Filed Under Rule 497(c)
'40 Act File # 811-7620
'33 Act File# 33-60592
KENILWORTH FUND, INC.
PROSPECTUS
JUNE 25, 1999
The Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
INVESTMENT OBJECTIVE.................................3
PRINCIPAL INVESTMENT STRATEGIES......................3
PRINCIPAL INVESTMENT RISKS...........................4
FUND PAST PERFORMANCE CHARTS.........................4
FUND EXPENSES........................................4
MANAGEMENT OF THE FUND...............................6
Investment Adviser..............................6
SHAREHOLDER INFORMATION..............................7
Pricing of Fund Shares..........................7
Purchase of Fund Shares.........................7
Redemption of Fund Shares.......................7
Dividends and Distributions.....................7
Tax Consequences................................7
FINANCIAL HIGHLIGHTS INFORMATION.....................8
SHARE PURCHASE APPLICATION..........................11
<PAGE>
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INVESTMENT OBJECTIVE
The Kenilworth Fund's investment objective is long term
capital appreciation. As with any mutual fund, there is no
assurance that the Fund will achieve its goal.
PRINCIPAL INVESTMENT STRATEGIES
Our investment philosophy during the last 30 years has been
guided by the historical fact that long term investment in stocks
in the United States has produced annual returns of over 9.5%
over a sixty year span. When one includes the decade of the
1980s, with its 18% annual return and similar returns currently
in the 1990s, the annual return averages almost 11% exceeding
that of bonds and money market instruments. Hence, one of the
Fund's principal investment strategies is to invest in a non-
diversified portfolio of common stocks. Notwithstanding the
historical returns for common stocks, there is no assurance that
these returns will continue in the future.
Before investing in companies, the Fund tries to determine
the outlook for the economy, the course of monetary policy as
pursued by the Federal Reserve Board, the direction of interest
rates and of overall corporate profits--the two most critical
factors determining overall equity market values. Then, we
focus on four or five large industries that are likely to
perform well in that economic milieu and generally choose two to
four companies that are the dominant growers, those companies
with dominant or growing market share in a growing market, in
their respective industries. The Fund generally rotates out of
expensive stocks and into inexpensive stocks by selling the
stocks of those companies whose price earnings ratios become
expensive relative to that of their growth rates and that of the
overall market, and buying the stocks of those companies whose
price earnings ratios are low relative to that of their growth
rates and that of the overall market. The Fund employs both a
growth and value style of investing.
The Fund invests primarily in:
(a)large capitalization stocks listed on the United States stock
exchanges, those generally over $10 billion in size;
(b)in special situations such as:
--those situations in which companies are likely to be
bought out at a high premium to their current market price;
--those situations in which a company's stock market price
does not reflect the underlying value of all the company's
assets, particularly those of real-estate or patents carried
at historic cost;
--those situations in which the stock market price of a
corporation with two very profitable businesses is trading
at a discount to its actual value because of political
and/or legal uncertainties involving one of the businesses,
thereby placing a negative value on that business;
(c) turnaround situations where due to new products, managements,
or technologies a new future is forecast for a given company, or;
(d) in companies with a very strong technological niche in a
dynamic growth industry.
We use extensive research to identify growing companies to
buy at reasonable prices and then we hold those companies for
long periods of time. We have developed many criteria over the
last 30 years to identify companies that generate superior long
term returns:
(a) Management: great companies are created by visionary
managers who deliver predictable growth;
(b) strong return on capital showing wise use of scarce capital;
(c) low costs: companies that can produce the product at a lower
cost than their competitors;
(d) dominant or growing market share in a growing market;
(e) strong balance sheets;
(f) turnaround situations due to new management, products, or
technologies;
(g) historically consistent and predictable growth rates.
The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment
strategies when market conditions warrant such trading. Market
conditions warrant active and frequent trading when major
political, economic and financial uncertainties appear on the
investment horizon. Active and frequent trading results in
increased portfolio turnover which may have tax consequences to
tax paying shareholders. The possible tax consequences to tax
paying shareholders are:
--an increase in the size of capital gains
distributions by the Fund, which distributions are
taxable to tax paying shareholders;
--an increase in the size of short-term capital gains
distributions, which distributions are generally taxed
at a higher tax rate than long-term capital gains
distributions.
The tax consequences of a Fund's portfolio turnover may affect
the Fund's performance by reducing its after tax rate of return.
In response to adverse market, economic, political or other
conditions, the Fund may, from time to time, take temporary
defensive positions that are inconsistent with the Fund's
principal investment strategies. The effect of taking such
temporary defensive positions is that the Fund may not achieve
its investment objective of long term capital appreciation.
PRINCIPAL INVESTMENT RISKS
The risks of investing in the Fund are:
(a) the overall market's decline because of political and/or
economic uncertainties;
(b) factors bearing specifically on a given industry or company;
(c) the Fund's non-diversified style of investing.
Ultimately, when you sell your shares of the Fund, they could be
worth less than what you paid for them.
The Fund's share price changes daily in response to
political, economic and financial news. A change in the
direction of interest rates, military conflagrations, statistics
showing adverse economic conditions, or political and regulatory
happenings can all cause the Fund's net asset value to decline.
Similarly, news regarding the financial condition or changes in
specific economic or political conditions that may affect a
particular company whose stock the Fund holds may also cause the
Fund's share price to decline.
In addition, the Fund is classified as being non-diversified
which means that, compared with other funds, it may invest a
relatively high percentage of its assets in a limited number of
companies. Because the Fund may hold roughly 50% of its assets
in the stocks of only several companies, the Fund's share price
may be more susceptible to any single economic, political or
regulatory occurrence than would a fund that seeks broad
diversification. Thus, the net asset value of the Fund is likely
to be more volatile than the net asset value of a diversified
fund.
The risk of investing in special situations and turnaround
situations is that there is no assurance that the hoped for
elements of these situations will occur. Specifically, there is
no assurance that companies will be bought out at a high premium
to their current market price; or that a company's stock market
price will ever reflect the underlying value of all the company's
assets.
The Fund, its service providers and the Fund's investments
may be affected by Year 2000 computer transition issues (many
computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the manner in which dates
are encoded and calculated). Difficulties with Year 2000 issues
could have a negative impact on handling securities trades,
payments of interest and dividends, pricing and account services.
At this time, there can be no assurance that there will be no
adverse impact on the Fund. The Fund's service providers have
advised the Fund that they have been actively working on the
necessary changes to their computer systems, and those of other
parties they deal with, and will be adapted in time for the Year
2000. In addition, there can be no assurance that the companies
which the Fund invests in will not experience difficulties with
Year 2000 issues which may negatively effect the market value of
those companies.
Loss of money is a risk of investing in the Fund.
FUND PAST PERFORMANCE CHARTS
The following bar chart and table provides some indication
of the risks of investing in the Fund by showing the changes in
the Fund's performance from year to year and compares the Fund's
average annual performance returns over various periods of time
to the performance of the S&P 500 Index. Returns are based on
past results and are not an indication of future performance.
YEAR-BY-YEAR RETURNS
Kenilworth Fund
<Calendar Years: 1994 1995 1996 1997 1998>
<Returns: -5.95% 28.03% 29.48% 20.67% 20.58%>
Best Quarter: Q4 1998 28.39%
Worst Quarter: Q3 1998 -11.34%
AVERAGE ANNUAL RETURNS
Periods ended December 31, 1998
Past 1 year Past 5 years Since Inception*
Kenilworth Fund 20.58% 17.80% 16.80%
S&P 500 Index 28.72% 24.09% 22.82%
*Inception Date: July 1, 1993
The S&P 500 stock Index follows the stock market performance of
500 of the largest companies in the United States. The return of
the S&P 500 Index does not reflect the costs of buying and
selling securities or managing a stock portfolio, costs that are
deducted from mutual fund returns.
