<PAGE> 1
MARKED TO SHOW CHANGES
Securities Act File No. 33-36454
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 7
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
ACT OF 1940
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Amendment No. 7
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ASM FUND, INC.
(Exact Name of Registrant as Specified in Charter)
15438 N. Florida Ave., Ste 107, Tampa, FL 33613
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (813) 963-3150
Commission File No. 33-36454
Commission File No. 811-6187
Steven H. Adler
Vector Index Advisors, Inc.
15438 N. Florida Ave., Ste. 107
Tampa, Fl. 33613
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement
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It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
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On (Date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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X On March 1, 1996 pursuant to paragraph (a) Rule 485
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Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
elected to register an indefinite number of shares of its common stock, $.001
par value. Its Rule 24f-2 notice with respect to the year ended on October 31,
1995 was filed on December 21, 1995.
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<PAGE> 2
CROSS REFERENCE SHEET
(As required by Rule 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
<S> <C>
Part A
Item 1. Cover Page............................................... Cover Page
Item 2. Synopsis................................................. Table of Fees and Expenses
Item 3. Condensed Financial Information.......................... Selected Per Share
Data and Ratios
Item 4. General Description of Registrant........................ Cover Page; The Fund;
Principal Investment Restrictions;
Item 5. Management of the Fund................................... Management of the Fund
Item 6. Purchase of Securities Being Offered..................... How to Purchase Shares;
Net Asset Value
Item 7. Redemption or Repurchase................................. How To Redeem Shares; Exchange
Privilege
Item 8. Capital Stock and Other Securities....................... Dividends, and Tax Status
Item 9. Performance History...................................... Performance Information
Item 10. General Information...................................... General Information
Part B
Item 10. Cover Page................................................ Cover Page
Item 11. Table of Contents......................................... Table of Contents
Item 12. Investment Objectives and Policies........................ Investment Objectives and Policies;
Investment Restrictions;
Repurchase Agreements;
U S. Government Securities;
Portfolio Turnover
Item 13. Management of the Fund.................................... Management
Item 14. Control Persons and Principal Holders
of Securities....................................... Management
Item 15. Investment Advisory and Other Services.................... Management Agreement
Item 16. Brokerage................................................. Portfolio Transactions and
Brokerage
</TABLE>
<PAGE> 3
CROSS REFERENCE SHEET
(As required by Rule 495)
Page 2
<TABLE>
<S> <C>
Item 17. Purchase, Redemption and Pricing of
Securities Being Offered............................ Net Asset Value:
Redemption in kind
Item 18. Tax Status................................................ Taxation
Item 19. Underwriter............................................... N/A
Item 20. Performance............................................... Performance Information
Item 21. Capital Stock and Other Securities........................ General Information
Item 22 General History........................................... General Information
Item 23. Financial Statements...................................... Statement of Assets and
Liabilities
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
[ASM FUND LOGO]
PROSPECTUS FEBRUARY 23, 1996
ASM Fund, Inc. (the "Fund") is a no-load diversified, open-end management
investment company commonly referred to as a mutual fund. The Fund has an
investment objective of providing total return through a combination of capital
appreciation and current income. There can be no assurance that Fund will
achieve its investment objective.
The Fund will pursue its objective by investing primarily in equity securities
of well established companies with large market capitalizations and earnings
and dividend histories.
Shares of the Fund are sold at their net asset value without a sales charge.
There is no distribution or "Rule 12b-1" charge.
This prospectus concisely sets forth the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read this prospectus and retain it for future reference. A Statement of
Additional Information, dated February 23, 1996 has been filed with the
Securities and Exchange Commission and is available without charge by writing
or calling the Fund at the address or phone number listed on back cover. The
Statement of Additional Information is incorporated into this prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY 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>
<CAPTION>
TABLE OF CONTENTS PAGE
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<S> <C> <C> <C>
Table of Fees and Expenses 3 Net Asset Value 9
Financial Highlights 4 How to Redeem Shares 9,10
The Fund 5 Exchange Privilege 11
Principal Investment Restrictions 5 Dividends and Tax Status 12
Management of the Fund 6 Performance Information 13
How to Purchase Shares 7,8 General Information 14
</TABLE>
<PAGE> 5
THE CURRENT PORTFOLIO INSIDE FRONT COVER, PAGE 2
The current portfolio is comprised of an equal number of shares of each of
the following:
AMERICAN TELEPHONE & TELEGRAPH CO. GOODYEAR TIRE & RUBBER CO.
ALLIED SIGNAL, INC. INTERNATIONAL BUSINESS MACHINES, CORP.
ALUMINUM COMPANY OF AMERICA INTERNATIONAL PAPER CO.
AMERICAN EXPRESS CO. McDONALD'S CORP.
BETHLEHEM STEEL CORP. MERCK & CO.
BOEING CO. MINNESOTA MINING & MANUFACTURING CO.
CATERPILLAR J. P. MORGAN
CHEVRON CORP. PHILIP MORRIS COMPANIES, INC.
COCA-COLA CO. PROCTER & GAMBLE CO.
WALT DISNEY SEARS ROEBUCK & CO.
E. I. DUPONT DE NEMOURS & CO. TEXACO, INC.
EASTMAN KODAK CO. UNION CARBIDE CORP.
EXXON CORP. UNITED TECHNOLOGIES CORP.
GENERAL ELECTRIC CO. WESTINGHOUSE ELECTRIC CORP.
GENERAL MOTORS CORP. WOOLWORTH CORP.
TABLE OF FEES AND EXPENSES (BEGINS ON PAGE 3)
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<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases none
Maximum Sales Load Imposed on Reinvested Dividends and Capital Gains none
Deferred Sales Load none
12b-1 Fees none
Short Term Redemption Fees up to 0.75%*
Annual Fund Operating Expenses (as a percentage of average net assets) **
Management Fees 0.60%
Other Expenses after Expense Reimbursement actual but not greater than 1.90%
Total Fund Operating Expenses actual but not greater than 2.50%
</TABLE>
* The Fund will deduct a redemption fee up to 0.75% of the value of shares
redeemed if they are redeemed more than six (6) times per year. However, the
redemption fee will not be applicable to shares held in omnibus accounts. See
page 9. This fee, which is applicable only to such short-term redemptions on
certain accounts, is not reflected in the example below.
** The percentages expressing annual operating expenses reflect the Advisor's
obligation effective November 1, 1995 to reimburse the Fund for expenses in
excess of 2.5% of its net asset value ("NAV"). Prior thereto the Advisor
reimbursed the Fund for expenses in excess of .75% of its NAV and consequently
the expenses for these prior periods would have been less than for those
projected for the current year. Without the Expense reimbursement, the ratio of
expenses to average net assets for the fiscal year ended October 31, 1995 would
have been 5.94%.
The Annual Fund Operating Expenses shown above are based in part on the
agreement of the Fund's advisor, Vector Index Advisors, Inc. (the "Advisor") to
reimburse the Fund for expenses incurred. See also, Management of the Fund.
<PAGE> 6
EXAMPLE:
You would pay the following expenses of a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$26 $79 $135 $286
</TABLE>
The amounts listed in this example should not be considered as representative
of future expenses and actual expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, the Fund's
actual performance will vary and may result in an actual return greater or less
than 5%. The foregoing table is to assist you in understanding the various
direct and indirect costs and expenses that an investor in the Fund would bear.
The example takes into account the fact that the Advisor has agreed to limit
the Fund's annual operating expenses to 2.50% of the Fund's average net assets.
Prior to November 1, 1994, the Advisor reimbursed the Fund for expenses
incurred in excess of 0.75% of the Fund's average net assets and consequently,
the expenses you would have paid for these prior periods would have been less
than those reflected in the above table.
FINANCIAL HIGHLIGHTS (BEGINS ON PAGE 4)
The following financial information for the periods indicated has been examined
by Hacker, Johnson, Cohen & Grieb, independent auditors, whose report thereon
appears in the Statement of Additional Information. This information should be
read in conjunction with the financial statements and related footnotes
included in the Statement of Additional Information .
ASM Fund, Inc.
Selected Per Share Data and Ratios
For a share outstanding throughout the periods:
<TABLE>
<CAPTION>
1995 (2) 1994(2) 1993 (2) 1992 (2) 1991 (2)
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<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.78 $10.07 $9.23 $8.93 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income - $ 0.56 $0.43 $0.26 0.09
Net Gains or (Losses) on Securities
(both realized and unrealized) $1.77 $(0.16) $0.88 $0.20 (1.16)
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Total From Investment Operations $11.55 $10.47 $10.54 $9.39 8.93
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LESS DISTRIBUTIONS
Dividends (from net investment income) (0.5) (0.52) (0.47) (0.16) ---
Distributions (from capital gains) (0.13) --- --- --- ---
Return of Capital (0.17) --- --- ---
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Total Distributions (0.18) (0.69) (0.47) (0.16) ---
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NET ASSET VALUE, END OF PERIOD $11.37 $9.78 $10.07 $9.23 $8.93
TOTAL RETURN 18.10% 3.97% 14.65% 5.10% (17.74%) (3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $9,704 7,277 17,085 6,584 1,326
Ratio of Expenses to
Average Net Assets 3.01%(5) 0.75% (5) 0.75% 0.75% 0.75%
Ratio of Net Income to
Average Net Assets 0..4% 2.17% (4) 3.35% 2.41% 0.97%
Portfolio Turnover Rate 340%(4) 1193% (4) 642%(4) 405% (4) 01% (4)
Average Commission Per Share 0.07 -- -- -- --
</TABLE>
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(1) For the Period ended October 31, 1991.
