ASM FUND INC, 497, 1997-03-12

ASM FUND INC
497, 1997-03-12

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[ASM FUND LOGO]
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PROSPECTUS MARCH 4, 1997
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ASM Fund, Inc. (the "Fund") is a pure 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 the Fund will
achieve its investment objective.

Shares of the Fund are sold at their net asset value without a sales charge.

There is no distribution or "Rule 12b-1" charge.

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. The Fund has adopted a non-fundamental policy that its
investment advisor shall limit investments to the equity securities of the
thirty (30) companies that comprise the Dow Jones Industrial Average. The Dow
Jones Industrial Average is a trademark of Dow Jones & Company, Inc. The Fund is
neither sponsored by, nor affiliated with, Dow Jones & Company, Inc.

This prospectus concisely sets forth the information about the Fund that a
prospective investor should know before investing. Investors are advised to read
this prospectus and retain it for future reference. A Statement of Additional
Information, dated March 4, 1997 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.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURTIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>
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AS OF THE DATE OF THIS PROSPECTUS, THE FUND'S
PORTFOLIO IS COMPRISED OF THE FOLLOWING:
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AMERICAN TELEPHONE & TELEGRAPH CO.
ALLIED SIGNAL, INC.
ALUMINUM COMPANY OF AMERICA
AMERICAN EXPRESS CO.
BETHLEHEM STEEL CORP.
BOEING CO.
CATERPILLAR
CHEVRON CORP.
COCA-COLA CO.
WALT DISNEY
E. I. DUPONT DE NEMOURS & CO.
EASTMAN KODAK CO.
EXXON CORP.
GENERAL ELECTRIC CO.
GENERAL MOTORS CORP.
GOODYEAR TIRE & RUBBER CO.
INTERNATIONAL BUSINESS MACHINES, CORP.
INTERNATIONAL PAPER CO.
McDONALD'S CORP.
MERCK & CO.
MINNESOTA MINING & MANUFACTURING CO.
J. P. MORGAN
PHILIP MORRIS COMPANIES, INC.
PROCTER & GAMBLE CO.
SEARS ROEBUCK & CO.
TEXACO, INC.
UNION CARBIDE CORP.
UNITED TECHNOLOGIES CORP.
WESTINGHOUSE ELECTRIC CORP.
WOOLWORTH CORP.

Page 2

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Table of Contents
Page Page
Table of Fees and Expenses . . . . . . 3-4 Net Asset Value . . . . . 11
Financial Highlights . . . . . . . . . 5-6 How to Redeem Shares. . .11-12
The Fund . . . . . . . . . . . . . . . 6 Exchange Privilege. . . . 13
Principal Investment Restrictions. . . 6-7 Dividends and Tax Status.13-14
Management of the Fund . . . . . . . . 7-9 Performance Information .14-15
How to Purchase Shares . . . . . . . . 9-10 General Information . . . 16
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TABLE OF FEES AND EXPENSES
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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

Redemption Fees....................................... up to 0.75% (a)

Annual Fund Operating Expenses
(as a percentage of average net assets) (b)

Management Fees after
Expense Reimbursement (c)............................. 0.00%

12b-1 Fees............................................ None

Other Expenses........................................ 0.18%

Total Fund Operating Expenses (d)................. 0.18%

(a) The Fund will deduct a redemption fee of up to 0.75% of the value of shares
redeemed only 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.

(b) The percentages expressing annual operating expenses reflect the Advisor's
obligation effective January 15, 1997 to reimburse the Fund for expenses in
excess of 0.18% of its net asset value ("NAV") for the current fiscal year.
Prior thereto the Advisor reimbursed the Fund for expenses in excess of
1.86% from November 1, 1995 until October 31, 1996. For the period from
November 1, 1996 until January 14, 1997, the Advisor reimbursed the Fund
for expenses in excess of 2.19%. Without the reimbursement of $89,199, the
ratio of expenses to average net assets for the fiscal year ended October
31, 1996 would have been 2.59%.

(c) It is anticipated that the Fund's Board of Directors will recommend for
shareholder approval at the 1997 meeting of the Fund an investment
management agreement with the Advisor. The Fund expects that such
management agreement would authorize the payment of a management fee of
0.08% of the Fund's average net assets, subject to a waiver of the fee to
the extent necessary to comply with the expense limitation commitment set
forth above to limit the Total Fund Operating Expenses to 0.18%.

(d) In addition to these costs, the Fund assesses at the beginning of each

Page 3

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calendar quarter an account maintenance fee of $2.50. This fee will be
waived for shareholders with an account balance of $10,000 or more.

The table above sets forth the various costs and expenses that a
shareholder in the Fund will bear directly or indirectly. The Annual Fund
Operation 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."