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FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases.........None
Maximum Deferred Sales Charge (Load).....................None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends................................None
Redemption Fee...........................................None
Exchange Fee.............................................None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fee..........................................1.00%
Distribution (12b-1) Fee................................None
Other Expenses..........................................0.42%
Total Annual Fund Operating Expenses*...................1.42%
*The Fund's expenses are limited to 1.70% of its average net
assets. Expenses in excess of 1.70% are required to be
reimbursed by the Fund's investment advisor, pursuant to its
advisory agreement with the Fund. The Fund's advisory agreement,
which contains the expense reimbursement clause, is reviewed
every year by the Fund's Board of Directors. The expense
reimbursement clause cannot be terminated at will by the Fund's
investment advisor.
EXAMPLE:
This EXAMPLE is intended to help you compare the cost of
investing in this Fund with the cost of investing in other mutual
funds.
This EXAMPLE assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. This EXAMPLE also assumes that your
investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
1 year 3 years 5 years 10 years
$ 145 $ 449 $ 776 $1702
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MANAGEMENT OF THE FUND
INVESTMENT ADVISOR
The Investment Advisor to the Fund is Institutional
Portfolio Services, Ltd. (IPS), One First National Plaza, Suite
2594, Chicago, Illinois 60603. Mr. B. Padmanabha Pai is the sole
shareholder, principal executive officer and director of IPS.
Since 1969, IPS has served as an investment advisor to wealthy
individuals and corporate pension plans. IPS is registered as an
investment advisor with the Securities and Exchange Commission
under the Investment Advisers Act of 1940.
IPS provides the Fund with investment advisory services,
office space and personnel. IPS also pays the salaries of those
of the Fund's employees, officers, and directors who are also
employees, officers, and/or directors of IPS. Additionally, IPS
pays all other executive salaries and executive expenses, charges
for all clerical services relating to the Fund's investments and
all promotional expenses of the Fund, including the printing and
mailing of the prospectus to other than current shareholders.
As compensation for its advisory services, the Fund pays to
IPS a monthly advisory fee at the annual rate of 1.0% per year on
the average net assets of the Fund. All fees are computed on the
average daily closing net asset value of the Fund and are payable
monthly. The advisory fee paid to IPS for the fiscal year ended
December 31, 1998 was 1.0% of the Fund's average net assets. The
Fund also pays IPS for certain administrative services such as
record keeping, computer software and development, and other
operations management services. The administrative services fee
paid to IPS for the fiscal year ended December 31, 1998 was
$30,000. The administrative services fee to be paid to IPS in
1999 will be $40,000. IPS is required to reimburse the Fund for
the Fund's expenses incurred in excess of 1.7% of the Fund's
average net assets. IPS will reimburse the Fund for any excess
on a yearly basis.
PORTFOLIO MANAGER
Mr. B. Padmanabha Pai is the President of IPS and has been
with IPS since 1969. Mr. Pai is responsible for the day-to-day
management of the Fund's portfolio. Mr Pai's business experience
during the past five years has been that of portfolio manager and
President of IPS and Vice-President and a Director of Kenilworth
Fund, Inc.
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SHAREHOLDER INFORMATION
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined at
the close of trading on the New York Stock Exchange (currently
4:00 P.M., Eastern Standard Time)on days in which the Exchange is
open for business, except that the net asset value will not be
computed on a day in which no orders to purchase shares were
received and no shares were tendered for redemption. The net
asset value per share is calculated by adding the value of all
securities, cash or other assets, subtracting liabilities, and
dividing the remainder by the number of shares outstanding.
Each security traded on a national stock exchange is valued
at its last sale price on that exchange on the day of valuation
or, if there are no sales that day, at the latest bid quotation.
Each over-the-counter security for which the last sale price on
the day of valuation is available from NASDAQ is valued at that
price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid quotation.
Other assets and securities are valued at a fair value determined
in good faith by the Board of Directors.
PURCHASE OF FUND SHARES
An initial purchase of shares of the Fund may be made by
sending a properly completed Share Purchase Application to the
Fund. The minimum initial purchase of shares is $10,000.
Related party accounts and retirement accounts require a
minimum initial purchase of $5,000. Related party accounts are
defined as those accounts opened with the Fund under the same tax
identification number, or those accounts opened by a family
member or relative of an existing shareholder. Purchases
subsequent to the initial purchase may be sent to the address
given in the Prospectus. Minimum subsequent purchases of shares
is $1,000. The offering price for the Fund's shares is equal to
the net asset value per share (determined in the manner described
under "Determination of Net Asset Value") on the day, prior to
the close of trading on the New York Stock Exchange, that the
purchase order is received and accepted by the Fund. Orders
received by the Fund after the close of the New York Stock
Exchange will be confirmed at the net asset value determined at
the close of the New York Stock Exchange on the next business
day. All purchases must be made in U.S. dollars and checks must
be drawn on U.S. banks. No cash will be accepted.
The Fund now sells fractional shares in addition to whole
shares. The Fund maintains a book-entry-only system with regard
to Fund shares. Fund share certificates will not be issued.
The minimums for subsequent purchases do not apply to shares
purchased pursuant to the reinvestment of income dividends and
capital gain distributions. The minimums may be changed at any
time. Shareholders will be given at least thirty days notice of
any increase in the minimums. However, the Fund reserves the
right to waive or lower investment minimums at its discretion.
All orders to purchase shares are subject to the Fund's
acceptance and are not binding until so accepted. All orders to
purchase shares that are accepted will be processed at the net
asset value next determined after receipt of the purchase order
as provided herein regardless of the date of acceptance. The
Fund may decline to accept a purchase order when in the judgment
of management the acceptance of an order is not in the best
interests of existing shareholders.
RETIREMENT ACCOUNTS
Shares of the Fund may be purchased or redeemed for
retirement accounts through New York Stock Exchange registered
brokerage firms having a relationship with the Fund. Typically,
a shareholder will elect to custody his or her retirement account
at a brokerage firm. Upon the shareholder's direction to
purchase shares of the Fund for his or her retirement account,
the brokerage firm will effect a written order for the purchase
of Fund shares. Any such purchase or redemption will not be
effective until the order or request is received by the Fund.
Retirement account holdings, including the Fund, will appear
monthly on the retirement account statement issued directly by
the relevant brokerage firm.
The minimum initial investment for retirement accounts is
$5,000 and $1,000 for subsequent purchases. There are no
additional Fund charges for retirement accounts. Brokerage firms
usually charge a fixed yearly fee for the custody and
administration of retirement accounts.
REDEMPTION OF FUND SHARES
Shareholders of the Fund may request redemption of their
shares at any time as provided herein. The redemption price
shall be equal to the net asset value next determined after
receipt by the Fund's transfer agent of a request for redemption
submitted in proper form. See "Determination of Net Asset
Value." The value of the shares on redemption may be more or
less than their original cost, depending upon the then-current
market value of the Fund's investments.
Shares may be redeemed by submitting a written request for
redemption to the Fund. A written redemption request to the
Fund, as transfer agent, must specify (a) the name of the Fund,
(b) the dollar amount or specific number of shares to be
redeemed, and (c) the shareholder's name and account number.