<PAGE> 7
(2) For fiscal years ending October 31.
(3) This percentage is annualized. The investment period is equal
to 66% of a full year.
(4) The ASM Fund continues to be nearly 100% invested in equities.
Therefore, almost all Fund portfolio turnover is a result of
purchases and sales of securities necessary for settlement of
transactions requested by ASM Fund shareholders.
(5) Includes $50,460 of interest expense not subject to the
voluntary expense reimbursement. For fiscal year beginning on
November 1, 1995, the ratio of Expenses to Average Net Assets
should be actual but not greater than 2.50%. (See Management
of the Fund.) Net of expense reimbursement. If the voluntary
expense reimbursement had not been in effect, the ratio of
expenses to average net assets would have been 5.94%,2.55%,
2.86%, 3.91% and 26.09% for 1995, 1994, 1993, 1992 and 1991,
respectively and the ratio of net investment income to average
net assets would have been 1.11% in 1993 and would have not
been meaningful in 1995,1994, 1992 and 1991 because the fund
would have incurred losses.
THE FUND (BEGINS PAGE 5)
ASM Fund, Inc. (the "Fund") is a no-load, diversified open-end investment
company or "mutual fund." The Fund has an objective of providing total return
through a combination of capital appreciation and current income. The Fund
seeks to achieve its objective by investing in equity securities of large,
well-established companies. The companies in which the Fund will invest have a
large market capitalization (in excess of $1.0 billion), an established history
of earnings and dividend payments, a large number of publicly held shares and
high trading volume and a high degree of liquidity. The Fund's portfolio will
consist substantially of the companies listed in the Dow Jones Industrial
Average ("DJIA")*, but the Fund is not limited in its investments to securities
in the DJIA and will purchase securities of other issuers that meet its
capitalization, earnings and other criteria for investment.
In determining which securities to purchase for the Fund, the Advisor reviews
potential companies that meet its market capitalization, earnings history and
liquidity criteria and then analyzes this grouping from an industry
perspective. It is expected that all of the equity securities held by the Fund
will trade on the New York Stock Exchange and will represent dominant, key
firms in their respective industries. The equity securities in which the Fund
will invest consist of common stocks. It is expected that short-term money
market securities would normally represent less than 5% of the Fund's total
assets. However, in the event future economic or financial conditions
adversely affect equity securities of the type described above, the Fund may
take a temporary, defensive investment position and invest all or part of its
assets in such short-term money market securities. These short-term
instruments include securities issued or guaranteed by the U.S. Government and
agencies thereof, bankers' acceptances and certificates of deposit and
repurchase agreements involving such obligations.
PRINCIPAL INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which are fundamental
policies that cannot be changed without the approval of a majority of the
Fund's outstanding voting securities (as defined in the Investment Company Act
of 1940, referred to as the "1940 Act").
The Fund's investment objective is such a fundamental policy. In addition, as
a matter of fundamental policy, (i) the Fund may not invest 25% or more of its
total assets (calculated at the time of purchase) taken at market value in any
one industry; (ii) purchase more than 10% of the outstanding voting securities
or of any class of securities of any one issuer; or (iii) borrow money except
from banks for temporary or emergency purposes in amounts not exceeding 10% of
the Fund's net assets. Additional information about the Fund's fundamental
policies and other investment restrictions is contained in the Statement of
Additional Information.
* Dow Jones Industrial Average and DJIA are trademarks of Dow Jones &
Company, Inc. ASM Fund is neither sponsored by, nor affiliated with Dow Jones
and Company, Inc.
<PAGE> 8
In addition, the Fund's operating policies preclude it from making certain
investments if thereafter more than 10% of the value of its net assets would be
so invested. The investments included in this 10% are (i) those which are
restricted, i.e., those which cannot freely be sold for legal reasons (which
the Fund does not expect to own); (ii) fixed time deposits subject to
withdrawal penalties (other than overnight deposits); (iii) repurchase
agreements having a maturity of more than seven days; and (iv) investments for
which market quotations are not readily available (which the Fund does not
expect to own). The 10 % limit does not include obligations which are payable
at principal amount plus accrued interest within seven days after purchase.
MANAGEMENT OF THE FUND (BEGINS ON PAGE 6)
The Fund's Board of Directors decides on matters of general policy and reviews
the activities of the Fund's Advisor, and the Fund's officers conduct and
supervise its daily business operations. Vector Index Advisors, Inc. (the
"Advisor"), 15438 N. Florida Ave., Suite 107, Tampa, FL 33613, acts as the
investment advisor to the Fund, subject to the control of the Fund's Board of
Directors. The Advisor is a Florida corporation that was organized to act as
the Fund's investment advisor. The Advisor is controlled by Mr. Steven H.
Adler, who has had over twenty years experience in the investment business
including employment with the management company of a major mutual fund and as
a consultant to eight mutual funds.
The Advisor is responsible for the investment and reinvestment of the Fund's
assets, provides the Fund with executive and other personnel, office space and
other facilities and administrative services, and supervises the Fund's daily
business affairs. It formulates and implements a continuous investment program
for the Fund, consistent with its investment objective, policies and
restrictions.
In placing orders for the Fund's portfolio transactions, the Advisor's policy
is to seek "best execution", i.e. prompt and efficient execution at the most
favorable price. In seeking to achieve this combination, the Advisor evaluates
factors such as the overall quality and reliability of dealers and services
they provide, including general execution capability, reliability, operational
capacity and financial condition. Subject to this policy, the Advisor also is
authorized to consider sales of shares of the Fund as a factor in the selection
of brokers to execute brokerage and principal transactions.
Under the Investment Advisory Agreement applicable to the Fund, the Fund pays
the Advisor a fee, computed daily and payable monthly, at the annual rate of
0.60 of 1% of the Fund's average daily net assets. The management of the Fund
is the only activity of the Advisor. Therefore, the viability of the Advisor
is totally dependent on the ability of the Fund to grow to a size where it is
able to pay its expenses, including fees to the Advisor. In addition to the
fees payable to the Advisor, the Fund is responsible for its operating
expenses, which include such items as interest, taxes, legal and audit
expenses, and custodian and shareholder service agent fees. See the Statement
of Additional Information for more information as to the Fund's Board of
Directors, officers, the Advisor and the Fund's operating expenses.
In order to assist the Fund in meeting its expenses, the Advisor had
voluntarily agreed to reimburse the Fund for the expenses in excess of an
agreed upon percentage of the Fund's average net assets. For 1993 and 1994
this voluntary agreement limited expenses of the Fund to 0.75% of average net
assets until October 31, 1994. At the present time the Advisor has agreed to
limit qualified Fund expenses to a 2.5% limit, and the Advisor will also comply
with any applicable state expense limitations. As a result of this agreement,
the Advisor reimbursed the Fund for $106,778, $85,558, $420,775, $321,043 and
$227,797 of expenses for the fiscal years 1991, 1992, 1993 1994 and 1995
respectively. These expenses included management fees earned by the Advisor
of, $2,492, $29,858, $69,436, $105,908 and $46,858 for these respective fiscal
years, which fees were either set off against the Advisor's reimbursement
obligation for such years or returned to the Fund by the Advisor in accordance
with its reimbursement obligation.
<PAGE> 9
During fiscal years prior to October 31, 1995, certain expense reimbursement
obligations of the Advisor were accrued by the Fund as a receivable from the
Advisor. All such obligations have been paid in full to the Fund and its
shareholders. In the future, any such amount will be applied to reduce
advisory fees payable to the Advisor. The staff of the SEC has advised the
Advisor that accrual procedures used in earlier years were not proper, and the
Advisor is discussing the resolution of the staff's concerns at this time. The
Advisor has informed the Fund that it proposes to settle such concerns with the
SEC shortly. (See note 2 to financial statements.) In connection with
therewith, the Advisor expects to institute additional compliance and audit
procedures for the protection of the Fund during the next several years, and
the Advisor has agreed to bear the cost of such procedures up to $20,000 for
the benefit of the Fund and its shareholders.
PORTFOLIO MANAGER
Steven H. Adler is primarily responsible for the day-to-day management of the
ASM Fund. Mr. Adler, a Director and President of the ASM Fund, has been
associated with the Fund since its inception in 1991. Mr. Adler is a Certified
Investment Management Analyst (CIMA, Investment Consultants Association) and a
Certified Pension Consultant (CPC, American Society of Pension Actuaries).