Example:
You would pay the following expenses of a $1,000 investment assuming (1) a 5%
annual return; and (2) a redemption at the end of each time period:

1 Year 3 Years 5 Years 10 Years
$2 $6 $10 $23

The amounts listed in this example should not be considered as representative of
past or 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 example takes into account the fact that the Advisor has agreed to
limit the Fund's annual operating expenses to 0.18%% of the Fund's average net
assets. Prior to January 15, 1997, the Advisor was obligated to reimburse the
Fund for expenses incurred in excess of 2.5% of the Fund's average net assets.
Consequently, the expenses reflected in this table are less than you would have
paid during the prior period.

The following table represents debt amounts related to interest charged to the
Fund by the Fund's custodian bank as a result of early settlement of Fund
redemptions. The amounts shown were not subject to any voluntary expense
reimbursement by the Advisor, and are treated as bank loans to the Fund.

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Fiscal Year Amount of Average Average Number Average
(11/1- 10/31) Debt Amount of of Registrant's Amount of
Outstanding Debt Shares Debt Per
at End Outstanding Outstanding Share
of Period During the During the During the
Period Period Period
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<S> <C> <C> <C> <C>
1991 (a) $0.00 $113 23,700 $0.004768

1992 $0.00 $222,943 461,227 $0.483369

1993 $0.00 $474,902 901,865 $0.526577

1994 $0.00 $385,752 693,241 $0.556447

1995 $0.00 $93 747,877 $0.000124
<FN>

(a) Inception 3/4/91
(b) Sum of debt outstanding each day divided by 365 (366 in fiscal year 1992)
</FN>
</TABLE>

Page 4

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Financial Highlights
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The following financial information for the periods indicated, before
restatement of expense ratios as indicated below, has been audited by Hacker,
Johnson, Cohen & Grieb, independent auditors for the years ended 1992, 1993,
1994 and 1995 and Coopers & Lybrand LLP for the year ended 1996, whose
unqualified reports thereon appear 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.
Financial Highlights

<TABLE>
<CAPTION>
Years Ended October 31, February 13, 1991+
Selected Per Share Data 1996 1995(b) 1994(b) 1993(b) 1992(b) To October 31,
1991 (b)(c)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.37 $9.78 $10.07 $9.23 $8.93 $10.00
----------- ----------- ----------- ------------- ----------- -----------

Income (loss) from investment operations

Net investment income 0.08 -- 0.56 0.43 0.26 0.09

Net gains or (losses) on securities
(both realized and unrealized) 2.76 1.77 (0.16) 0.88 0.20 (1.16)
----------- ----------- ----------- ------------- ----------- -----------

Total from investment operations 2.84 1.77 0.40 1.31 0.46 (1.07)
----------- ----------- ----------- ------------- ----------- -----------

Less distributions from
Net investment income (0.07) (0.05) (0.52) (0.47) (0.16) --
In excess of net investment income (0.01) (0.13) -- -- -- --
Return of capital -- -- (0.17) -- -- --
----------- ----------- ----------- ------------- ----------- -----------
Total distributions (0.08) (0.18) (0.69) (0.47) (0.16) --
----------- ----------- ----------- ------------- ----------- -----------
Net asset value, end of period $14.13 $11.37 $9.78 $10.07 $9.23 $8.93
=========== =========== =========== ============= =========== ===========
Total Return 25.01% 18.10% 3.97% 14.65% 5.10% (17.74%)
=========== =========== =========== ============= =========== ===========

Ratios/Supplemental Data
Net assets, end of period (000) 9,315 9,704 7,277 17,085 6,583 1,325
Ratio of expenses to average
net assets* 1.86% 3.01%** 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets* 0.53% 0.04% 2.17% 3.35% 2.41% 0.97%
Portfolio turnover rate*** 391% 340% 1193% 642% 405% 1%

Number of shares outstanding
at the end of period 659,472 853,716 743,776 1,696,044 713,816 148,399

Average commission rate(a) $0.08 -- -- -- -- --
<FN>
+ Commencement of operations.
* Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratio of expenses to average net assets would have been 2.59%,
5.77%, 2.94%, 3.38%, 3.91% and 26.09% for the years ended October 31, 1996,
1995, 1994, 1993, 1992 and 1991, respectively. As a result of certain tax
adjustments necessitated by the Fund's failure to qualify as a regulated
investment company for the years ended October 31, 1995, 1994 and 1993, as
well as other adjustments, the gross expense ratios previously reported for
these periods have been restated. The expense ratios before reimbursement
were 5.94%

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<PAGE>

2.55% and 2.86% for the years ended October 31, 1995, 1994 and 1993,
respectively.
** Includes $50,460 of interest expense not subject to the expense
reimbursement agreement.
*** The ASM Fund continues to be as fully invested in equities as possible.
Therefore, almost all Fund portfolio turnover is a result of purchases and
sales of securities necessary for settlement of transactions requested by
Fund shareholders.
(a) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
(b) Audited by predecessor auditor.
(c) Ratios are annualized.
</FN>
</TABLE>

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THE FUND
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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.

On September 12, 1996, the Fund's Board of Directors approved the adoption by
the Fund of a non-fundamental investment policy which authorizes the Fund's
advisor to limit the Fund's investments to the equity securities of the 30
companies that comprise the Dow Jones Industrial Average ("DJIA"). Although this
investment policy is not fundamental, the Fund intends to follow the policy, and
will notify shareholders before making any change to the policy.