The redemption request must be signed by each registered owner
exactly as the shares are registered. The Fund, at its
discretion, may require a signature guarantee for redemption from
a bank, trust company, savings and loan association, a member of
a national stock exchange for redemption, or any other financial
institution authorized to guarantee signatures. Requests for
redemption by telephone and requests that are subject
to any special conditions or that specify an effective date or
other than as provided herein cannot be honored.
For accounts registered in the name of corporations or
associations, the redemption request must include a corporate
resolution certified by a duly authorized officer of the
corporation or association, with such officer's signature
guaranteed. For accounts registered in the name of a trust, the
redemption request must be signed by each trustee registered on
the account with each signature guaranteed. Questions with
respect to the proper form of redemption requests should be
directed to the Transfer Agent at (312) 236-5388.
A redemption request received at the same time or near the same
time as an address change must be accompanied by a signature
guarantee. The guarantor of a signature must be a national bank
or trust company, a member of the Federal Reserve System or a
member firm of a national securities exchange or any other
financial institution authorized to guarantee signatures. The
Transfer Agent reserves the right to reject the signature
guarantee of an institution if such rejection would be in the
best interests of the Fund and its shareholders. Notwithstanding
the above, signature guarantees will be required where there
appears to be a pattern of redemptions designed to circumvent the
signature guarantee requirement, or where the Fund has other
reason to believe that this requirement would be in the best
interests of the Fund and its shareholders.
The proceeds of redemptions will ordinarily be mailed within
seven days after receipt of a properly completed redemption
request. It is mandatory that the Fund redeem shares upon the
proper request of a shareholder. When shares are purchased by
check, the Fund reserves the right to delay redemption of shares
until it is satisfied that the investor's check used to purchase
shares has cleared. Local checks generally are collected in
three business days and non-local checks may take longer in
certain circumstances.
The right of redemption may be suspended during any period
when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or such
Exchange is closed for other than weekends and holidays; (b) the
Securities and Exchange Commission has by order permitted such
suspension; or (c) an emergency as determined by the Securities
and Exchange Commission exists, making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably
practicable. A shareholder's account may be terminated by the
Fund if, at the time of any transfer or redemption of shares of
the Fund in the account at the current offering price falls below
$1000. The Fund will notify a shareholder of its intention to
terminate the account and provide the shareholder with not less
than thirty days to make additional investments.
The Fund reserves the right to pay redemptions in kind.
Thus, redemption proceeds may be paid in securities or other
assets rather than in cash if the Board of Directors determines
it is in the best interests of the Fund.
Questions regarding redemptions and the procedures that must
be followed should be directed to the Fund as Transfer Agent, One
First National Plaza, Suite 2594, Chicago, Illinois 60603, (312)
236-5388.
DIVIDENDS AND DISTRIBUTIONS
Unless a shareholder elects otherwise by notice to the Fund,
all income dividends and all capital gains distributions payable
on shares of the Fund will be reinvested in additional shares of
the Fund at the net asset value in effect on the dividend or
distribution payment date. The Fund acts as the shareholder's
agent to reinvest dividends and distributions in additional
shares and hold for his/her account the additional shares so
acquired. A shareholder may at any time change his/her election
as to whether to receive his/her dividends and distributions in
cash or have them reinvested by giving written notice of such
change of election to the Fund. Such change of election applies
to dividends and distributions the record dates of which fall on
or after the date that the Fund receives the written notice.
Dividends from the Fund's net investment income as well as
distributions designated as capital gains will ordinarily be
declared and paid annually in such a manner as to avoid paying
income tax on the Fund's net investment income and net realized
capital gains or being subject to a federal excise tax on
undistributed net investment income and net realized capital
gains. Such distributions and dividends will typically be made
in December. As current income is not an objective of the Fund,
the amount of dividends will likely be small. There is no fixed
dividend rate and there can be no assurance as to the payment of
any dividends or the realization of any gains.
TAX CONSEQUENCES
The Fund intends to maintain its qualification as a
"regulated investment company" under the Internal Revenue Code by
distributing as dividends not less than 90% of its taxable income
and by continuing to comply with all other requirements of
Subchapter M of the Code. If the Fund qualifies, the Fund will
not be liable for Federal income taxes on amounts paid by it as
dividends and distributions.
For Federal income tax purposes, dividends paid by the Fund
and distributions from short-term capital gains, whether received
in cash or reinvested in additional shares, are taxable as
ordinary income. Distributions paid by the Fund from long-term
capital gains whether received in cash or reinvested in
additional shares, are taxable as long-term capital gains,
regardless of the length of time you have owned shares in the
Fund. The distributions are taxable whether you receive them in
cash or in additional shares. If you are not required to pay tax
on your income, you will not be required to pay Federal income
taxes on the amounts distributed to you. Dividends and capital
gain distributions declared in December and paid the following
January will be taxable in the year they are declared.
Distributions by the Fund may subject an investor to state
and local taxes on the distributions, depending on the laws of a
shareholder's home state and locality. Because this section is
not intended to be a full discussion of present or proposed
Federal income tax law and its effect on shareholders,
shareholders are urged to consult their own tax adviser.
CONDENSED FINANCIAL INFORMATION
Financial Highlights
The financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years.
Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey & Pullen,L.L.P. for the
years ended 1996, 1997 and 1998, and by other auditors for the
years ended 1994 and 1995. McGladrey & Pullen's report,
along with the Fund's financial statements, are included in the
Fund's Annual Report, which is available upon request.
<TABLE>
<CAPTION>
For the Years Ended December 31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net Asset Value,
beginning of period
$18.17 $15.43 $11.93 $9.64 $10.31
Income from Investment Operations
Net Investment
Income (Loss) (0.04) (0.05) 0.01 0.06a 0.06a
Net Realized and
Unrealized Gain (Loss)
on Investments 3.78 3.24 3.51 2.64 (0.67)
Total...........3.74 3.19 3.52 2.70 (0.61)
Less Distributions From
Net Investment Income 0.00 0.00 0.01 0.06 0.06
From Net Realized Gains 0.00 0.45 0.01 0.35 0.00
Total...........0.00 0.45 0.02 0.41 0.06
Net Asset Value,
end of period $21.91 $18.17 $15.43 $11.93 $9.64
Total Return............20.58% 20.67% 29.48% 28.03% (5.95%)
Ratios and Supplemental Data
Net Assets,
end of period
(in thousands) $12,178 $9,790 $7,222 $5,099 $3,530
Ratio of Net Expenses
to Average Net Assets 1.42% 1.52% 1.51% 1.69%a 1.70%a
Ratio of Net Investment
Income to Average
Net Assets (0.24%) (0.29%) 0.06% 0.54%a 0.67%a
Portfolio Turnover Rate 70.28% 76.99% 73.93% 82.17% 11.78%
aNet of reimbursement of expenses by Advisor.
</TABLE>
<PAGE>
<PAGE>
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus
and in the related Statement of Additional Information and, if
given or made, such information or representations may not be
relied upon as having been authorized by the Kenilworth Fund,
Inc. This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering
may not lawfully be made.
<PAGE>
<PAGE>
KENILWORTH FUND, INC.
SHARE PURCHASE APPLICATION
Mail To: Minimum Investments:
Kenilworth Fund, Inc. Initial: $10,000.00
One First National Plaza Retirement/Related Party: $5,000.00
Suite 2594 Subsequent: $1,000.00
Chicago, IL 60603
All applications are accepted in Illinois and under Illinois
laws.
#1...Registration of Shares
Owner (Individual, Corporation, Trustee or Joint Owner
Custodian)
Social Security Number
Address
Daytime Telephone Number
City State Zip
If more than one owner is listed above, then shares will be
registered as joint tenants with rights of survivorship
and not as tenants in common, unless otherwise instructed.
