prior to their maturity. When
completed, please return the signed form, a copy of your current
custodian's statement, and the appropriate new account application for
your Roth IRA if required to:
First Class Mail Overnight Mail:
THE BERWYN FUNDS THE BERWYN FUNDS
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8987 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8987 Wilmington DE 19809-3710
Insufficient information or incorrect forms will result in delays in
processing your instructions. If you need assistance in completing
this form please contact our Customer Service Representatives at 1-
800-992-6757. We would be happy to help you. If you need additional
forms please call 1-800-992-6757.
INSTRUCTIONS TO RESIGNING CUSTODIAN/TRANSFER AGENT:
Please liquidate the Depositor's account(s) ONLY IF THEY ARE ROTH
IRAs, as specified in section 3. Issue a check payable as indicated
in section 3 and mail along with any other instructions to:
First Class Mail Overnight Mail:
THE BERWYN FUNDS THE BERWYN FUNDS
C/O PFPC Inc. C/O PFPC Inc.
PO Box 8987 400 Bellevue Pkwy Suite 108
Wilmington DE 19899-8987 Wilmington DE 19809-3710
ACCEPTANCE BY PNC BANK, NATIONAL ASSOCIATION AS CUSTODIAN:
PNC Bank, National Association (PNC Bank, N.A.), accepts its
appointment as custodian of the above referenced Roth IRA account and
has established a Roth IRA as indicated by the shareholder on the
front of this form under the relevant IRS guidelines for Roth IRAs
under the shareholder's name in BERWYN FUNDS. BERWYN FUNDS and PNC
Bank, N.A., as custodian, cannot accept assets other than cash. Upon
receipt of the check, the proceeds will be credited to the named
shareholder's account.
Accepted by PNC Bank, N.A., as custodian for THE BERWYN FUNDS.
__________________________________________________
_________________________
Authorized Representative of PNC Bank, N.A.
Date
THE BERWYN FUNDS ROLLOVER/CONVERSION
CERTIFICATION FORM
Use this form to certify a rollover distribution from your current
Roth IRA or eligible conversion distribution from a Traditional IRA to
your BERWYN FUNDS Roth IRA. You must complete the rollover within 60
calendar days of your receipt of that distribution.
- - - .
First Middle Last Name
Social Security Number
/ .
Street
Date of Birth
( ) .
City State
Zip Code Telephone
TYPE OF ROLLOVER CONTRIBUTION (Please check one)
Roth IRA Rollover - A distribution from another Roth IRA which
is being rolled over into your BERWYN FUNDS Roth IRA within 60 days of
receipt. Note that 365 days must have passed since you last received a
rollover distribution from the distributing Roth IRA.
Traditional IRA Conversion Distribution - A distribution from
a regular (traditional) IRA which is being converted and/or rolled
over into your BERWYN FUNDS Conversion Roth IRA within 60 days of
receipt. Ordinary income taxes must be paid on the distribution in
the year of the distribution, with the exception that income taxes in
respect to distributions taken in 1998 must be paid over four years.
Qualified Domestic Relations Order Distribution.
CERTIFICATION
I certify that the contribution described above is an eligible Roth
IRA rollover/conversion contribution and that I am rolling over this
contribution within 60 calendar days of my receipt of that
distribution. I understand that this rollover is irrevocable and
involves important tax considerations. Other tax considerations may
also apply.
I agree that I am solely responsible for all tax consequences of this
rollover contribution. I also agree that the Roth IRA custodian shall
have no responsibility for any tax consequences.
I have read and understand and agree to be legally bound by the terms
of this form. I also understand that the Roth IRA custodian will rely
on this form when accepting my rollover/conversion contribution. I
understand I am not eligible for a Conversion if my adjusted gross
income exceeds $100,000 or I am married and filing separately. I
understand that this rollover/conversion is irrevocable and may not be
reversed in the future. I also understand that I am responsible for
the movement of the rollover/conversion to my successor Roth IRA, and
that PNC Bank, National Association and PFPC Inc. have no duty to
enforce the collection of any assets to be rolled over to my BERWYN
FUNDS Roth IRA.
______________________________________________________________________
___________________________
Depositor's Signature
Date
THE BERWYN FUNDS Roth IRA
c/o PFPC Retirement Plan Services WITHDRAWAL AUTHORIZATION
PO Box 8987 Wilmington DE 19899-8987 AND INSTRUCTIONS FOR
DISTRIBUTION
Page 1 of 2
For assistance in completing this form please call our customer
service at 1-800-992-6757.