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.

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PRINCIPAL INVESTMENT RESTRICTIONS
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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").

Page 6

<PAGE>

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.

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.

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MANAGEMENT OF THE FUND
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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.

Page 7

<PAGE>

The Investment Advisory Agreement between the Fund and the Advisor terminated on
April 15, 1995. The Advisor continues to provide its services to the Fund, and
will continue to do so until other arrangements, such as approval by the Fund of
a new agreement between the Fund and the Advisor, can be completed. The Advisor
has not retained any management fee from the Fund during the period from April
15, 1995 to the present, and will not collect any advisory fee from the Fund
until a new advisory agreement is approved. The Advisor has agreed in writing to
continue to fulfill its commitment to limit the Fund expenses until that time.

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.
The Fund's Board of Directors monitors on a continuing basis the ability of the
Advisor to perform its obligations under its agreement with the Fund. 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 it's expenses, the Advisor has agreed to
reimburse the Fund for the expenses in excess of an agreed upon percentage of
its average NAV. Initially, this amount was 2.5% of average net assets. On
October 31, 1991 the Advisor revised this agreement retroactively to limit
expenses of the Fund to 0.75% of average net assets and continued this
limitation until October 31, 1994. On November 1, 1994 the Advisor reinstated
the initial expense limitation of 2.5% of average net assets. This expense
limitation of 2.5% of average net assets continued until January 14, 1997. On
January 15, 1997 the Advisor revised the expense limitation of the Fund to the
current limitation of 0.18% of average net assets.

As a result of these expense limitations, the Advisor reimbursed the Fund
$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.

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 advised the Advisor that
accrual procedures used in earlier years and the Advisor's failure to pay its
expense reimbursement obligations to the Fund in a timely manner, were not
proper, The Advisor has informed the Fund that it has settled such concerns with
the SEC. In connection therewith, the

Page 8

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Advisor will institute additional compliance and audit procedures for the
protection of the Fund, and the Advisor retained an independent consultant to
conduct a comprehensive compliance audit of the Advisor and its procedures for
the ultimate benefit of the Fund and its shareholders. This audit was conducted
by counsel selected by the Advisor and approved by the Fund's Board of
Directors, and by the SEC.

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).

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HOW TO PURCHASE SHARES
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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

Page 9

<PAGE>

Shareholders wishing to open an account or send subsequent investment to the
Fund using an OVERNIGHT COURIER service may use the following address:

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 60 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.

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NET ASSET VALUE
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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). Shares tendered for redemption on a day the Exchange is
open for unrestricted trading prior to the close of trading will be valued at
the close of trading on that day. The fund accepts order to purchase shares on
days the Exchange is open for unrestricted trading. The Fund reserves the right
to reject any purchase order which is contrary to the interests of the Fund. The
Fund may reject any larger order to purchase shares received after 3:00 p.m.
Therefore, any order received after that time will not be accepted by the Fund
or priced at the net asset value next computed on the following business day.

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.

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HOW TO REDEEM SHARES
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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 60 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
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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:

Over $10 million . . . . . . . . . . . . 0.06%

Over $1.5 million to $10 million . . . . 0.10%

Over $100,000 to $1.5 million. . . . . . 0.20%

0 to $100,000. . . . . . . . . . . . . . 0.75%

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 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.

Page 12
<PAGE>
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EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

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.

- --------------------------------------------------------------------------------
DIVIDENDS AND TAX STATUS
- --------------------------------------------------------------------------------

The Fund expects to pay annual capital gain distributions and to pay income
divi-

Page 13

<PAGE>

dends 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
- --------------------------------------------------------------------------------

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

Page 14

<PAGE>

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.

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.

The line graph below illustrates the performance of $10,000 when invested in the
ASM Fund ("ASM") from March 4, 1991 (when shares of the Fund were first sold) to
October 31, 1996 as compared to the S&P 500, a broad-based index.

ASM Fund

GRAPHS

[Graphics Omitted]

The line graph illustrates the past performance of ASM Fund as compared to the
Dow Index and S&P 500 Index. The graph illustrates that a $10,000 investment on
March 4, 1991 (when shares of the Fund were first sold) would be worth $16,582
for the Fund, $24,154 for the Dow, and $22,231 for the S&P 500 Index. The
average annual total return chart for the Fund appears under the line graph.
This chart shows that the average annual total return for the Fund was 25.01%,
13.53% and 9.35% for the one year period ended October 31, 1996, the five year
period ended October 31, 1996 and the period from March 4, 1991 (when shares of
the Fund were first sold) to October 31, 1996, respectively.