#2...Investment Information
This investment represents (a)an:
___ Initial purchase payable to: Kenilworth Fund, Inc.
Amount $__________
___ Subsequent purchase payable to Kenilworth Fund, Inc.
Amount $__________
#3...Dividend Option
All income dividends and capital gains distributions will be
reinvested in additional shares as stated in the prospectus
unless the box below is checked.
___ Please pay all income dividends and capital gains
distributions in cash.
I/We understand that certificates for shares purchased
(either initial or reinvested) will not be issued.
#4...Taxpayer Obligations W-9
I am a U.S. citizen ___ Yes ___ No
The Internal Revenue Service (IRS) requires each taxpayer
to provide a Social Security or Taxpayer Identification Number
and to make the following certifications:
I certify under penalty of perjury
that:
1) The Social Security or other Tax I.D. number stated
above is correct.
2) I am not subject to backup withholding because:*
a. The IRS has not informed me that I am subject
to backup withholding.
b. The IRS has notified me that I am no longer
subject to backup withholding.
* If this statement is not true and you
are subject to backup withholding,
strike out Section 2
#5...Signature and Agreement
I/We, the undersigned, have received a copy of the current
prospectus of the Kenilworth Fund, Inc., and are purchasing fund
shares in accordance with its provisions. I/We further certify
that the undersigned is of legal age and has full legal capacity
to make this purchase. The purchase price shall be the net asset
value next determined following receipt of the application by the
Fund, if the application is accepted. This application cannot be
processed unless accompanied by payment. The Internal Revenue
Service does not require your consent to any provision of this
document other than the certifications required to avoid backup
withholding.
Signature of Owner Date
Signature of Joint Owner (if any) Date
<PAGE>
<PAGE>
OTHER FUND DOCUMENTS
Additional information about the Kenilworth Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year.
Additional information about the Kenilworth Fund and its
management and operations is available in the Statement of
Additional Information, which is incorporated by reference into
this Prospectus.
WHERE TO GET THESE DOCUMENTS
The Statement of Additional Information and the Fund's annual and
semi-annual reports are available, without charge, upon request.
To receive these documents or request other information about the
Fund, or for shareholder inquiries:
1. Write to us at: Kenilworth Fund, Inc., One First National
Plaza, Suite 2594, Chicago, IL 60603
2. Call us collect Monday through Friday, 9 a.m. to 5 p.m.,
Central Standard Time at 312-236-5388.
3. Visit the Kenilworth Fund website: www.kenilworthfund.com.
4. E-Mail the Fund at: [email protected]
Information about the Fund (including the Statement of Additional
Information) can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C.
Information on the operation of the public reference room may be
obtained by calling the Commission at 1-800-SEC-0330. Reports
and other information about the Fund are available on the
Commission's Internet site at http://www.sec.gov. Copies of this
information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009.
Kenilworth Fund, Inc. Investment Company Act File No. 811-7620
<PAGE>
KENILWORTH FUND, INC.
One First National Plaza
Suite 2594
Chicago, Illinois 60603
(312) 235-5388
PART B
STATEMENT OF ADDITIONAL INFORMATION
Dated: June 25, 1999
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of Kenilworth
Fund, Inc., dated June 25, 1999, and any supplement thereto.
A copy of the Prospectus may be obtained without charge from the
Kenilworth Fund, Inc., at the address and telephone number set
forth above.
No person has been authorized to give
any information or to make any representations other than those
contained in this Statement of Additional Information and the
Prospectus dated June 25, 1999, and, if given or made, such
information or representations may not be relied upon as
having been authorized by the Kenilworth Fund, Inc.
<PAGE>
TABLE OF CONTENTS
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . 3
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . 5
Directors . . . . . . . . . . . . . . . . . . 5
Investment Adviser. . . . . . . . . . . . . . 5
Administrative & Management Services. . . . . 6
Custodian & Transfer Agent . . . . . . . . . 6
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . .. 6
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . . . . . . 6
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . 7
HOW TO PURCHASE FUND SHARES . . . . . . . . . . . . . . . . . 7
HOW TO REDEEM FUND SHARES. . . . . . . . . . . . . . . . . . . 7
SHAREHOLDER PLANS. . . . . . . . . . . . . . . . . . . . . . . 8
Dividend Reinvestment Plan. . . . . . . . . . . 8
RETIREMENT ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . 9
DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . . . 9
Distributions . . . . . . . . . . . . . . . . . 9
Taxes . . . . . . . . . . . . . . . . . . . . . 9
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . 9
SHAREHOLDER REPORTS AND MEETINGS . . . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
THE FUND
Kenilworth Fund, Inc. (the "Fund") is a no-load, open-end,
non-diversified management investment company commonly called a
"mutual fund." As a no-load fund, the Fund does not impose sales
charges, 12b-1 charges, or redemption fees. The Fund was
organized as an Illinois corporation on October 24, 1988.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital
appreciation which it seeks by investing primarily in a
non-diversified portfolio of common stocks, preferred stocks,
warrants to purchase common stocks, convertible bonds,
fixed-income obligations of corporations and the United States
government, and securities convertible into common stocks of
corporations.
Although the Fund seeks to invest substantially all its
assets in common stocks, the composition of the Fund's portfolio
will vary depending upon the Adviser's perception of current and
future market and economic conditions. The Fund may, for
temporary defensive purposes and to meet its redemption
requirements, invest some of its assets in money market
securities, including U.S. government obligations, certificates
of deposit, bankers' acceptances, commercial paper or cash or
cash equivalents. The Fund does not intend to invest in any
security which, at the time of purchase, is not readily
marketable. The Fund does not retain securities that
subsequently become illiquid. The Fund does not intend to place
emphasis on short-term trading profits. However, when
circumstances warrant, investment securities may be sold
from time to time without regard to the length of time they have
been held.
The Fund's investment advisor expects that under normal
circumstances the Fund's anticipated portfolio turnover rate
will not exceed 75%. However, this rate should not be construed
as a limiting factor and the portfolio turnover rate may exceed
75% when the investment advisor deems changes appropriate.
Nonetheless, the Fund will not change its investment objective of
long-term capital appreciation. The annual portfolio turnover
rate indicates changes in the Fund's portfolio. For instance, a
rate of 100% would result if all the securities in the portfolio
(excluding securities whose maturities at acquisition were one
year or less) at the beginning of an annual period had been
replaced by the end of the period.
The Fund is designed for investors with a long-term
investment perspective (and not with a view to playing short-term
swings in the market). Investors should be aware that up to 100%
of the Fund's portfolio may be invested in common stocks and
other equity-type securities. To the extent that the Fund's
portfolio is primarily invested in common stocks and other
equity-type securities, the Fund's net asset value may be subject
to greater fluctuation than a portfolio containing a substantial
amount of fixed income securities. There can be no assurance
that the objective of the Fund will be realized or that any
income will be earned. Nor can there be assurance that the
Fund's portfolio will not decline in value.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which
are presented below, and which, together with the investment
objective of the Fund, cannot be changed without approval by
holders of a majority of the Fund's outstanding voting shares.
As defined in the Investment Company Act of 1940, this means the
lesser of (a) 67% of the shares of the Fund at a meeting where
more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of the
Fund.