HOW TO PURCHASE SHARES (BEGINS ON PAGE 7)
Shares of the Fund are offered at their net asset value without a sales charge
as an investment vehicle for individuals, institutions, fiduciaries and
retirement plans. The Advisor may make payments of up to 0.20% of the average
daily net assets attributable to registered representatives, including
retirement plan consultants, that provide assistance to them in their efforts
to distribute shares of the Fund. Such payments will be made by the Advisor
out of its own resources. The Advisor, at its expense and under its objective
criteria, may from time to time provide additional promotional incentives to
such representatives. In some instances these payments or incentives may be
offered only to persons who have initiated the purchase of significant amounts
of Fund shares. The minimum initial investment in the Fund is $1,000. except
for retirement and other employee benefit plans, for which the minimum initial
investment is $500. The minimum subsequent investment is $100. The Fund
reserves the right to reject any order. Investors may be charged a fee if they
effect transactions in Fund shares through a securities dealer, bank or other
financial institution.
PURCHASE BY CHECK
Investors may purchase shares by sending a check payable to ASM Fund, Inc.
together with the application form to:
ASM Fund, Inc.
c/o Mutual Funds Service Co., Inc.
6000 Memorial Drive
Dublin, Ohio 43017
SUBSEQUENT INVESTMENTS in an existing account may be made by mailing a deposit
slip and check made payable to ASM Fund, Inc. to:
ASM Fund, Inc.
P. O. Box 640276
Cincinnati, OH 45264-0276
Shareholders wishing to open an account or send subsequent investment to the
Fund using an OVERNIGHT COURIER service may use the following address:
<PAGE> 10
ASM Fund, Inc. c/o Mutual Funds Service Co., Inc.
6000 Memorial Drive, Dublin, Ohio 43017
Shares of the Fund will be purchased for the account of the investor at the net
asset value next determined after receipt of the investor's check.
PURCHASE BY WIRE
Investors may invest in the Fund by first contacting the Fund's transfer agent
at 800-333-4276 to obtain a shareholder account number and then wire the amount
to be invested to ASM Fund, Inc. care of the Fund's custodian bank, at the
following address:
Star Bank, N. A., Cinti/Trust, ABA # 0420-0001-3
Attn: ASM Fund. Credit Account # 480389436
Account Name (your name)
Personal Account Number (your ASM account number)
Shares of the Fund will be purchased for the account of the Investor at the net
asset value next determined after receipt of the Investor's order. To secure
this price, the Transfer Agent must be notified no later than 30 minutes prior
to the close of trading on the New York Stock Exchange.
At the same time the Investor should mail an application form to the Transfer
Agent at the following address:
ASM Fund, Inc. c/o Mutual Funds Service Co., Inc.
P O. Box 7177, 6000 Memorial Drive Dublin, OH 43017
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan whereby an Investor may
automatically make purchases of shares of the Fund on a regular, convenient
basis ($100 minimum per transaction). Under the Automatic Investment Plan, an
Investor's designated bank or other financial institution debits a pre
authorized amount on the Investor's account each month and applies the amount
to the purchase of Fund shares. The Automatic Investment Plan must be
implemented with a financial institution that is a member of the Automated
Clearing House ("ACH"). In addition, the Fund must have a currently effective
registration in those states in which it is required. No service fee is
currently charge by the Fund for participating in the Automatic Investment
Plan. A fee will be imposed by the Transfer Agent if sufficient funds are not
available in the Investor's account at the time of the automatic transaction.
Applications to establish the Automatic Investment Plan are available from the
Fund. The $1,000 minimum initial investment must be met before the Automatic
Investment Plan may be established.
NET ASSET VALUE (BEGINS ON PAGE 9)
The Fund's net asset value per share is determined on each day that the New
York Stock Exchange is open for trading, as of the close of the Exchange
(currently 4:00 p.m. Eastern time). Purchase orders received or shares
tendered for redemption on a day the Exchange is open for trading prior to the
close of trading on that day will be valued at the close of trading on that
day. Application for purchase of shares and requests for redemption of shares
received during the half hour preceding the close of trading on the Exchange
will be based on the net asset value as determined as of the close of trading
on the next day that the Exchange is open.
<PAGE> 11
The net asset value per share is the value of the Fund's assets, less its
liabilities, divided by the number of shares of the Fund outstanding. The
value of the Fund's portfolio securities is determined on the basis of the
market value of such securities. Short-term investments maturing in less than
60 days are valued at amortized cost unless the Board of Directors determines
that it does not represent a fair value. See the Statement of Additional
Information for further details.
HOW TO REDEEM SHARES
A shareholder wishing to redeem shares by telephone may do so if appropriate
information is supplied on the Account Registration Form. You can redeem
shares by calling the Fund's Transfer Agent at 1-800 333-4276 no later than 30
minutes prior to the close of trading on the New York Stock Exchange to receive
that day's price. The proceeds may be sent by check to your address of record
only or by wire transfer to your bank account on the next business day
following your telephone request. Wire transfers will be restricted to amounts
of $1,000 or more.
A shareholder wishing to redeem shares may do so at any time by writing or
delivering instructions to:
ASM Fund, Inc. c/o Mutual Funds Service Co., Inc.
P. O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
Shareholders desiring to use overnight courier services should address
correspondence to:
ASM Fund, Inc. c/o Mutual Funds Service Co., Inc.
6000 Memorial Drive, Dublin, Ohio 43017
The redemption request should specify the number of shares to be redeemed and
be signed by all registered owners exactly as the account is registered, and it
will not be accepted unless it contains all required documents in proper form,
as described below. If the request is in proper form, the shares specified
will be redeemed at the net asset value next determined after receipt of the
request.
CHARGE APPLICABLE FOR SHORT-TERM REDEMPTIONS
If you redeem shares more than six (6) times per year, the Fund will deduct a
redemption fee. The fee will be retained by the Fund and used to offset the
transaction costs that short-term trading imposes on the Fund and its
shareholders. The fee does not apply to tax qualified pension or retirement
plan accounts. In addition, the redemption fee will not be charged upon
redemption of shares purchased through omnibus accounts. Also, shares acquired
through reinvestment of dividends and capital gain distributions are exempt from
the redemption fee. The fee is based on the following amounts of assets
redeemed:
<TABLE>
<S> <C> <C> <C>
over $10 million 0.06% over $100,000 to $1.5 million 0.20%
over $1.5 million to $10 million 0.10% 0 to $100,000 0.75%
</TABLE>
PROPER FORM
In addition to written instructions, if any shares being redeemed or
repurchased by stock certificates, the certificates must be surrendered. The
certificates must either be endorsed or accompanied by a stock power signed by
the registered owners, exactly as the certificates are registered. Additional
documents may be required from corporations or other organizations, fiduciaries
or anyone other than the shareholder of record. Any questions concerning
documents needed should be directed to 1-800-333-4276.
PAYMENTS
Payment for shares tendered normally will be made within seven days after
receipt by the Fund of instructions, certificates, if any, and other documents,
all in proper form. However, payment may be delayed under unusual
circumstances, as specified in the 1940 Act or as determined by the Securities
and
<PAGE> 12
Exchange Commission. Payment may also be delayed for any shares purchased by
check for a reasonable time (not to exceed 15 days from the purchase date)
necessary to determine that the purchase check will be honored. Payment will
be sent only to shareholders at the address of record.
REDEMPTION OF SMALL ACCOUNTS
In order to reduce the Fund's expenses, the Board of Directors is authorized to
cause the redemption of all of the shares of any shareholder whose account has
declined to a net asset value of less than $500, as a result of a transfer or
redemption, at the net asset value determined as of the close of business on
the business day preceding the sending of proceeds of such redemption. The
Fund would give shareholders whose shares were being redeemed 60 days prior
written notice in which to purchase sufficient shares to avoid such redemption.
EXCHANGE PRIVILEGE (BEGINS ON PAGE 11)
A shareholder may redeem all or any portion of his Fund shares and use the
proceeds to purchase shares of The Flex-Funds Money Market Fund, a money market
mutual fund not affiliated with the Fund or the Advisor, if shares are offered
in his/her state of residence. The redemption of shares of the Fund and the
purchase of shares of The Flex-Funds Money Market Fund will be effected at the
respective net asset values of such Funds. An exchange transaction is a sale
and purchase of shares for federal income tax purposes and may result in a
capital gain or loss. Also, if such exchange transaction is made more than six
times per year, the "Charge Applicable for Short-term Redemptions" as described
on page 10 will be imposed. Prior to exercising the exchange privilege, a
shareholder should obtain and carefully read the prospectus for The Money
Market Fund, which is available from the Fund and may be obtained by telephone
at 1-800 445-2763, or by writing to the Fund, ASM Fund, Inc., 15438 North
Florida Avenue, Suite 107, Tampa Florida 33613. The exchange privilege does not
in any way constitute an offering or recommendation on the part of the Fund or
the Advisor of an investment in Flex Funds, Money Market Fund. The
registration of both the account from which the exchange is being made and the
account to which the exchange is made must be identical.
In order to elect this exchange option, you must complete both the Exchange
Authorization Form and New Account Application for The Money Market Fund and
mail it to Mutual Funds Service Co., Box 7177, 6000 Memorial Drive, Dublin, OH
43017. Once you have elected the exchange option you may initiate an exchange
by calling stating your name, account numbers for both the ASM Fund and The
Money Market Fund, and the number of shares or dollar value of shares to be
exchanged or by sending a letter stating the same information to the Fund c/o
Mutual Funds Service Co., Inc. An exchange must meet the applicable minimum
investment of the Money Market Fund (currently $2500 for an initial investment
and $100 for a subsequent investment).
The Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify or terminate the exchange privilege or its use in any manner by
any person or class. In particular, since an excessive number of exchanges may
be disadvantageous to the Fund, the Fund reserves the right to terminate the
exchange privilege of any shareholder who makes more than six exchanges of
shares in a year or three in a calendar quarter.
<PAGE> 13
DIVIDENDS AND TAX STATUS (BEGINS ON PAGE 12)
The Fund expects to pay annual capital gain distributions and to pay income
dividends quarterly. For the convenience of investors, all dividends and
distributions are paid in full and fractional shares of the Fund based on the
net asset value per share at the close of business on the record date, unless
the shareholder has previously notified the transfer agent that dividends are
to be paid in cash by so electing on the application form or by subsequent
written notice to Mutual Fund Service Co., Inc. the Fund's transfer agent and
the dividend paying agent.
The Fund expects to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies for the current and all subsequent
fiscal years, under which all taxable income is expected to be distributed to
shareholders. If so qualified, the Fund will not be subject to federal income
taxes on its net investment income and capital gains, if any, realized during
any fiscal year in which it is distributed. All dividends from net investment
income together with distributions of net short-term capital gains
(collectively "income dividends") will be taxable as ordinary income to
shareholders even though paid in additional shares. Capital gains dividends
will be taxable to shareholders as net long-term capital gains, regardless of
the length of time a shareholder has owned his shares. Dividends and
distributions are generally taxable to shareholders in the year in which
received. However, dividends and distributions received in January of any
calendar year will be treated for tax purposes as if received in the prior
calendar year on the recorded date for the dividend or distribution, if the
record date was in October, November or December. The Fund will notify each
shareholder after the close of its fiscal year both of the dollar amount and
the tax status of that year's dividends and distributions.
Gains realized from the sale of securities will be long or short term,
depending on the length of time owned by the Fund.
The Fund may be required to impose backup withholding at a rate of 31% from
income dividends and capital gain distributions and upon payment of redemption
proceeds if a shareholder does not comply with federal requirements relating
to the furnishing and certification of taxpayer identification numbers and
reporting of dividends.
PERFORMANCE INFORMATION (BEGINS ON PAGE 13)
From time to time the Fund may quote its average annual total return
("standardized return") in advertisements or promotional materials.
Advertisements and promotional materials reflecting standardized return
("performance advertisements") will show percentage rates reflecting the
average annual change in the value of an assumed initial investment in the Fund
of $1,000 at the end of one, five and ten year periods. If such periods have
not yet elapsed, data will be given as of the end of a shorter period
corresponding to the duration of the Fund. Standardized return assumes the
reinvestment of all dividends and capital gain distributions.
The Fund also may refer in advertising and promotional materials to its yield.
The Fund's yield shows the rate of income that it earns on its investments,
expressed as a percentage of the net asset value of Fund shares. The Fund
calculates yield by determining the interest income it earned from its
portfolio investments for a specified thirty day period (net of expenses),
dividing such income by the average number of Fund shares outstanding, and
expressing the result as an annualized percentage based on the net assets value
at the end of that thirty day period. Yield accounting methods differ from the
methods used for other accounting purposes; accordingly, the Fund's yield may
not equal the dividend income actually paid to investors or the income reported
in the Fund's financial statements.
In addition to standardized return, performance advertisements may also include
other total return performance data ("non-standardized return").
Non-standardized return may be quoted for the same or different periods as
those for which standardized return is quoted and may consist of aggregate or
average annual percentage rate of return, actual year by year rates or any
combination thereof.
<PAGE> 14
All data included in performance advertisements will reflect past performance
and will not necessarily be indicative of future results. The investment
return and principal value of an investment in the Fund will fluctuate, and an
investor's proceeds upon redeeming Fund shares may be more or less than the
original cost of the shares.
(BEGINS ON PAGE 14)
ASM FUND VS. S&P 500 INDEX AND LIPPER GENERAL EQUITY MUTUAL FUND AVERAGE
<TABLE>
<CAPTION>
LIPPER
GENERAL
EQUITY
MUTUAL
ASM FUND $1,000.00 S&P 500 $1,000.00 FUND $1,000.00
INDEX AVERAGE
<S> <C> <C> <C> <C> <C> <C>
3/31/91-
10/31/91 -1.12% $ 988.75 6.26% $1,062.63 6.50% $1,065.00
10/31/92 7.47% $1,062.61 6.68% $1,133.62 8.19% $1,152.22
10/31/93 14.14% $1,212.86 11.74% $1,266.70 18.87% $1,369.65
10/31/94 3.21% $1,251.80 0.97% $1,278.94 0.72% $1,379.51
10/31/95 19.10% $1,490.89 23.11% $1,574.47 21.85% $1,680.93
- ---------------------------------------------------------------------------------------------------
Since 9.10% 10.41% 12.00%
Inception
Three Year 14.67% 14.00% 13.40%
One Year 19.09% 20.04% 21.80%
</TABLE>
The above information outlines the growth of $1,000 and the average annual
total returns for the ASM fund vs The S&P 500 Index and Lipper General Equity
Mutual Fund Average. This is representative of past performance and is not
intended to indicate future performance. The returns of the various indexes
are from the end of the month nearest the Fund's inception to the end of the
calendar year.
1995 IN REVIEW
The ASM Fund mirrored the Dow Jones Industrial Average, plus dividends, less
expenses.
GENERAL INFORMATION
The Fund was incorporated in Maryland on April 25, 1990. Star Bank, NA. acts
as custodian of the Fund's assets, Mutual Funds Service Co. acts as accounting
and shareholder servicing agent and Hacker, Johnson, Cohen and Grieb serve as
the independent auditors for the Fund. It is not contemplated that regular
annual meetings of shareholders will be held. No amendment may be made to the
Articles of Incorporation without the affirmative vote of the holders of more
than 50% of the Fund's outstanding shares. The holders of shares have no
pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable.
Shareholder inquiries should be directed to the Fund at the address and
telephone number indicated on the cover of the Fund application.
ACCOUNT APPLICATION INCLUDED
FOR ADDITIONAL INFORMATION:
813 963-3150
800 445-2763
FAX (813) 968-4074
<PAGE> 15
ASM FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 23,1996
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the prospectus of ASM Fund, Inc. (the "Fund"),
February 23, 1996. A copy of the prospectus may be obtained from the Fund's
Advisor, Vector Index Advisors, Inc. at 15438 No. Florida Ave., Suite. 107,
Tampa, FL 33613, Tel: (813) 963-3150 or (800) 445-2763.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in the
Page Prospectus
---- ----------
<S> <C> <C>
Investment Objective and Policies 2 4
Investment Restrictions 2,3 4
Repurchase Agreements 3 -
U.S. Government Securities 3 -
Portfolio Turnover 3 4
Management 4 5
Portfolio Transactions and Brokerage 5,6 6
Net Asset Value 6 8
Redemption in Kind 6 8
Taxation 6 11
Performance Information 7,8 12
General Information 8 13
Financial Statements -
</TABLE>
1
<PAGE> 16
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide total return through a
combination of capital appreciation and current income. The Fund's investment
policies are described in the Fund's prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions (in addition to those
indicated in its prospectus) as fundamental policies, which may not be changed
without the favorable vote of the holders of a "majority," as defined in the
Investment Company Act of 1940 (the "1940 Act"), of the Fund's outstanding
voting securities. Under the 1940 Act, the vote of the holders of a majority
of a Fund's outstanding voting securities means the vote of the holders of the
lesser of (i) 67% of the shares of the Fund represented at a meeting at which
the holders of more than 50% of its outstanding shares are represented or (ii)
more than 50% of the outstanding shares.
The Fund may not:
1. Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of transactions.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow on an unsecured basis from banks for
temporary or emergency purposes or for the clearance of
transactions in amounts not exceeding 10% of its total assets
(not including the amount borrowed) and will not make
investments while borrowings in excess of 5% of the value of
the Fund's total assets are outstanding.
4. Buy or sell commodities or commodity futures contracts, or buy or
sell real estate, real estate limited partnership interests or
other interests in real estate (although it may purchase and
sell securities which are secured by real estate and
securities of companies which invest or deal in real estate).
5. Make loans (except for purchases of publicly-traded debt
securities consistent with the Fund's investment Policies).
6. Make Investments for the purpose of exercising control or
management.
7. Act as underwriter (except to the extent the Fund may be deemed to
be an underwriter in connection with the sale of securities in
the Fund's investment portfolio).
8. Invest 25% or more of its total assets (calculated at the time of
purchase and taken at market value) in any one industry.
9. As to 75% of the value of its total assets, invest more than 5% of
the value of its total assets in the securities of any one
issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities), or
purchase more than 10% of all outstanding voting securities of
any one issuer.
The Fund observes the following restrictions as a matter of operating but not
fundamental policy, pursuant to positions taken by federal and state regulatory
authorities:
The Fund may not:
10. Purchase any security if as a result the Fund would then hold
more than 10% of any class of securities of an issuer (taking
all common stock issues as a single class, all preferred stock
issues as a single class, and all debt issues a single class).