Past performance is not predictive of future performance Source: Dow Jones
Averages; Ibbotsom Associates; Wall Street Journal

Page 15

<PAGE>

During the fiscal year ended October 31, 1996, the Fund had a total return of
25.01%. During the same period, the Dow Jones Industrial Average (the "Dow),
with dividends reinvested, returned 29.71% while the S&P 500 Index with
dividends reinvested returned 23.98%. The Fund's management believes the new
expense limitation will allow the Fund to more closely track the Dow's
performance in the future.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated in Maryland on April 25, 1990. Star Bank, N.A. acts as
custodian of the Fund's assets, Mutual Funds Service Co. acts as accounting and
shareholder servicing agent and Coopers & Lybrand LLP 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 Article of
Incorporation without the affirmative vote of the holders of more than 50% of
the Fund's outstanding shares. The holder of shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable.

Shareholder inquires should be directed to the Fund at the address and telephone
number indicated on the cover of the Fund application.

[ASM FUND LOGO]

Page 16
<PAGE>
ASM FUND, INC.

Statement of Additional Information

March 4, 1997

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"), dated
March 4, 1997. A copy of the prospectus may be obtained from the Fund's Advisor,
Vector Index Advisors, Inc. at 15438 North Florida Avenue, Suite 107, Tampa,
Florida 33613, Tel: (813) 963-3150 or (800) 445-2763.

<TABLE>
<CAPTION>
TABLE OF CONTENTS
Cross Reference to
Page Number Page in 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>

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.

<PAGE>

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).

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.

<PAGE>

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 Fund's portfolio turnover rate for each of the fiscal years ending October
31, 1995 and 1996 was 340% and 391% respectively. 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. The high portfolio turnover
rates in 1995 and 1996 resulted primarily from portfolio securities sales made
by the Fund to make payment on redemptions. High portfolio turnover may involve
additional brokerage or tax consequences to the Fund and shareholders. See
"Dividends and Tax Status" in the Fund's Prospectus

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 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 age,
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*, 59 President, President, Secretary
15438 N. Florida Ave. Secretary and Director of the Advisor,
Tampa, FL 33613 Director formerly Vice President,
George K. Baum & Co.

<PAGE>

Jerome P. Feltenstein, 62 Director President
61 Mimosa Drive American Business
Cos Cob, CT 06807 Associates, Inc.

W. Keith Schilit, 42 Director Faculty member
Catalyst Ventures University
4928 Bay Way Drive of South Florida, President,
Tampa, FL 33629 Catalyst Ventures

Daniel Calabria, Director Trustee, The IDEX Mutual
7120 S. Shore Dr. S. Funds, Florida Tax Free Funds
S. Pasadena, FL 33707 Arbitrator, N.A.S.D., Retired
President, CEO & Director
Templeton Funds Management
- ------------------------------------------------------------------------------
<FN>
* denotes directors or officers who are "interested persons" of the Fund
under the 1940 Act.
</FN>
</TABLE>

The following table shows the compensation paid by the Fund to the Directors of
the Fund during the fiscal year ended October 31, 1996:

<TABLE>
<CAPTION>
COMPENSATION TABLE

Pension or Retirement Estimated Annual Benefits
Aggregate Compensation Benefits Accrued as Part of Upon Retirement
Director Fund Expenses
<S> <C> <C> <C>
Steven H. Adler none none none
Jerome P. Feltenstein $6,500 none none
W. Keith Schilit $6,500 none none
Daniel Calabria $5,000 none none
</TABLE>

The Fund pays fees of $1,000 per quarterly meeting (plus $500 for each special
meeting attended) 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, 1996, directors fees and expenses
totaled $20,266.

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.

<PAGE>

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") on December 27, 1991. It was first approved by
its public shareholders at a meeting held on April 15, 1992.

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. Under the Agreement, the Advisor is
entitled to receive a monthly fee at an annual rate of 0.60 of 1% of the Fund's
average daily net assets for services provided to the Fund. 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 initially agreed to limit
expenses of the Fund to 2.5% of average net assets on an annual basis. The
Advisor voluntarily revised this agreement on October 31, 1991, retroactively,
to limit expenses of the Fund to 0.75% of average net assets. This limitation
continued until October 31, 1994. During the year beginning November 1, 1994,
the Advisor agreed to limit expenses of the Fund to a maximum of 2.5% of average
net assets. This limitation continued until January 14, 1997. Effective January
15, 1997, the Advisor agreed to limit expenses of the Fund to 0.18% of average
net assets on an annual basis.

The Advisor waived fees and reimbursed the Fund for expenses in the amount of
$321,043 and $204,354 for the fiscal years ended 1994 and 1995, respectively.
These amounts included management fees earned by the Advisor of $105,908 and
$23,415 for these respective years. For fiscal year ended 1996, the Advisor was
not entitled to any fees, and reimbursed the Fund for expenses in the amount of
$89,199.

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.

<PAGE>

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, 1996, the Fund paid a total of
$124,142 ($306,184 in 1994, $73,668 in 1995) in brokerage commissions.

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.

<PAGE>

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, 1996, 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, 1996 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.

<PAGE>

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%
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.