Certain restrictions referred to in the foregoing paragraph are
summarized below. The Fund will not:
(1) Act as underwriter for securities of other issuers except
insofar as the Fund may be deemed an underwriter in disposing of
its own portfolio securities;
(2) Borrow money, issue senior securities, or purchase
securities on margin, but may obtain such short term credit from
banks as may be necessary for clearance of purchases and sales of
securities for temporary or emergency purposes in an amount not
exceeding 5% of the value of its total assets;
(3) Invest more than 25% of its assets at the time of purchase in
any one industry;
(4) Invest in securities of other investment companies except as
part of a merger, consolidation, or purchase of assets approved
by the Fund's shareholders or by purchases with no more than 10%
of the Fund's assets in the open market involving only customary
broker's commissions;
(5) Make investments in commodities, commodity contracts or real
estate although the Fund may purchase and sell securities of
companies which deal in real estate or interests therein;
(6) The Fund may not purchase or retain securities of any issuer
if those officers and directors of the Fund or its Investment
Adviser owning individually more than 1/2 of 1% of any class of
security collectively own more than 5% of such class of
securities of such issuer;
(7) Pledge, mortgage, hypothecate or otherwise encumber any of
its assets, except as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 15% of its assets
taken at cost;
(8) Invest in restricted, illiquid or other securities without
readily available market quotations; and
(9) Purchase the securities of any issuer if, at the time of
acquisition it would own more than 10% of the outstanding voting
securities of any one company;
(10) Invest in companies for the primary purpose of acquiring
control of management thereof;
(11) Purchase securities on margin, except such short-term
credits as are necessary for the clearance of transactions and
make short sales of securities (except short sales against the
box);
(12) Make loans, except that this restriction shall not prohibit
the purchase and holding of a portion of an issue of publicly
distributed debt securities;
(13) Purchase securities of any company having less than three
years continuous operation (including operations of any
predecessors) if such purchase would cause the value of the
Fund's investments in all such companies to exceed 5% of the
value of its assets;
(14) Invest more than 5% of its total assets in warrants,
whether or not the warrants are listed on the New York Stock
Exchange, or more than 2% of the value of the assets of the Fund
in warrants which are not listed on those exchanges. Warrants
acquired in units or attached to securities are not included in
this restriction.
<PAGE>
<PAGE>
MANAGEMENT OF THE FUND
Directors
The Fund's Board of Directors has overall responsibility for
the business and affairs of the Fund in accordance with the laws
of the State of Illinois governing the responsibilities of
directors. Officers and Directors of the Fund, together with
their addresses, and principal occupations during the past five
years are:
<TABLE>
<CAPTION>
Principal
Occupations
Past Five
Name and Address Position Years
<C> <C> <C>
Mohini C. Pai* President Vice President
One First National Interested IPS, Ltd.
Plaza Director Chicago, IL
Chicago, IL.
B. Padmanabha Pai* Vice-President President
One First National Interested IPS, Ltd.
Plaza Director Chicago, IL
Chicago, IL.
Savitri P.Pai,* Secretary/Treasurer Attorney-at-Law
One First National Interested Chicago, IL
Plaza Director
Chicago, IL.
Kirtna Pai Interested Vice-President
1585 Broadway Director Morgan Stanley
New York, NY & Company, Inc.
New York, NY
Dr. Larry A. Non-Interested Professor of
Sjaastad Director Economics,
Department of University of
Economics Chicago, IL
*interested persons
Mr. B.P. Pai and Mrs. Mohini C. Pai are husband and wife. Mr.
B.P. Pai and Mrs. Mohini C. Pai are the parents of Ms. Savitri P.
Pai and Ms. Kirtna Pai, who are sisters. Additionally, at this
time the Fund does not make payments to its Directors. All
payments made to employees of the Fund who are also Directors of
the Fund are paid by the Adviser.
</TABLE>
<PAGE>
<PAGE>
Investment Adviser
The Fund has entered into an Investment Advisory Agreement
("Advisory Agreement") with Institutional Portfolio Services,
Ltd., One First National Plaza, Suite 2594, Chicago, Illinois
60603 (the "Adviser"). Mr. B. Padmanabha Pai is the sole
shareholder, principal executive officer and director of the
Adviser. Since 1969, the investment advisor has served as an
investment advisor to wealthy individuals and corporate pension
plans on an individual account basis for the past 27 years. The
Adviser is registered as an investment adviser with the
Securities and Exchange Commission under the Investment Advisers
Act of 1940.
The Advisory Agreement provides that the Adviser shall
manage the Fund's investments and shall determine the Fund's
portfolio transactions and shall be responsible for overall
management of the Fund's business affairs, subject to the
supervision of the Board of Directors. As compensation for its
services, the Fund pays to the Adviser a monthly advisory fee at
the annual rate of 1% per year on the net assets of the Fund.
All fees are computed on the average daily closing net asset
value of the Fund and are payable monthly. For the fiscal years
ending December 31, 1996, 1997 and 1998 the Adviser was paid
$59,220, $90,314 and $103,469 respectively.
Under the Advisory Agreement, the Adviser provides the Fund
with investment advisory services, office space and personnel.
The Adviser also pays the salaries of those of the Fund's
employees, officers and directors who are also employees,
officers, and/or directors of the Adviser. Additionally, the
Adviser pays all other executive salaries and executive expenses,
charges for all clerical services relating to the Fund's
investments and all promotional expenses of the Fund, including
the printing and mailing of the prospectus to other than current
shareholders.
The Fund pays all of its other costs and expenses
including interest, taxes, salaries of its employees, fees of
directors who are not employees, officers, or directors of the
Adviser, administrative expenses related directly to the issuance
and redemption of shares (such as expenses of registering or
qualifying shares for sale, charges of custodians, transfer
agents, and registrars), costs of printing and mailing reports
and notices to shareholders, charges for auditing services and
legal services, and other fees and commissions of every kind not
expressly assumed by the Adviser. (See section below titled:
"Administrative & Management Services"). The Funds expenses are
limited, however, by an excess reimbursement provision in the
Advisory Agreement. If the annual operating and management
expenses (excluding taxes and interest) exceeds 1.7% of the
average net assets of the Fund, the Advisory Agreement requires
the Adviser to reimburse the Fund for any such excess on a
monthly basis.
<PAGE>
Administrative & Management Services
The Fund has entered into an Administrative & Management
Services Agreement (the "Administrative Services Agreement")
with the Fund's investment adviser, Institutional Portfolio
Services, Ltd., ("IPS"). The Administrative Services Agreement
requires IPS to provide record keeping, computer software and
development and other operations management services for the
Fund. IPS will be paid the sum of $40,000 per year. As
stated in the above-mentioned section titled: "Investment
Adviser", if the Fund's annual operating and management expenses
exceed 1.7% of the average net assets of the Fund, the Fund's
investment adviser will reimburse the Fund for any excess on a
monthly basis.
Custodian & Transfer Agent
The Fund acts as its own custodian and transfer agent. The
Fund will comply with all provisions of Rule 17f-2 of the Act in
regard to self-custodianship. Specifically, there will be three
independent audits annually with at least two of the audits
unannounced.
PRINCIPAL SHAREHOLDERS
As of April 19, 1999, the following persons owned of
record 5 percent or more of the Fund's shares outstanding:
(1) Marjorie Lindsay Remainder Trust, P.O. Box 7127
Indian Lake Estate, FL (7.61%); (2) Shirley Lindsay Trust,
P.O.Box 7127, Indian Lake Estate, FL (9.54%); (3) B.P. Pai, One
First National Plaza, Chicago, IL (5.81%); (4) Institutional
Portfolio Services, Ltd., One First National Plaza, Chicago, IL
(6.15%).
All directors and officers of the Fund, as a group, own
138,212 shares beneficially, directly and/or indirectly or
24.77% of the Fund's total shares outstanding.