Please tell us about yourself:
NAME:_________________________________________________________________
______________________________________
(PLEASE PRINT FULL NAME)
SOCIAL SECURITY NUMBER:_________-_______-_________
DATE OF BIRTH _________/_________/_________
mm dd yy
ADDRESS:______________________________________________________________
______________________________________
STREET ADDRESS
CITY STATE
ZIP
FUND : ______________________________________________ ACCOUNT
NUMBER: ______________________________________
ACCOUNT TYPE: CONTRIBUTORY 1st Tax Year of Contributions _________
CONVERSION Year of Conversion _________
Reason For Distribution - Check the box that applies in both sections
A and B.
A. Over five year holding period OR Five year
holding period not reached
B. Under age 59 1/2
1st Time Home Purchase
Age 59 1/2 or older Divorce or
Legal Separation
Disability Death
The proper documentation must be received or attached for each
distribution type before the request will be processed. All legal
documents must be a certified copy; and signature guarantees are
required for the Roth IRA owner/beneficiary or spouse.
Payout Method
Partial Withdrawal / Amount:_______________________________________
DOLLARS / SHARES (CIRCLE ONE)
Total Distribution of Account
Mail to my address currently on file.
Mail to the following address:
Purchase funds into my existing non-retirement
mutual fund account:
_______________________________________________________
Account Number _________________________________________
_______________________________________________________
Fund___________________________________________________
Financial Institution Name:_________________________________
NEW ACCOUNT; check here and attach completed application to
Account Number:_________________________________________
purchase funds into a new mutual fund account.
(to be used if check going to another Financial
Institution)
(over)
WITHHOLDING ELECTION (Form W-4P OMB#1545-0415)
THE BERWYN FUNDS ROTH IRA
Page 2 of 2 WITHDRAWAL AUTHORIZATION
AND INSTRUCTIONS FOR DISTRIBUTION
Federal income tax will be withheld from payments from Roth IRAs
unless you elect otherwise. You can use Form W-4P, or a substitute
form such as this one, to instruct the fund to withhold no tax from
your Roth IRA payment or to revoke this election. Generally, non-
periodic payments must have tax withheld at a rate of 10%. You can
elect to have no income tax withheld from a nonperiodic payment by
filing Form W-4P or this substitute with the fund and check the
appropriate box on the form. Your election will remain in effect for
any subsequent distributions unless you change or revoke your election
by completing a new W-4P or substitute form, and submit it to the
fund.
Number of allowances on which withholding is to be
computed ________.
_____ I elect not to have federal income tax withheld from my
distribution.
_____ I elect to have federal income tax withheld from my
distribution. If you want a percentage exceeding the current rate,
please indicate
the percentage _________% (not more than 90%).
_____ I want the following additional amount withheld from each
distribution $__________.
Caution: Remember you are liable for the payment of Federal income tax
on the taxable amount of your distribution(s) and there are penalties
for not paying enough tax during the year, either through withholding
or estimated tax payments.
SIGNATURE
I certify that I am the Depositor authorized to make these elections
and that all information provided is true and accurate. I further
certify that no tax or legal advice has been given to me by the
custodian, THE BERWYN FUNDS, or any agent of either of them, and that
all decisions regarding the elections made on this form are my own.
The custodian is hereby authorized and directed to distribute funds
from my account in the manner requested . The custodian may
conclusively rely on this certification and authorization without
further investigation or inquiry. I expressly assume responsibility
for any adverse consequences which may arise from the Election(s) and
agree that the custodian, THE BERWYN FUNDS, and their agents shall in
no way be responsible, and shall be indemnified and held harmless, for
any tax, legal or other consequences of the Election(s) made on this
form. This form MAY ONLY be used for one account. If you have
another account from which you wish to take distributions, please fill
out a separate form.
X________________________________________________________________
Date______________________
Depositor's Signature (or beneficiary's signature if Depositor
is deceased.)
____________________________________________
Signature Guarantee - Medallion Stamp*
12/97
*(The medallion signature guarantee may be executed by banks, broker
dealers, credit unions, national securities exchanges and savings
associations which participate in STAMP, SEMP or NYSE-MSP. A notary
public is not a substitute for a Signature Guarantee. The medallion
signature guarantee stamp must include the words "SIGNATURE
GUARANTEED, MEDALLION GUARANTEED" and otherwise comply with the
medallion program requirements. Please check your fund prospectus or
with your fund as to whether a signature guarantee is required.)
First Class Mail:
Overnight Express:
THE BERWYN FUNDS
THE BERWYN FUNDS
Attn: THE BERWYN FUNDS IRA
Attn: THE BERWYN FUNDS IRA
PO Box 8987
400 Bellevue Pkwy Suite 108
Wilmington, DE 19899-8987
Wilmington, DE 19809-3710
1-800-992-6757
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