Average Annual Total Returns
For Periods Ended October 31, 1996

Past 1 Past 5 From
Year Years 3/4/97*
25.01% 13.53% 9.35%

*Date Shares Were First Sold

<PAGE>

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 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. For the
30-day period ended 10/31/96, the yield of the Fund was .0822%.

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.

<PAGE>

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.

Coopers & Lybrand L.L.P. 101 East Kennedy Boulevard, Tampa, Florida 33602
have been chosen to be Independent Auditors for the Fund. The Fund employs
Mutual Funds Service Co., P.O. Box 7177, 6000 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.

As of February 28, 1997, FTC & Co., Denver, CO, held of record 34.2% of the
outstanding shares of common stock of the Fund. Persons or organizations owning
25% or more of the outstanding shares of the Fund may be presumed to "control"
(as that term is defined in the 1940 Act) the Fund. As a result, those persons
or organizations could have the ability to vote a majority of shares of the Fund
on any matter requiring the approval of shareholders of the Fund.

Also, as of February 28, 1997, Donaldson, Lufkin & Jenrette, Jersey City, NJ,
held of record 13.66% and National Financial Services Corp., New York, NY, held
of record 6.47% of the outstanding shares of common stock of the Fund.

<PAGE>
==================================
ASM FUND PORTFOLIO
==================================

American Telephone & Telegraph
Co.
Allied Signal, Inc.
Aluminum Company of America
American Express Co.
Bethlehem Steel Corp.
Boeing Co.
Caterpillar
Chevron Corp.
Coca-Cola Co.
Walt Disney
Dupont de Nemours & Co.
Eastman Kodak Co.
Exxon Corp.
General Electric Co.
General Motors Corp.
Goodyear Tire & Rubber Co.
International Business Machines
Corp.
International Paper Co.
McDonald's Corp.
Merck & Co.
Minnesota Mining & Manufacturing
Co.
JP Morgan
Philip Morris Companies, Inc.
Procter & Gamble Co.
Sears Roebuck & Co.
Texaco, Inc.
Union Carbide Corp.
United Technologies Corp.
Westinghouse Electric Corp.
Woolworth Corp.

Managed by:
Vector Index Advisors, Inc.
15438 North Florida Avenue Ste.
107
Tampa, Florida 33613
(813)963-3150
(800)445-2763

ASM FUND, INC.

Tampa, Florida

Audited Annual Financial Statements

For the Year Ended October 31, 1996

- -------------------------------------------------------
Table of Contents Page
- -------------------------------------------------------

Report of Independent Accountants 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

Financial Highlights 7

Notes to Financial Statements 8-10

- -------------------------------------------------------
<PAGE>
December 30, 1996

Dear ASM Fund Shareholder,

During the past year, the stock market pundits were pessimistic about
stocks in 1996, after such a strong 1995. Happily, they were incorrect and ASM
Fund shareholders benefited. The last quarter saw increasing volatility that has
become a stock market phenomenon and investors are learning not to overreact to
short term swings in prices. The "Dow" continues to be less volatile than other
sectors of the market. The average mutual fund trailed the ASM Fund by more than
25% this year.

The consensus of analysts' projections for 1997 anticipate about an 15%
increase in earnings in the 30 Dow companies. The global business is growing and
the companies are more productive than ever.

The superior performance of the ASM Fund was helped by the lowering of
expenses during 1996. As the public discovers the benefits of investing in an
index fund, I expect to see the ASM Fund grow dramatically. Market observers
will find the Dow Jones Industrial Average produces superior returns. Combining
the performance with lower expenses, will make the ASM Fund more attractive. The
press has continued to recognize the Fund and its advantages.

I am proud that the ASM Fund was selected as one of the three growth funds
of the eleven best funds to own in 1997 by, "Best Pick for 1997." We are also
being featured by some of the prestigious investment firms in their select
lists. There are good reasons for 1997 to be an exceptional year for the ASM
Fund.

Very truly yours,

Steven H. Adler
President
<PAGE>

Report of Independent Accountants

To the Shareholders and Board of Directors of
ASM Fund (the Fund)

We have audited the accompanying statement of assets and liabilities of the
Fund, including the schedule of portfolio investments, as of October 31, 1996,
and the related statement of operations, the statement of changes in net assets,
and the financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1995 and the financial highlights before
restatement for the years ended October 31, 1995, 1994, 1993 and 1992, were
audited by other auditors, whose report dated December 27, 1995 expressed an
unqualified opinion. We also audited the adjustments described in Note 5 that
were applied to restate the expense ratios included in the financial highlights
for the years ended October 31, 1995, 1994 and 1993. In our opinion such
adjustments are appropriate and have been properly applied.

We conducted our audit 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 financial
highlights 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, 1996, by correspondence with the custodian and brokers. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund as of October 31, 1996, the results of its operations, the changes in the
net assets and the financial highlights for the year then ended, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND, L.L.P.