BROKERAGE ALLOCATION
The Fund requires all brokers to effect transactions in
portfolio securities in such a manner as to get prompt execution
of the orders at the most favorable price. The Fund places all
orders for purchase and sale of its portfolio securities through
the Fund President who is answerable to the Fund Board of
Directors. The President may select brokers who, in addition to
meeting the primary requirements of execution and price, have
furnished statistical or other factual information and services,
which, in the opinion of management, are helpful or necessary to
the Fund's normal operations. Those services may include
economic studies, industry studies, security analyses and
reports, sales literature and statistical devices furnished
either directly to the Fund or to the Adviser. No effort is made
in any given circumstance to determine the value of these
materials or services or the amount they might have reduced
expenses of the Adviser.
Other than set forth above, the Fund has no fixed policy,
formula, method or criteria which it uses in allocating brokerage
business to brokers furnishing these materials and services. The
Board of Directors evaluates and reviews the reasonableness of
brokerage commissions paid semiannually. For the fiscal
years ending December 31, 1996, 1997 and 1998 the Fund paid
$15,298, $20,598 and $19,166 respectively, in brokerage
commissions.
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined at
the close of trading on the New York Stock Exchange (currently
4:00 P.M., Eastern Standard Time) on days in which the Exchange
is open for business, except that the net asset value will not be
computed on a day in which no orders to purchase shares were
received and no shares were tendered for redemption. The net
asset value per share is calculated by adding the value of all
securities, cash or other assets, subtracting liabilities, and
dividing the remainder by the number of shares outstanding.
Each security traded on a national stock exchange is valued
at its last sale price on that exchange on the day of valuation
or, if there are no sales that day, at the latest bid quotation.
Each over-the-counter security for which the last sale price on
the day of valuation is available from NASDAQ is valued at that
price.
All other over-the-counter securities for which reliable
quotations are available are valued at the latest bid
quotation. Other assets and securities are valued at a fair
value determined in good faith by the Board of Directors.
HOW TO PURCHASE FUND SHARES
An initial purchase of shares of the Fund may be made by
sending a properly completed Share Purchase Application to the
Fund. The minimum initial purchase of shares is $10,000.
Related party accounts and retirement accounts require a minimum
initial purchase of $5,000. Related party accounts are defined
as those accounts opened with the Fund under the same tax
identification number, or those accounts opened by a family
member or relative of an existing shareholder. Purchases
subsequent to the initial purchase may be sent to the address
given in the Prospectus. Minimum subsequent purchases of shares
is $1,000. The offering price for the Fund's shares is equal to
the net asset value per share (determined in the manner described
under "Determination of Net Asset Value") as determined as soon
as possible after the close of the New York Stock Exchange on the
day that the purchase order is received and accepted by the Fund.
Orders received by the Fund after the close of the New York Stock
Exchange will be confirmed at the net asset value determined at
the close of the New York Stock Exchange on the next business
day. All purchases must be made in U.S. dollars and checks must
be drawn on U.S. banks. No cash will be accepted.
The Fund now sells fractional shares in addition to whole
shares. The Fund maintains a book-entry-only system with regard
to Fund shares. Fund share certificates will not be issued.
The minimums for subsequent purchases do not apply to shares
purchased pursuant to the reinvestment of income dividends and
capital gain distributions. The minimums may be changed at any
time. Shareholders will be given at least thirty days notice of
any increase in the minimums. However, the Fund reserves the
right to waive or lower investment minimums at its discretion.
All orders to purchase shares are subject to the Fund's
acceptance and are not binding until so accepted. All orders to
purchase shares that are accepted will be processed at the net
asset value next determined after receipt of the purchase order
as provided herein regardless of the date of acceptance. The
Fund may decline to accept a purchase order when in the judgment
of management the acceptance of an order is not in the
best interests of existing shareholders.
<PAGE>
HOW TO REDEEM FUND SHARES
Shareholders of the Fund may request redemption of their
shares at any time as provided herein. The redemption price
shall be equal to the net asset value next determined after
receipt by the Fund's transfer agent of a request for redemption
submitted in proper form. See "Determination of Net Asset
Value." The value of the shares on redemption may be more or
less than their original cost, depending upon the then-
current market value of the Fund's investments.
Shares may be redeemed by submitting a written request for
redemption to the Fund. A written redemption request to the
Fund, as transfer agent, must specify (i) the name of the Fund,
(ii) the dollar amount or specific number of shares to be
redeemed, and (iii) the shareholder's name and account number.
The redemption request must be signed by each registered owner
exactly as the shares are registered. The Fund, at its
discretion, may require a signature guarantee for redemption from
a bank, trust company, savings and loan association, a member of
a national stock exchange, or any other financial institution
authorized to guarantee signatures. Requests for redemption by
telephone or telegram and requests that are subject to any
special conditions or that specify an effective date or other
than as provided herein cannot be honored.
For accounts registered in the name of corporations or
associations, the redemption request must include a corporate
resolution certified by a duly authorized officer of the
corporation or association, with such officer's signature
guaranteed. For accounts registered in the name of a trust, the
redemption request must be signed by each trustee registered on
the account with each signature guaranteed. Questions with
respect to the proper form of redemption requests should be
directed to the Transfer Agent at (312) 236-5388.
A redemption request received at the same time or near the
same time as an address change must be accompanied by a signature
guarantee. The guarantor of a signature must be a national bank
or trust company, a member of the Federal Reserve System or a
member firm of a national securities exchange or any other
financial institution authorized to guarantee signatures. The
Transfer Agent reserves the right to reject the signature
guarantee of an institution if such rejection would be in the
best interests of the Fund and its shareholders. Notwithstanding
the above, signature guarantees will be required where there
appears to be a pattern of redemptions designed to circumvent the
signature guarantee requirement, or where the Fund has other
reason to believe that this requirement would be in the best
interests of the Fund and its shareholders.
The proceeds of redemptions will ordinarily be mailed within
seven days after receipt of a properly completed redemption
request. It is mandatory that the Fund redeem shares upon the
proper request of a shareholder. When shares are purchased by
check, the Fund reserves the right to delay redemption of shares
until it is satisfied that the investor's check used to purchase
shares has cleared. Local checks generally are collected in
three business days and non-local checks may take longer in
certain circumstances.
The right of redemption may be suspended during any period
when: (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or such
Exchange is closed for other than weekends and holidays; (b) the
Securities and Exchange Commission has by order permitted such
suspension; or (c) an emergency as determined by the Securities
and Exchange Commission exists, making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably
practicable. A shareholder's account may be terminated by the
Fund if, at the time of any transfer or redemption of shares of
the Fund in the account at the current offering price falls below
$1000. The Fund will notify a shareholder of its intention to
terminate the account and provide the shareholder with not less
than thirty days to make additional investments.
The Fund reserves the right to pay redemptions in kind.
Thus, redemption proceeds may be paid in securities or other
assets rather than in cash if the Board of Directors determines
it is in the best interests of the Fund.
Questions regarding redemptions and the procedures that must
be followed should be directed to the Fund as Transfer Agent, One
First National Plaza, Suite 2594, Chicago, Illinois 60603, (312)
236-5388.
<PAGE>
SHAREHOLDER PLANS
Dividend Reinvestment Plan
Unless a shareholder elects otherwise by notice to the Fund,
all income dividends and all capital gains distributions payable
on shares of the Fund will be reinvested in additional shares of
the Fund at the net asset value in effect on the dividend or
distribution payment date. The Fund acts as the shareholder's
agent to reinvest dividends and distributions in additional
shares and hold for his/her account the additional shares so
acquired. A shareholder may at any time change his/her election
as to whether to receive his/her dividends and distributions in
cash or have them reinvested by giving written notice of such
change of election to the Fund. Such change of election applies
to dividends and distributions the record dates of which fall on
or after the date that the Fund receives the written notice.