2
<PAGE> 17
11. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or of the Advisor
owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such directors who own more than 1/2 of 1% own in
the aggregate more than 5% of the outstanding securities of
such issuer.
12. Invest more than 5% of the value of its net assets in warrants
(included in that amount, but not to exceed 2% of the value of
the Fund's net assets, may be warrants which are not listed on
the New York or American Stock Exchange).
13. Invest in any security if as a result the Fund would have more
than 5% of its total assets invested in securities of
companies which together with any predecessor have been in
continuous operation for fewer than three years.
14. Invest in oil, gas or mineral related programs, partnerships or
leases.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to
resell that security to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity
of the purchased security. The Fund maintains custody of the underlying
securities prior to their repurchase; thus the obligation of the bank or dealer
to pay the repurchase price on the date agreed to is, in effect, secured by
such underlying securities. If the value of such securities is less than the
repurchase price, the other party to the agreement will provide additional
collateral so that at all times the collateral is at least equal to the
repurchase price.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, the Fund intends to enter into repurchase agreements
only with banks and dealers believed by the Advisor to present minimum credit
risks in accordance with guidelines established by the Board of Directors.
The Advisor will review and monitor the creditworthiness of such institutions
under the Board's general supervision. To the extent that the proceeds from
any sale of collateral upon a default in the obligation to repurchase were less
than the repurchase price, the Fund would suffer a loss. If the other party to
the repurchase agreement petitions for bankruptcy or otherwise becomes subject
to bankruptcy or other liquidation proceedings, there might be restrictions on
the Fund's ability to sell the collateral and the Fund could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Fund intends to comply
with provisions under such Code that would allow it immediately to resell the
collateral.
U.S. GOVERNMENT SECURITIES
The U.S. Government securities in which the Fund may invest include direct
obligations of the U.S. Treasury such as Treasury bills, notes and bonds, and
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith
and credit of the United States, such as Government National Mortgage
Association ("GNMA") certificates, securities that are supported by the right
of the issuer to borrow from the U.S. Treasury, such as securities of the
Federal Home Loan Banks, and securities supported solely by the
creditworthiness of the issuer, such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") securities.
PORTFOLIO TURNOVER
The ASM Fund continues to be 100% invested in equities. Therefore, almost all
Fund portfolio turnover is a result of purchases and sale of securities
necessary for settlement of transactions requested by ASM Fund shareholders.
MANAGEMENT
The overall management of the business and affairs of the Fund is vested with
its Board of Directors. The Board approves all significant agreements between
the Fund and persons or companies furnishing services to it, including the
Fund's agreement with its Advisor, Custodian and Transfer Agent. The day to
day operations of the
3
<PAGE> 18
Fund are delegated to its officers, subject to the investment objectives and
policies of the Fund and to general supervision by the Board of Directors.
The directors and officers of the Fund and of the Advisor, their business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Directors and Position with
Officers Fund Principal Occupation
- -------- ---- --------------------
<S> <C> <C>
Steven H. Adler* President, President, Secretary
15438 N. Florida Ave. Secretary and Director of the Advisor,
Tampa, FL 33613 Director formerly Vice President,
George K. Baum & Co.
Jerome P. Feltenstein Director President
61 Mimosa Drive American Business
Cos Cob, CT 06807 Associates, Inc.
W. Keith Schilit Director Faculty member University
Catalyst Ventures of South Florida, President,
4928 Bay Way Drive Catalyst Ventures
</TABLE>
- --------------------------------------------------------------------------------
*denotes directors or officers who are "interested persons" of the Fund under
the 1940 Act.
The Fund pays fees of $1,500 per meeting to directors who are not "interested
persons" of the Fund. Such directors are reimbursed for any expenses incurred
in attending meetings. During the fiscal period ended October 31, 1995,
directors fees and expenses totaled $30,000 ($0 in 1994).
THE MANAGEMENT AGREEMENT
Subject to the supervision of the Board of Directors, investment advisory,
management and administration services are provided to the Fund by Vector Index
Advisors, Inc., (the "Advisor") pursuant to an Investment Management Agreement
dated April 15, 1992 (the "Agreement"). The Advisor is a Florida corporation
organized in 1990 to act as Advisor to the Fund and is controlled by Mr. Steven
H. Adler.
Under the Agreement, the Advisor will provide a continuous investment program
for the Fund and make decisions and place orders to buy, sell or hold
particular securities. The Advisor also will supervise all matters relating to
the operation of the Fund and will obtain for it corporate officers, clerical
staff, office space, equipment and services. As compensation for its services,
the Advisor will receive a monthly fee at an annual rate of 0.60 of 1% of the
Fund's average daily net assets. In addition to the fee payable to the
Advisor, the Fund is responsible for its operating expenses, including: (i)
interest and taxes; (ii) brokerage and futures commissions; (iii) insurance
premiums; (iv) compensation and expenses of Directors other than those
affiliated with the Advisor; (v) legal and audit expenses; (vi) fees and
expenses of the custodian, shareholder, service or transfer agent; (vii) fees
and expenses for registration or qualification of the Fund and its shares under
federal or state securities laws; (viii) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders; (ix) other
expenses incidental to holding any shareholder meetings; (x) dues or
assessments of or contributions to the Investment Company Institute or any
successor; and (xi) such non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligations with respect to which
the Fund may have to indemnify its officers and Directors.
The Advisor voluntarily agreed to limit expenses of the Fund. During fiscal
years 1993 and 1994 to 0.75% of average net assets and in 1995 to 2.5% of
average net assets. As a result of this Agreement, the Advisor reimbursed the
Fund for $420,775 and $321,043 and $227,797 of expenses for the fiscal years
1993 and 1994 and 1995 respectively. These expenses included management fees
earned by the Advisor of, $69,436 and $105,908 and $46,858 for these
respective fiscal years,
4
<PAGE> 19
which fees were either set off against the Advisor's reimbursement obligation
for such years or returned to the Fund by the Advisor in accordance with its
reimbursement obligation.
Under the Agreement, the Advisor will not be liable to the Fund for any error
of judgment by the Advisor or any loss sustained by the Fund except in the
case of a breach of fiduciary duty with respect to the receipt of compensation
for services (in which case any award of damages will be limited as provided in
the 1940 Act) or of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
The cost of distributing shares of the Fund is borne by the Advisor.
Unaffiliated registered broker-dealers act as, or will act as, distributor of
Fund shares at no cost to the Fund.
The Agreement was approved by the Board of Directors and by a majority of the
directors who neither are interested persons of the Fund nor have any direct or
indirect financial interest in the Agreement or any other agreement related
thereto ("Independent Directors") and by the Fund's public shareholders at a
meeting held on April 15, 1993. If not terminated, the Agreement will continue
after its initial two-year term for successive annual periods, provided that
such continuance is specifically approved at least annually (i) by a majority
vote of the Independent Directors cast in person at a meeting called for the
purpose of voting on such approval, or (ii) by the vote of a majority of the
outstanding voting securities of the Fund.
The Agreement is terminable by vote of the Board of Directors or by the holders
of a majority of the outstanding voting securities of the Fund at any time
without penalty, on 60 days' written notice to the Advisors. The Agreement
also may be terminated by the Advisor on 60 days written notice to the Fund.
The Agreement terminates automatically upon its assignment (as defined in the
1940 Act).
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Agreement states that in connection with its duties to arrange for the
purchase and the sale of securities held in the portfolio of the Fund by
placing purchase and sale orders for the Fund, the Advisor shall select such
broker-dealers ("brokers") as shall, in its judgment, achieve the policy of
"best execution," i,e., prompt and efficient execution at the most favorable
securities price. In making such selection, the Advisor is authorized in the
Agreement to consider the reliability, integrity and financial condition of the
broker. The Advisor also is authorized by Agreement to consider whether the
broker provides research or statistical information to the Fund and/or other
accounts of the Advisor.
The Agreement states that the commissions paid to brokers may be higher than
another broker would have charged if a good faith determination is made by the
Advisor that the commission is reasonable in relation to the services provided,
viewed in terms of either that particular transaction or the Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion and that the Advisor shall use its judgment in determining that the
amount of commissions paid are reasonable in relation to the value of brokerage
and research services provided and need not place or attempt to place a
specific dollar value on such services or on the portion of commission rates
reflecting such services. The Agreement provides that to demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor shall be prepared to show that commissions paid
(i) were for purposes contemplated by the Agreement; (ii) were for products or
services which provide lawful and appropriate assistance to its decision-making
process; and (iii) were within a reasonable range as compared to the rates
charged by brokers to other institutional investors as such rates may become
known from available information.
The research services discussed above may be in written form or through direct
contact with individuals and may include information as to particular companies
and securities as well as market, economic or institutional areas and
information assisting the Fund in the valuation of its investments. The
research which the Advisor receives for the Fund's brokerage commissions,
whether or not useful to the Fund, may be useful to it in managing the accounts
of its other advisory clients, if any. Similarly, the research received for
the commissions of such accounts may be useful to the Fund.
During the fiscal period ended October 31, 1995, the Fund paid a total of
$73,668 ($306,184 in 1994) in brokerage commissions.