Tampa, Florida
December 5, 1996

page 1
<PAGE>

ASM FUND, INC.
Portfolio of Investments
October 31, 1996
<TABLE>
<CAPTION>
% of Total
Net Assets Shares Value
------------ ------------- -----------
<S> <C> <C> <C>

Common Stocks--

Aerospace 11.1%
Boeing Company 4,605 $ 439,202
United Technologies Corp. 4,605 592,894
-----------
1,032,096
-----------
Auto and Truck 2.7%
General Motors Corporation 4,605 248,094
-----------
Banking 4.3%
J. P. Morgan & Co., Inc. 4,605 397,757
-----------
Beverage 2.5%
Coca-Cola Company 4,605 232,552
-----------
Chemical 6.7%
E. I. DuPont de Nemours & Co. 4,605 427,114
Union Carbide Corporation 4,605 196,288
-----------
623,402
-----------
Consumer Products 4.9%
Proctor & Gamble Company 4,605 455,895
-----------
Drugs and Hospital Supplies 3.7%
Merck & Co., Inc. 4,605 341,346
-----------
Electrical Equipment 5.6%
General Electric Corp. 4,605 445,534
Westinghouse Electric Corp. 4,605 78,861
-----------
524,395
-----------
Entertainment and Leisure 3.3%
Walt Disney Company 4,605 303,354
-----------
Financial Services 2.3%
American Express Company 4,605 216,435
-----------
Machinery 3.4%
Caterpillar, Inc. 4,605 316,018
-----------
Metals and Mining 2.9%
Aluminum Company of America 4,605 269,968
-----------
</TABLE>

See accompanying Notes to Financial Statements
page 2

<PAGE>

ASM FUND, INC.
Portfolio of Investments, (Continued)
October 31, 1996

<TABLE>
<CAPTION>
% of Total
Net Assets Shares Value
------------- ------------ -------------
<S> <C> <C> <C>
Common Stocks (continued)
Office Equipment 6.4%
International Business Machines 4,605 $ 594,045
-------------
Oil-International 12.7%
Chevron Corporation 4,605 302,779
Exxon Corporation 4,605 408,118
Texaco, Inc. 4,605 467,983
-------------
1,178,880
-------------
Paper 2.1%
International Paper Company 4,605 196,864
-------------
Photography 3.9%
Eastman Kodak Co. 4,605 367,249
-------------
Restaurant 2.2%
McDonald's Corp. 4,605 204,346
-------------
Retail 3.4%
Sears, Roebuck & Company 4,605 222,767
Woolworth Corp. (A) 4,605 96,705
-------------
319,472
-------------
Steel 0.4%
Bethlehem Steel Corp. (A) 4,605 37,416
-------------
Telecommunications 1.7%
American Telephone & Telegraph Co. 4,605 160,607
-------------
Tire and Rubber 2.3%
Goodyear Tire & Rubber 4,605 211,254
-------------
Tobacco 4.5%
Philip Morris Companies, Inc. 4,605 426,538
-------------
Diversified 7.0%
Allied-Signal, Inc. 4,605 301,628
Minnesota Mining & Manufacturing Co. 4,605 352,858
-------------
654,486
-------------

Total common stocks (cost - $9,220,201) 100.0% 9,312,469
Other assets less liabilities 0.0% 3,014
------------- -------------

Total Net Assets 100.0% $ 9,315,483
============= =============
<FN>
(A) Non-income producing security
</FN>
</TABLE>

See accompanying Notes to Financial Statements.
page 3
<PAGE>

ASM FUND, INC.
Statement of Assets and Liabilities

October 31, 1996
<TABLE>
<S> <C>
Assets:

Investments at market value
(cost of $9,220,201) $ 9,312,469
Cash 294,836
Receivable for securities sold 5,537,903
Receivable for capital stock sold 10,510
Receivable from advisor (Note 5) 201,946
Dividends receivable 8,257
Other assets 23,893
------------------

Total Assets 15,389,814
------------------

Liabilities:

Payable for capital stock redeemed 5,883,634
Accrued expense 65,897
Accrued taxes payable (Note 5) 124,800
------------------

Total Liabilities 6,074,331
------------------

Net Assets $ 9,315,483
==================

Net Asset value per share is based
on 659,472 shares of $.001 par value
capital stock outstanding (authorized
capital stock - 1,000,000,000 shares) $ 14.13
==================

Net assets consist of:

Capital paid-in $ 9,145,424
Undistributed net investment income 89,231
Accumulated net realized loss on investments (11,440)
Net unrealized appreciation on investments 92,268
------------------

Net Assets $ 9,315,483
==================
</TABLE>

See accompanying Notes to Financial Statements.
page 4
<PAGE>

ASM FUND, INC.
Statement of Operations
Year Ended October 31, 1996
<TABLE>
<S> <C>
Investment income:
Dividends $ 270,048
Interest
22,293
---------------

Total investment income
292,341
---------------

Expenses:
Legal fees 96,134
Audit fees 52,620
Custodian fees 36,010
Printing and postage 12,047
Transfer agent and accounting fees 30,159
Registration and filing fees 29,173
Amortization of organization expense 11,607
Trustee fees 20,226
Administrative fees 6,250
Interest expense 10,300
Other expenses 11,963
---------------
Total expenses 316,489
Less:
Reimbursement of expenses by advisor 89,199
---------------
Total expenses - net 227,290
---------------
Investment income - net 65,051
---------------