RETIREMENT ACCOUNTS
Shares of the Fund may be purchased or redeemed for
retirement accounts through New York Stock Exchange registered
brokerage firms having a relationship with the Fund. Typically,
a shareholder will elect to custody his or her retirement account
at a brokerage firm. Upon the shareholder's direction to purchase
shares of the Fund for his or her retirement account, the
brokerage firm will effect a written order for the purchase of
Fund shares. Any such purchase or redemption will not be
effective until the order or request is received by the Fund.
Retirement account holdings, including the Fund, will appear
monthly on the retirement account statement issued directly by
the relevant brokerage firm.
The minimum initial investment for retirement accounts is
$5,000 and $1,000 for subsequent purchases. There are no
additional Fund charges for retirement accounts. Brokerage firms
usually charge a fixed yearly fee for the custody and
administration of retirement accounts.
DISTRIBUTIONS AND TAXES
Distributions
Dividends from the Fund's net investment income as well as
distributions designated as capital gains will ordinarily be
declared and paid annually in such a manner as to avoid paying
income tax on the Fund's net investment income and net realized
capital gains or being subject to a federal excise tax on
undistributed net investment income and net realized capital
gains. Such distributions and dividends will typically be made
in December. As current income is not an objective of the Fund,
the amount of dividends will likely be small. There is no fixed
dividend rate and there can be no assurance as to the payment of
any dividends or the realization of any gains.
Taxes
The Fund intends to maintain its qualification as a
"regulated investment company" under the Internal Revenue Code by
distributing as dividends not less than 90% of its taxable income
and by continuing to comply with all other requirements of
Subchapter M of the Code. If the Fund qualified, the Fund will
not be liable for Federal income taxes on amounts paid by it as
dividends and distributions.
For Federal income tax purposes, dividends paid by the Fund
and distributions from short-term capital gains, whether received
in cash or reinvested in additional shares, are taxable as
ordinary income. Distributions paid by the Fund from long-term
capital gains whether received in cash or reinvested in
additional shares, are taxable as long-term capital gains,
regardless of the length of time you have owned shares in the
Fund. The distributions are taxable whether you receive them in
cash or in additional shares. If you are not required to pay tax
on your income, you will not be required to pay Federal income
taxes on the amounts distributed to you. Dividends and capital
gain distributions declared in December and paid the following
January will be taxable in the year they are declared.
The Fund is required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividend payments,
distributions and redemption proceeds if a shareholder fails to
furnish the Fund with his/her social security or other tax
identification number ("TIN") and certify under penalty of
perjury that such number is correct and that he/she is not
subject to backup withholding due to the under reporting of
income. The certification form is included as part of the Share
Purchase Application and should be completed when the account is
established.
If you do not have a tax identification number, you should
indicate on the application form whether a number has been
applied for. The Fund may be required to backup withhold if a
certified TIN is not delivered to the Fund within 7 days.
Distributions by the Fund may subject an investor to state
and local taxes on the distributions, depending on the laws of a
shareholder's home state and locality. Because this section is
not intended to be a full discussion of present or proposed
Federal income tax law and its effect on shareholders,
shareholders are urged to consult their own tax adviser.
<PAGE>
CAPITAL STOCK
The Fund is a corporation organized under the laws of the
State of Illinois and was incorporated on October 24, 1988. The
Fund has 10,000,000 shares of authorized capital stock. Each
share has one vote and all shares participate equally in
dividends and other distributions by the Fund and in the residual
assets of the Fund in the event of liquidation. Shares of the
Fund have no preemptive rights and no conversion or subscription
rights. Shareholders are entitled to redeem shares as set forth
under "How to Redeem Shares." The investor will be the record
owner of all shares in his account with full shareholder rights.
SHAREHOLDER REPORTS AND MEETINGS
The Fund will provide to shareholders annual reports containing
certified financial statements. Additionally, shareholders will
receive other periodic reports, at least semi-annually,
containing unaudited financial statements. Shareholders will
receive a confirmation after each transaction affecting his or
her account with the Fund. The annual meeting of the
shareholders of the Fund shall be held in the month of
March. Any inquiries concerning the Fund may be made by
telephone (312) 236-5388, or by writing to the Fund at One First
National Plaza, Suite 2594, Chicago, Illinois 60603.
<PAGE>
<PAGE>
Performance: This graph shows the growth of a $10,000 investment
in your Fund and compares it to the S&P 500 index. For the
period beginning July 1, 1993 and ending December 31, 1998 your
investment in the Fund would be $23,498 as compared to a
theoretical investment in the S&P 500 which would have grown to
$31,036. This performance includes the reinvestment of
dividends.
<TABLE>
<CAPTION>
Cumulative Total Returns
Periods ended December 31, 1998
Past 1 Year Past 5 years Life of Fund
<S> <C> <C> <C>
Kenilworth Fund, Inc. 20.58% 126.85% 134.97
S&P 500 28.72% 194.24% 209.86
</TABLE>
Cumulative total returns reflect the Fund's actual performance
over a set period. The Fund began
operations on July 1, 1993.
<TABLE>
<CAPTION>
Average Annual Returns
Periods ended December 31, 1998
Past 1 Year Past 5 Years Life of Fund
<S> <C> <C> <C>
Kenilworth Fund, Inc. 20.58% 17.80 16.80%
S&P 500 28.72% 24.09 22.82%
</TABLE>
Average annual returns take the Fund's actual (or cumulative)
return and show you what would have
happened if the Fund had performed at a constant rate each year.
Total returns and yields are based on past results and are not
indicative of future performance.
<PAGE>
<PAGE>
KENILWORTH FUND, INC.
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION> Market
COMMON STOCKS 97.27%a Shares Value Percent
<S> <C> <C> <C>
Aircraft 1.07%
Boeing Corp. 4,000 $130,500 1.07
Autos 5.29%
Ford Motor 5,500 322,779 2.65
General Motors 4,500 322,029 2.64
Banks 4.90%
Wells Fargo & Co. 5,000 199,685 1.64
Citigroup, Inc. 8,000 397,496 3.26
Computer-Semiconductor 11.32%
Intel Corp. 10,000 1,185,620 9.74
Applied Materials, Inc.* 4,500 192,092 1.58
Computer Software 9.65%
Adaptec, Inc.* 5,000 87,810 0.72
Oracle Systems, Inc.* 2,250 97,031 0.80
Intuit, Inc.* 3,800 275,500 2.26
Network Associates, Inc.* 8,000 530,000 4.35
Cisco Systems 2,000 185,624 1.52
Computer Systems 6.48%
Hewlett-Packard 10,000 683,120 5.61
Quantum Corp.* 5,000 106,250 0.87
Drugs 14.28%
Merck & Co. 4,000 590,000 4.85
Bristol-Myers Squibb 4,600 615,535 5.05
Schering-Plough 6,000 331,500 2.72
Eli Lilly & Company 1,000 88,875 0.73
Warner-Lambert 1,500 112,781 0.93
Electrical Equipment 5.03%
General Electric 6,000 612,000 5.03
Finance 25.03%
Federal National Mortgage 13,500 999,000 8.20
Federal Home Loan Mortgage 23,500 1,514,269 12.44
Household International, Inc. 6,000 237,750 1.95
Associates First Capital Corp.7,006 296,879 2.44
<PAGE>
</TABLE>
<PAGE>
KENILWORTH FUND, INC.