5
<PAGE> 20
NET ASSET VALUE
The net asset value of the Fund's shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (currently 4:00 p.m.
Eastern time) each business day. The Exchange annually announces the days on
which it will not be open for trading. The most recent announcement indicates
that it will not be open on the following days: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. However, the Exchange may close on days not included in
that announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding at such time.
Portfolio securities that are principally traded on a national securities
exchange are valued at their last sale on the exchange on which they are
principally traded prior to the close of the New York Stock Exchange or, in the
absence of recorded sales, at their current bid price on such exchanges.
Securities listed on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") are valued at the last available sale price on
NASDAQ prior to the time of valuation. Securities that are principally traded
in securities markets, but not principally traded on securities exchanges or
NASDAQ, are valued at the current bid price prior to the close of the New York
Stock Exchange. Other securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith
using methods approved by the Board of Directors.
REDEMPTION IN KIND
If the Board of Directors determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly in
cash, the Fund may pay the redemption price in part by a distribution in kind
of securities from the portfolio of the Fund, in lieu of cash. The Fund has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem shares solely in cash up to the lesser of $250,000
or one percent of the net asset value of the Fund during any 90 day period for
any one shareholder. Should redemption's by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess in cash or in
kind. If shares are redeemed in kind, the redeeming shareholder would incur
brokerage costs in converting the assets into cash.
TAXATION
For the period ended October 31, 1994, the Fund qualified to be taxed as a
regulated investment company ("RIC") under the Internal Revenue Code (the
"Code") and therefore was not subject to federal and state income tax at
October 31, 1994 on net investment income and realized and unrealized gains and
losses.
For the current and all subsequent fiscal years, the Fund intends to elect to
be and to qualify for treatment as a regulated investment company ("RIC") under
Subchapter M of the Code. In each taxable year that the Fund qualifies, the
Fund (but not its shareholders) will be relieved of federal income tax on that
part of its investment company taxable income (consisting generally of
interest and dividend income and net short term capital gain) and net capital
gain that is distributed to shareholders.
In order to qualify for treatment as a RIC, the Fund must distribute annually
to its shareholders as least 98% of its investment company taxable income and
must meet several additional requirements. Among these requirements are the
following: (1) at least 90% of the Fund's gross income each taxable year must
be derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing
in securities or currencies; (2) less than 30% of the Fund's gross income each
taxable year may be derived from the sale or other disposition of securities
held for less than three months; (3) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs
and other securities, with such other securities, limited in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund and that
does not represent more than 10% of the outstanding voting securities of such
issuer; and (4) at the close of each quarter of the Fund's taxable year, not
more than 25%
6
<PAGE> 21
of the value of its assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and Distributions. Dividends from the Fund's investment company
taxable income (whether paid in cash or invested in additional shares) will be
taxable to shareholders as ordinary income to the extent of the Fund's earnings
and profits. Distributions of the Fund's net capital gain (whether paid in
cash or invested in additional shares) will be taxable to shareholders as
long-term capital gain, regardless of how long they have held their Fund
shares.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of such months will be
deemed to have been paid by the Fund and received by the shareholders on the
record date if the dividends are paid by the Fund during the following January.
Accordingly, such dividends will be taxed to shareholders for the year in which
the record date falls.
Withholding. The Fund is required to withhold 31% of all dividends, capital
gain distributions and repurchase proceeds payable to any individuals and
certain other non corporate shareholders who do not provide the Fund with a
correct taxpayer identification number. The Fund also is required to withhold
20% of all dividends and capital gain distributions paid to such shareholders
who otherwise are subject to backup withholding.
PERFORMANCE INFORMATION
Total return. Average annual total return quotations used in the Fund's
advertising and promotional materials are calculated according to the following
formula:
n
P (1 + T) = ERV
Where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending
redeemable value at the end of the period of a hypothetical $1000 payment made
at the beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. Average annual
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the
initial amount invested to the ending redeemable value. Average annual total
return assumes the reinvestment of all dividends and distributions.
Yield. Annualized yield quotations used in the Fund's advertising and
promotional materials are calculated by dividing the Fund's interest income for
a specified thirty-day period, net of expenses, by the average number of
shares outstanding during the period, and expressing the result as an
annualized percentage (assuming semi-annual compounding) of the net asset value
per share at the end of the period. Yield quotations are calculated according
to the following formula:
6
YIELD = 2 [ ( a -b + 1) - 1 ]
----
cd
Where "a" equals dividends and interest earned during the period; "b" equals
expenses accrued for the period, net of reimbursements; "c" equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends and "d " equals the maximum offering price per share on the
last day of the period.
Except as noted below, in determining net investment income earned during the
period ("a" in the above formula), the Fund calculates interest earned on each
debt obligation held by it during the period by (1) computing the obligation's
yield to maturity, based on the market value of the obligation (including
actual accrued interest) on the
7
<PAGE> 22
last business day of the period or, if the obligation was purchased during the
period, the maturity by 360 and multiplying the resulting quotient by the
market value of the obligation (including actual accrued interest). Once
interest earned is calculated in this fashion for each debt obligation held by
the Fund, net investment income is then determined by totaling all such
interest earned.
For purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.
Other information. The Fund's performance data quoted in advertising and other
promotional materials represents past performance and is not intended to
predict or indicate future results. The return and principal value of an
investment in the Fund will fluctuate, and an investor's redemption proceeds
may be more or less than the original investment amount. In advertising and
promotional materials the Fund may compare its performance with data published
by Lipper Analytical Services, Inc. ("Lipper") or CDA Investment Technologies,
Inc. ("CDA"). The Fund also may refer in such materials to mutual fund
performance rankings and other data, such as comparative asset, expense and fee
levels, published by Lipper or CDA. Advertising and promotional materials also
may refer to comparisons of the Fund and comparative mutual fund data and
ratings reported in independent periodicals including, but not limited to, The
Wall Street Journal, Money Magazine, Forbes, Business Week, Financial World,
and Barron's.
GENERAL INFORMATION
The Fund, incorporated in the State of Maryland on April 25, 1990 is authorized
to issue 1,000,000,000 shares of common stock, $.001 per value (the "Common
Stock"). Shares of the Fund, when issued, are fully transferable and
redeemable at the option of the holder. Shares are also redeemable at the
option of the Fund in certain circumstances as described in the Fund's
Prospectus under "How to Redeem Shares". All Fund shares are equal as to
earnings assets and voting privileges. There are no conversion, preemption or
other subscription rights. Under the Fund's Articles of Incorporation, the
Board of Directors may authorize the creation of additional series of common
stock, with such preferences, privileges, limitations and voting and dividend
rights as the Board may determine. Each share of the Fund outstanding is
entitled to share equally in dividends and other distributions and in the net
assets of the Fund on liquidation. Accordingly, in the event of liquidation,
each share of the Fund's common stock is entitled to its portion of all the
Fund's assets after all debts and expenses have been paid. The shares of the
Fund do not have cumulative voting rights for the election of Directors.
It is not contemplated that regular annual meetings of shareholders will be
held. There normally will be no meetings of shareholders for the purpose of
electing directors unless and until such time as less than a majority of the
directors holding office have been elected by shareholders, at which time the
directors then in office will call a shareholders' meeting for the election of
directors. The Fund has undertaken to afford shareholders certain rights,
including the right to call a meeting of shareholders for the purpose of voting
on the removal of one or more directors. Such removal can be effected upon the
action of two-thirds of the outstanding shares of the Fund. The directors are
required to call a meeting of shareholders for the purpose of voting on the
question of removal of any director when requested in writing to do so by
shareholders of record of not less than 10% of the Fund's outstanding shares.
In addition, ten of the Fund's shareholders holding the lesser of $25,000 worth
or one percent of the Fund's shares may advise the directors in writing that
they wish to communicate with other shareholders for the purpose of requesting
a meeting to remove a director. The directors will then, if requested by the
Applicants, mail at the applicants' expense the applicants' communication to
all other shareholders.
Hacker, Johnson, Cohen & Grieb, 500 North Westshore Boulevard, P.O. Box 20368,
Tampa, Florida 33622 have been chosen to be Independent Auditors for the Fund.
The Fund employs Mutual Funds Service Co., P.O. Box 7177, Memorial Drive,
Dublin, OH 43017 as Transfer Agent, Shareholder Service and Fund Accounting
Service, Transfer Agent, and Fund Accounting Service. The Fund also employs
Star Bank, N.A. as it's Custodian.
8
<PAGE> 23
ASM FUND, INC.
Tampa, Florida
Audited Financial Statements
October 31, 1995 and for the
Years Ended October 31, 1995 and 1994
(Together with Independent Auditor's Report)
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report ........................................... 1
Schedule of Investments in Securities .................................. 2,3
Statement of Assets and Liabilities .................................... 4
Statement of Operations ................................................ 5
Statements of Changes in Net Assets .................................... 6
Selected Per Share Data and Ratios ..................................... 7
Notes to Financial Statements .......................................... 8-10
</TABLE>
<PAGE> 24
page 1
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
ASM Fund, Inc.