Realized and unrealized gain (loss) on investments :
Net realized gain 2,445,312
Change in unrealized depreciation of investments (362,252)
---------------
Net gain on investments 2,083,060
---------------

Net increase in net assets resulting from operations $ 2,148,111
===============
</TABLE>

See accompanying Notes to Financial Statements. page 5

<PAGE>

ASM FUND, INC.
Statement of Changes in Net Assets
Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
October 31, October 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 65,051 $ 2,868
Net realized gain from investment transactions 2,445,312 753,136
Net change in unrealized appreciation (depreciation)
of investments (362,252) 424,306
---------------- ----------------
Net increase in net assets resulting from operations 2,148,111 1,180,310
---------------- ----------------
Distributions to shareholders:
Net investment income (65,051) (23,980)
In excess of net investment income (12,633) (66,021)
---------------- ----------------
Total distributions (77,684) (90,001)
---------------- ----------------
Capital share transactions:
Net proceeds from shares sold 49,671,530 29,998,335
Reinvestment of distributions 66,202 81,452
Cost of redemptions (52,196,702) (28,742,989)
---------------- ----------------
Net increase (decrease) in net assets
resulting from capital share transactions (2,458,970) 1,336,798
---------------- ----------------
Total increase (decrease) in net assets (388,543) 2,427,107

Net Assets:
Beginning of period 9,704,026 7,276,919
---------------- ----------------
End of period (including undistributed net
income of $89,231 and $0 for 1996 and 1995,
respectively) $ 9,315,483 $ 9,704,026
================ ================

Changes in shares outstanding:
Shares sold 3,734,945 2,975,479
Shares issued in connection with
reinvestment of distributions 4,919 7,929
Shares redeemed (3,934,108) (2,873,468)
---------------- ----------------
Net increase (decrease) (194,244) 109,940
================ ================
</TABLE>

See accompanying Notes to Financial Statements.
page 6

<PAGE>

ASM FUND, INC.
Financial Highlights

<TABLE>
<CAPTION>
Years Ended October 31,
Selected Per Share Data 1996 1995 (b) 1994 (b) 1993 (b) 1992 (b)

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.37 $ 9.78 $ 10.07 $ 9.23 $ 8.93
-------------------------------------------------------
Income (loss) from investment operations
Net investment income 0.08 -- 0.56 0.43 0.26
Net gains or (losses) on securities
(both realized and unrealized) 2.76 1.77 (0.16) 0.88 0.20
-------------------------------------------------------
Total from investment operations 2.84 1.77 0.40 1.31 0.46
-------------------------------------------------------
Less distributions from
Net investment income (0.07) (0.05) (0.52) (0.47) (0.16)

In excess of net investment income (0.01) (0.13) -- -- --
Return of capital -- -- (0.17) -- --
----------------------------------------------------------
Total distributions (0.08) (0.18) (0.69) (0.47) (0.16)
----------------------------------------------------------
Net asset value, end of period $ 14.13 $ 11.37 $ 9.78 $ 10.07 $ 9.23
==========================================================
Total Return 25.01% 18.10% 3.97% 14.65% 5.10%
==========================================================
Ratios/Supplemental Data
Net assets, end of period (000) 9,315 9,704 7,277 17,085 6,583
Ratio of expenses to average
net assets* 1.86% 3.01%** 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets* 0.53% 0.04% 2.17% 3.35% 2.41%
Portfolio turnover rate *** 391% 340% 1193% 642% 405%

Number of shares outstanding
at the end of period 659,472 853,716 743,776 1,696,044 713,816

Average commission rate (a) $ 0.08 -- -- -- --

</TABLE>

* Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratio of expenses to average net assets would have been 2.59%,
5.77%, 2.94%, 3.38% and 3.91% for the years ended October 31,1996, 1995,
1994, 1993 and 1992, respectively. As a result of certain tax adjustments
necessitated by the Fund's failure to qualify as a regulated investment
company for the years ended October 31, 1995, 1994 and 1993, as well as
other adjustments, the gross expense ratios previously reported for these
periods have been restated. (See Note 5)
** Includes $50,460 of interest expense not subject to the expense
reimbursement agreement.
*** The ASM Fund continues to be as fully invested in equities as possible.
Therefore, almost all Fund portfolio turnover is a result of purchases and
sales of securities necessary for settlement of transactions requested by
Fund shareholders.
(a) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
(b) Audited by predecessor auditor.

See accompanying Notes to Financial Statements.
page 7

<PAGE>

ASM FUND, INC.
Notes to Financial Statements
October 31, 1996

ASM Fund, Inc. (the "Fund") was incorporated in Maryland on April 25, 1990 and
is registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended, as an open-end diversified management investment company.

1. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. Preparation of the
financial statements includes the use of management estimates.

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 purchases of investments one business day after trade date and
sale of investments on the trade date. Realized gains and losses on sales of
investments are calculated on the specific identification basis. Interest income
is recognized on the accrual basis, and dividend income is recorded on the
ex-dividend date.

Distributions to Shareholders

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.

Federal Income Taxes

The Fund intends 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 for the year ended October 31, 1996.

page 8
<PAGE>

ASM FUND, INC.
Notes to Financial Statements, Continued
October 31, 1996

2. Investment Advisory Fees
The Fund operated under an investment management agreement (the
"Agreement") with Vector Index Advisors, Inc. (the "Advisor") through April 15,
1995, which agreement was not continued after such date due to technical
requirements under the 1940 Act, and thereafter received the services called for
under the Agreement without charge. Under the agreement, the Advisor was
entitled to receive a fee, accrued daily and payable monthly at an annual rate
of .60 of 1% of the Fund's average daily net assets. The Fund will propose that
shareholders approve a new agreement which will provide for such fees and
reimbursements as are agreeable to the parties.

The Advisor provided continuous supervision of the investment portfolio and
pays the cost of compensation of the officers of the Fund, and occupancy and
certain clerical and administrative costs involved in portfolio management. The
Fund bears all other costs and expenses.

Certain officers and directors of the Fund are also officers and directors
of the Advisor. The Agreement provided 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, exceeded a certain percentage of the Fund's average
daily net assets for any full fiscal year. Under state expense limitations then
applicable to the Fund, the Advisor is required to limit expenses of the Fund to
2.5% of average net assets for the first $30,000,000, 2.0% of the average net
assets for the next $70,000,000 and 1.50% of the average net assets in excess of
$100,000,000. Such state law provisions excluded items such as taxes, interest,
brokerage commissions, and extraordinary expenses from such limitations.
Pursuant to such limitations, and to further commitments made to the Fund by the
Advisor, the Advisor reimbursed the Fund $89,199 for the year ended October 31,
1996, of which $10,649 was required as a result of the state expense limitation
discussed above.

In November 1995, a regional office of the Securities and Exchange
Commission advised the Advisor that it intended to recommend administrative
proceedings against the Advisor on the grounds that a delay by the Advisor in
its payment of a receivable owed from the Advisor constituted an improper loan
to the Advisor. Without admitting to the allegation, the Advisor and it's
president have settled the matter by paying a fine of $10,000 and agreeing to an
order intended to prevent a repetition of the challenged activities.

page 9
<PAGE>
ASM FUND, INC.
Notes to Financial Statements, Continued
October 31, 1996

3. Investment Transactions

For the year ended October 31, 1996, purchases and sales of investment
securities, (excluding short-term securities) were $45,982,701 and $48,107,248,
respectively.

As of October 31, 1996, the aggregate cost of investments for Federal
income tax purposes was $9,440,409 and net unrealized depreciation for Federal
income tax purposes was comprised of the following:

Gross unrealized appreciation of investments $ 92,180
Gross unrealized depreciation of investments (220,120)
===========
Net unrealized depreciation of investments $ (127,940)
===========

4. Deferred Organization Expenses

Organization expenses in the amount of $175,320 were initially paid by the
Advisor and were reimbursed by the Fund. These costs were deferred and amortized
over a sixty-month period.

5. Financial Highlights Restatement

During the year ended October 31, 1996, the Fund, in consultation with its
auditors and legal counsel, determined, based on information currently
available, that the Fund did not qualify as a regulated investment company under
the Internal Revenue Code for the years ended October 31, 1995, 1994 and 1993.
As such, the Fund would be subject to accrued Federal income taxes and interest
of approximately $9,900, $69,700 and $34,900 for the years ended October 31,
1995, 1994 and 1993, respectively. The Advisor has agreed to bear these costs.
Also, as discussed in Footnote 2, advisory fees in the amount of $23,443 for the
period from April 16, 1995 to October 31, 1995 should not have been accrued by
the Fund and reimbursed by the Advisor. As a result of this, the expense ratios
before reimbursement in the Financial Highlights have been restated to reflect
these changes. The expense ratios prior to restatement were 5.94%, 2.55% and
2.86% for the years ended October 31, 1995, 1994 and 1993, respectively. In
addition the Advisor has also agreed to reimburse the Fund for the accrued
interest due on the Federal income taxes of approximately $10,300 reflected on
the Statement of Operations for the year ended October 31, 1996. All amounts
discussed above as well as amounts due under statutory and voluntary expense
limitations are reflected in the receivable from advisor on the Statement of
Assets and Liabilities.

The Board of Directors of the Fund has obtained confirmation that the
Advisor has made arrangements to assure availability of funds to discharge the
Fund's obligations. All amounts due under statutory and voluntary expense
limitations were paid by the Advisor within 30 days of determination.

6. Related Party Transactions

In connection with the production of certain of the Fund's required
communications, certain printing costs in the amount of approximately $4,500
were paid to the Advisor for services provided.

page 10