Tampa, Florida
We have audited the accompanying statement of assets and liabilities of ASM
Fund, Inc. (the "Fund"), including the schedule of investments in securities, as
of October 31, 1995, and the related statement of operations for the year then
ended and the statements of changes in net assets for each of the years in the
two-year period then ended and the selected per share data and ratios for each
of the years in the four-year period then ended. These financial statements and
per share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and per
share data and ratios based on our audits. The selected per share data and
ratios of the Fund for the period from February 13, 1991 (inception) through
October 31, 1991 were audited by other auditors whose report dated December 2,
1991 expressed an unqualified opinion on these items.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates, made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the Fund as of October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended and the selected per share data and ratios for each
of the years in the four-year period then ended, in conformity with generally
accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
December 27, 1995 page 1
<PAGE> 25
page 2
ASM FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Net Assets Shares Value
---------- ------ -------
<S> <C> <C> <C>
COMMON STOCKS--(UNITED STATES) 96.4%
Aerospace 9.04%
Boeing Company 5,685 373,078
United Technologies Corp. 5,685 504,544
-------
877,622
Autos and trucks 2.56%
General Motors Corporation 5,685 248,719
-------
Banks 4.52%
J. P. Morgan & Co., Inc. 5,685 438,456
-------
Beverages 4.21%
Coco-Cola Company 5,685 408,609
-------
Chemicals 5.87%
E. I. DuPont de Nemours & Co. 5,685 354,602
Union Carbide Corporation 5,685 215,319
-------
569,921
Consumer Products 4.75%
Proctor & Gamble Company 5,685 460,485
-------
Drugs and Hospital Supplies 3.37%
Merck & Co., Inc. 5,685 326,887
-------
Electrical Equipment 4.53%
General Electric Corp. 5,685 359,576
Westinghouse Electric Corp. 5,685 80,301
------
439,877
Entertainment and Leisure 3.38%
Walt Disney Company 5,685 327,598
-------
Financial 2.38%
American Express Company 5,685 230,953
-------
Machinery 3.29%
Caterpillar, Inc. 5,685 319,071
-------
Metals and Mining 2.99%
Aluminum Company of America 5,685 289,935
=======
</TABLE>
<PAGE> 26
page 3
- --------------------------------------------------------------------------------
ASM FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES, (CONTINUED)
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Net Assets Shares Value
---------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
Office Equipment 5.70% 5,685 $ 552,866
----------
International Business Machines
Oil-International 11.20%
Chevron Corporation 5,685 265,774
Exxon Corporation 5,685 434,192
Texaco, Inc. 5,685 387,291
----------
1,087,257
Paper 2.17%
International Paper Company 5,685 210,345
----------
Photography 3.67%
Eastman Kodak Co. 5,685 356,023
----------
Restaurants 2.40%
McDonald's Corp. 5,685 233,085
----------
Retail 2.85%
Sears, Roebuck & Company 5,685 193,290
Woolworth Corp. 5,685 83,143
----------
276,433
Steel 0.77%
Bethlehem Steel Corp. 5,685 74,616
----------
Telecommunications 3.75%
American Telephone & Telegraph Co. 5,685 363,840
----------
Tires 2.23%
Goodyear Tire & Rubber 5,685 216,030
----------
Tobacco 4.95%
Philip Morris Companies, Inc. 5,685 480,383
----------
Diversified 5.82%
Allied-Signal, Inc. 5,685 241,612
Minnesota Mining & Manufacturing Co. 5,685 323,334
----------
564,946
Total common stocks (cost - $8,899,437) 9,353,957
OTHER ASSETS LESS LIABILITIES 3.60% 350,069
------ ----------
TOTAL NET ASSETS 100.00% $9,704,026
==========
</TABLE>
See accompanying Notes to Financial Statements. page 3
<PAGE> 27
page 4
- --------------------------------------------------------------------------------
ASM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market
value (cost of $8,899,437) $ 9,353,957
Cash and cash equivalents 500,468
Dividends and interest receivable 7,309
Deferred organizational expenses, less
accumulated amortization of $163,713 11,607
Receivable from Advisor 180,939
Other assets 23,500
-----------
Total Assets 10,077,780
-----------
LIABILITIES:
Investment securities purchased 330,350
Accrued expenses 23,393
Payable for capital stock reacquired 20,011
-----------
Total Liabilities 373,754
-----------
Contingencies (Note 2)
NET ASSETS AT OCTOBER 31, 1995 -
Equivalent to $11.37 per share based on 853,716
shares of $.001 par value capital stock
outstanding (authorized capital stock -
1,000,000,000 shares) $ 9,704,026
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 28
page 5
- --------------------------------------------------------------------------------
ASM FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income
Dividends $ 203,097
Interest 33,811
----------
Total income 236,908
----------
EXPENSES:
Legal and auditing fees 141,692
Amortization of deferredorganization expenses 35,022
Custody and fund accounting fees 24,606
Transfer agent fees 35,571
Registration fees 27,154
Other expenses 17,014
Investment advisory fee 46,858
Printing and mailing 53,460
Interest expense 50,460
Directors fees 30,000
----------
Total expenses 461,837
Less:
Reimbursement and forgiveness of expenses by Advisor 227,797
234,040
----------
Investment income,net 2,868
----------
Realized and unrealized gains on investments:
Net realized gain from investment transactions 753,136
Increase in unrealized appreciation of investments 424,306
----------
Net realized gain and increase in unrealized
appreciation on investments 1,177,442
----------
Net increase in net assets resulting from operations $1,180,310
==========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 29
page 6
- --------------------------------------------------------------------------------
ASM FUND, INC.
STATEMENT OF CHANGE IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR YEAR ENDED OCTOBER 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 2,868 $ 388,215
Net realized gain (loss) from investments
transactions 753,136 (2,031,558)
Net change in unrealized appreciation
(depreciation) of investments 424,306 (1,631,412)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 1,180,310 (3,274,755)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (23,980) (519,905)
Net realizes gain capital (66,021) --
Return of capital (Note 5) -- (420,775)
------------ ------------
Net decrease in net assets resulting from
dividends and distributions (90,001) (940,680)
------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold 29,998,335 274,212,818
Shares issued in connection with
payment of dividends 81,452 432,251
Cost of shares redeemed (28,742,989) (280,738,148)
------------ -------------
Net increase (decrease) in net assets
from fund transactions 1,336,798 (5,593,079)
------------ ------------
Total increase (decrease) in net assets 2,427,107 (9,808,514)
NET ASSETS:
Beginning of year 7,276,919 17,085,433
------------ ------------
End of year (including undistributed net investment
income of $21,112 in 1994 and none in 1995) $ 9,704,026 $ 7,276,919
============ ============
CHANGES IN NUMBER OF SHARES OUTSTANDING:
Shares sold 2,975,479 27,520,255
Shares issued in connection with
payment of dividends 7,929 44,136
Shares redeemed (2,873,468) (28,516,659)
------------ ------------
Net increase (decrease) 109,940 (952,268)
Shares outstanding at beginning of year 743,776 1,696,044
------------ ------------
Shares outstanding at end of year 853,716 743,776
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 30
page 7
- --------------------------------------------------------------------------------
ASM FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2/13/91
(INCEPTION)
THROUGH
10/31, (A)
For a share outstanding YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
throughout the periods: 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.78 $ 10.07 9.23 8.93 10.00
Income from Investment Operations
Net investment income -- 0.56 0.43 0.26 0.09
Net gains or (losses) on securities
(both realized and unrealized) 1.77 (0.16) 0.88 0.20 (1.16)
------------------------------------------------------------------------------
Total 11.55 10.47 10.54 9.39 8.93
------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.05) (0.52) (0.47) (0.16) --
Net realized capital gains (0.13) -- -- -- --
------------------------------------------------------------------------------
Distributions (return of
capital) (Note 5) -- (0.17) -- -- --
------------------------------------------------------------------------------
Total distributions (0.18) (0.69) (0.47) (0.16) --
Net asset value, end of $ 11.37 9.78 10.07 9.23 8.93
Total return 18.10% 3.97% 14.65% 5.10% (17.74%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) 9,704 7,277 17,085 6,583 1,325
Ratio of expenses to average
net assets* 3.01%** 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets 0.04% 2.17% 3.35% 2.41% 0.97%
Portfolio turnover rate*** 340% 1193% 642% 405% 1%
Number of shares outstanding
at the end of period 853,716 743,776 1,696,044 713,816 148,399
</TABLE>
* Net of expense reimbursement. If the voluntary expense reimbursement had
not been in effect, the ratio of expenses to average net assets would have been
5.94%, 2.55%, 2.86%, 3.91% and 26.09% for 1995, 1994, 1993, 1992 and 1991
respectively and the ratio of net investment income to average net assets would
have been 1.11% in 1993 and would not have been meaningful in 1995, 1994, 1992
and 1991 because the fund would have incurred losses.
** Includes $50,460 of interest expense not subject to the voluntary expense
reimbursement agreement.
*** The ASM Fund continues to be nearly 100% invested in equities. Therefore,
almost all Fund portfolio turnover is a result of purchases and sales of
securities necessary for settlement of transactions requested by ASM Fund
shareholders.
(A) Ratios are annualized.
See accompanying Notes to Financial Statements. page 7
<PAGE> 31
page 8
ASM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
ASM Fund, Inc. (the "Fund") was incorporated in Maryland on April 25, 1990 and
is registered under the Investment Company Act of 1940, as amended, as an
open-end diversified management investment company.
SECURITY VALUATION.
Portfolio securities are listed on a national securities exchange and are stated
at the last reported sales price on the day of valuation.
SECURITY TRANSACTIONS.
The Fund records investment transactions on the trade date. Realized gains and
losses on sales of investments are calculated on the first-in-first-out basis.
Interest income is recognized on the accrual basis.
DISTRIBUTING TO SHAREHOLDERS.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
CASH AND CASH EQUIVALENTS.
Cash and cash equivalents consists of cash on deposit with the custodian and
investments in repurchase agreements.
INCOME TAXES.
The Fund's policy is to comply with the requirements of the Internal Revenue
code that are applicable to Regulated Investment Companies and to distribute all
of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
<PAGE> 32
page 9
ASM FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
OCTOBER 31, 1995
2. INVESTMENT ADVISORY FEES
The Fund has an investment and management agreement (the "Agreement") with
Vector Index Advisors, Inc. (the "Advisor"). The Advisor receives a fee, accrued
daily and payable monthly at an annual rate of .60 of 1% of the Fund's average
daily net assets.
The Advisor provides continuous supervision of the investment portfolio and
pays the cost of compensation of the officers of the Fund, occupancy and certain
clerical and administrative costs involved in portfolio management. The Fund
bears all other costs and expenses. The Advisor waived all $46,858 for these
services in 1995.
Certain officers and directors of the Fund are also officers and directors of
the Advisor. The Agreement provides for an expense reimbursement from the
Advisor if the Fund's total expenses, exclusive of taxes, interest on
borrowings, dividends on securities sold short, brokerage commissions, and
extraordinary expenses, exceed a certain percentage of the Fund's average daily
net assets for any full fiscal year under state expense limitations applicable
to the Fund, the Advisor is required to limit expenses of Fund to 2.5% of
average net assets for the first $30,000,000 and 2.0% of average net assets for
the next $70,000,000. Such state law provisions exclude items such as taxes,
interest, brokerage commissions, and extraordinary expenses from such expense
limitation. As a result of this obligation, the Advisor assumed $227,797 of
other operating expenses. The balance due from the Advisor relating to the
assumption of these expenses ($180,939 at October 31, 1995) was paid to the
Fund in full on December 27, 1995. In November 1995 regional office of the
Securities and Exchange Commission advised the Advisor that it intended to
recommend administrative proceedings against the Advisor on the ground that
the carrying by the Fund of a large receivable owed from the Advisor,
constituted an improper loan to the Advisor. Without admitting to the
allegation, the Advisor and it's president have offered to settle the matter by
paying a fine of $10,000 and agreeing to a cease and desist order intended to
prevent a repetition of the challenged activities. There can be no assurance
that the Securities and Exchange Commission will accept the proposed
settlement. Management does not expect the ultimate disposition of this matter
to have a material adverse impact on the Advisor or the Fund.
3. INVESTMENT TRANSACTIONS
For the year ended October 31, 1995, purchases and sales of investments
securities, (excluding short-term securities) were $27,856,282 and $26,191,804,
respectively. Net realized and unrealized gains on investments for the year
ended October 31, 1995 were $1,177,442. All security transactions were long
transactions, there were no short sale transactions or covered call options
written.
At October 31, 1995, the unrealized appreciation of securities was
$454,520. There were no accumulated undistributed net realized gains or
investment transactions at October 31, 1995.
page 9
<PAGE> 33
page 10
ASM FUND, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
OCTOBER 31, 1995
4. DEFERRED ORGANIZATION EXPENSES
Organization expenses in the amount of $175,320 were initially paid by the
Advisor and will be reimbursed by the Fund. These costs have been deferred and
are being amortized over a sixty-month period. During the amortization period,
the proceeds of any redemption of the original shares will be reduced by a pro
rata portion of the then unamortized organizational expenses based on the ratio
of the shares redeemed to the total initial shares outstanding immediately prior
to the redemption.
5. RECEIVABLE FROM ADVISOR WRITE-DOWN
On October 31, 1993, the assets of the Fund included a receivable from the
Advisor of $611,275. This amount included expense reimbursements payable to the
Fund by the Advisor. Subsequently, the Fund determined that it had, in fact,
qualified in 1993 as a regulated investment company and subsequently deleted
both the income tax liabilities and the corresponding receivable from the
Fund's books. This action reduced the receivable to $420,775. On May 9, 1994
the Fund's Board of Directors elected to write-off the remaining receivable
from the Advisor, thereby reducing the Net Asset Value "NAV" of the Fund by
$0.17 per share on May 6, 1994 in consideration for the Advisor's undertaking
to pay such amounts to affected shareholders of record on May 5, 1994. This
amount included expense reimbursements payable to the Fund by the Advisor
pursuant to its agreement to reimburse the Fund for expenses in excess of .75%
of the Fund's average net assets and for losses from the failure to transact
timely orders for the purchase of securities and certain potential tax
liabilities which might affect the Fund for which the Advisor would reimburse
the Fund. On October 26, 1994 all affected shareholders were paid in full all
amounts due under this provision.
page 10
<PAGE> 34
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
The following are included in the Statement of Additional Information
filed as Part B of this Post-Effective Amendment:
(1) Audited financial statements for the period ended October 31, 1995
Report of Independent Certified Public Accountants
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Selected Per Share Data and Ratios
Notes to Financial Statements
(b) EXHIBITS:
(1) Articles of Amendment*
(2) By-Laws*
(3) Not Applicable
(4) Specimen Stock Certificate*
(5) Management Agreement*
(6) (a) Distribution Agreement*
(b) Dealer Agreement*
(7) Not Applicable
(8) Custodian Agreement*
(9) (a) Transfer Agent Agreement*
(b) Fund Accounting Servicing Agreement*
(10) Opinion and Consent of Council*
(11) Consent of Accountants (per Item 24(a))
(12) Not Applicable
(13) Subscription Agreement*
(14) Not Applicable
(15) Not Applicable
(16) Computation of Performance Quotation (per Item 24(b)(16)
<PAGE> 35
* Previously filed and incorporated by reference from registration statement
on Form N - 1A, File No. 33-36454, and amendments No. 1, 2, 3, and 4.
Item 25. Persons Controlled by or under Common Control with Registrant.
See "Management" in Part A of this Registration Statement.
Item 26. Number of Holders of Securities.
As of December 1, 1995, the Registrant has Three Hundred seventy
five (375) shareholders.
Item 27. Indemnification
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940 (the
"1940 Act") and pursuant to Article Tenth of the Fund Articles of Incorporation
(Exhibit i to the Registration Statement) and section 2-418 of the Maryland
General Corporation Law, officers and directors of the Registrant may be
indemnified against liabilities in connection with the Registration, unless it
is proved that (i) the act or omission of the director or officer was material
to the cause of action adjudicated in the proceeding and was committed in bad
faith or with active and deliberate dishonesty, (ii) the director actually
received an improper personal benefit in money, property or services, or (iii)
in the case of a criminal proceedings, the director had reasonable cause to
believe that the act of omission was unlawful. As permitted by Section 17(i) of
the 1940 Ace, pursuant to the Distribution Agreement (Exhibit 6 to the
Registration Statement), the Distributor of the Registration may be indemnified
against liabilities which it may incur except liabilities arising from bad
faith, gross negligence, willful misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 ("Securities Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that the public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of the
Registrant in connection with the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
C-2
<PAGE> 36
Section 2(d) of the Management Agreement (Exhibit 5 to the Registration
Statement) limits the liability of Vector Index Advisors, Inc. (the "Manager")
to losses resulting from a breach of fiduciary duty with respect to their
receipt of compensation for services (in which case any award of damages shall
be limited to the period and amount set forth in section 36(b) of the 1940 Act)
or losses resulting from willful misfeasance, bad faith or gross negligence in
performance of its duties and obligation under the Management Agreement.
The Registrant undertakes to apply the indemnification provisions of its
Articles of Incorporation and the Management Contract in a manner consistent
with the provisions of Investment interpretations of Section 17(h) and (i) of
the Investment Company Act remain in effect.
Item 28. Business and other Connections of Investment Advisor
Reference is made to Part A of this registration Statement and to Form ADV filed
under the Investment Advisers Act of 1940 by the Manager (File No. 801-36873).
Item 29. Principal Underwriter
a. Vector Index Advisors, Inc.
ASM Fund, Inc.
Steven H. Adler President
Robert Kramer Executive Vice President
David Disick Vice President
Gene Mag Secretary
Joel Jacobs Treasurer
b. Not applicable
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of Registrant and Registrant's
custodian and shareholder service agent, as follows: the documents required to
be maintained by paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b)
will be maintained by the Registrant, and all other records will be maintained
by the Custodian and Shareholder service Agent.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant hereby undertakes to conduct its operations in accord with the
director removal and shareholder assistance provisions of Section 16(C) of the
Investment Company Act of 1940.
C-3
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 9,353,957
<RECEIVABLES> 188,248
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</TABLE>