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION> Market
COMMON STOCKS Shares Value Percent
<S> <C> <C> <C>
Insurance 7.31%
American International Group 6,000 579,750 4.76
Conseco, Inc. 3,500 106,750 0.88
Transamerica Corp. 1,000 115,500 0.95
Hartford Life, Inc. 1,500 87,375 0.72
Telecommunications 2.85%
ADC Telecommunication* 10,000 347,500 2.85
Utilities-Telephone 4.06%
Lucent Technologies 4,500 494,716 4.06
Total Investments 11,845,716
(Cost $6,148,063)
CASH AND RECEIVABLES
NET OF LIABILITIES 2.73% 332,559
TOTAL NET ASSETS 100.00% $12,178,275
NET ASSET VALUE PER SHARE $21.91
(based on 555,821 shares of capital stock outstanding)
a Percentages for various classifications relate to total
net assets.
*Non-income producing security.
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<PAGE>
KENILWORTH FUND, INC.
STATEMENT OF OPERATIONS
Year Ended
INVESTMENT INCOME December 31, 1998
INCOME:
Dividends $107,594
Interest 14,388
Total Income 121,982
EXPENSES:
Investment Advisory Fees 103,469
Administrative and Management Fees 30,000
Registration Fees 1,929
Auditing 5,604
Insurance and Other Expenses 6,233
Total Expenses 147,235
NET INVESTMENT LOSS: (25,253)
NET REALIZED LOSS ON INVESTMENTS (8,169)
NET INCREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS 2,109,675
NET REALIZED LOSS AND UNREALIZED APPRECIATION
ON INVESTMENTS 2,101,506
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,076,253
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<PAGE>
KENILWORTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
OPERATIONS: December 31, 1998 December 31,1997
<S> <C> <C>
Net Investment Loss ($25,253) ($26,744)
Net Realized Gain (Loss)
on Investments (8,169) 264,438
Net Increase in Unrealized
Appreciation
on Investments 2,109,675 1,320,457
Increase in Net Assets
from Operations 2,076,253 1,558,151
DISTRIBUTIONS To SHAREHOLDERS:
Distributions from
Net Investment Income --- ---
Distributions from Net Realized
Gains on Investments --- (237,694)
Decrease in Net Assets resulting
from Distributions --- (237,694)
CAPITAL SHARE TRANSACTIONS:
Proceeds From Shares Issued
(24,894 and 75,696 shares,
respectively) 462,667 1,338,097
Cost of Shares Redeemed
(7,957 and 14,740 shares,
respectively) (150,454) (270,698)
Reinvested Dividends
(0 and 9,888 shares,
respectively) --- 179,665
Increase in Net Assets from
Capital Share Transactions 312,213 1,247,064
Total Increase in
Net Assets 2,388,466 2,567,521
NET ASSETS AT BEGINNING OF YEAR
(538,884 and 468,040 shares
outstanding, respectively) 9,789,809 7,222,288
NET ASSETS AT END OF YEAR
(555,821 and 538,884 shares
outstanding, respectively) $12,178,275 $9,789,809
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<PAGE>
KENILWORTH FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Years Ended December 31
1998 1997 1996 1995 1994 1993a
<S> <C> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net Asset Value, beginning of period
$18.17 $15.43 $11.93 $9.64 $10.31 $10.00
Income from Investment Operations
Net Investment Income (Loss)
(0.04) (0.05) 0.01 0.06b 0.06b 0.05
Net Realized and Unrealized Gain (Loss) on Investments
3.78 3.24 3.51 2.64 (0.67) 0.31
Total....3.74 3.19 3.52 2.70 (0.61) 0.36
Less Distributions From Net Investment Income
0.00 0.00 0.01 0.06 0.06 0.05
From Net Realized Gains
0.00 0.45 0.01 0.35 0.00 0.00
Total....0.00 0.45 0.02 0.41 0.06 0.05
Net Asset Value,end of period
$21.91 $18.17 $15.43 $11.93 $9.64 $10.31
Total Return.....20.58% 20.67% 29.48% 28.03% (5.95%) 7.16%c
Ratios and Supplemental Data
Net Assets, end of period (in thousands)
$12,178 $9,790 $7,222 $5,099 $3,530 $2,840
Ratio of Net Expenses to Average Net Assets
1.42% 1.52% 1.51% 1.69%b 1.70%b 0.52%
Ratio of Net Investment Income to Average Net Assets
(0.24%) (0.29%) 0.06% 0.54%b 0.67%b 0.65%
Portfolio Turnover Rate
70.28% 76.99% 73.93% 82.17% 11.78% 0.00%
aJuly 1, 1993 (commencement of operations) to December 31, 1993
bNet of reimbursement of expenses by Advisor.
cAnnualized.
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
The Kenilworth Fund, Inc., (the "Fund") is registered under the
Investment Company Act of 1940 as a no-load, open-end,
non-diversified management investment company.
1. Summary of Significant Accounting Policies
a. The Fund is registered under the Investment Company Act
of 1940 as a no-load, open-end, non-diversified management
investment company. The Fund's objective is long-term capital
appreciation which it seeks by investing primarily in a
non-diversified portfolio of common stocks, preferred stocks,
warrants to purchase common stocks, convertible bonds and
fixed-income obligations of corporations and the United States
government.
Its books and records are maintained on the accrual basis.
Securities are valued at their last sale price as reported on a
securities exchange, or at their last bid price as applicable.
Short term instruments are valued at cost which approximates
market value. Cost amounts, as reported on the statement of net
assets, are the same for federal income tax purposes. For the
year ended December 31, 1998, purchases and sales of
investment securities were $7,869,601 and $7,282,167
respectively.
b. Security transactions are accounted for on the trade
date and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Realized gains
and losses from security transactions are reported on an
identified cost basis.
c. Provision has not been made for federal income tax since
the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all its income
to its shareholders and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment
companies.
d. As of December 31, 1998 there were 10,000,000 shares of
capital stock authorized.
e. The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual
results could differ from those estimates.
2. Investment Adviser and Investment Advisory Agreement and
Transactions with Related Parties:
The Fund has signed two agreements with Institutional
Portfolio Services, Ltd., ("IPS"), with whom certain officers of
the Fund are affiliated. Under the terms of the first agreement
(the investment advisory agreement) the Fund will pay IPS a
monthly investment advisory fee at the annual rate of 1.0% of
the daily net assets of the Fund. Under the terms of the second
agreement (the administrative and management services agreement)
the Fund will pay IPS a yearly administrative and management
services fee of $30,000 per year payable on a quarterly basis.
The advisory agreement requires the adviser to reimburse the Fund
in the event that the expenses of the Fund in any fiscal year
exceed 1.7%.
3. Sources of Net Assets:
As of December 31, 1998, the sources of net assets were as
follows:
Fund shares issued and outstanding $6,514,045
Unrealized Appreciation of Investments 5,697,652
Undistributed Investment Loss (25,253)
Accumulated Net Realized Loss (8,169)
Total $12,178,275
Aggregate Net Unrealized Appreciation as of December 31, 1998
consisted of the following:
Aggregate gross unrealized appreciation: $5,856,436
Aggregate gross unrealized deprecation: (158,784)
Net unrealized appreciation: $5,697,652
At December 31, 1998, the Fund has tax basis capital losses of
$8,169 which may be carried over to offset future capital gains.
Such losses expire in 2006.
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of the
Kenilworth Fund, Inc.
Chicago, Illinois
We have audited the accompanying statement of net assets of
Kenilworth Fund, Inc. as of December 31, 1998, and the related
statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the three years
in the period 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
audits. The financial highlights of Kenilworth Fund, Inc. for
periods prior to December 31, 1996, were audited by other
auditors, whose report, dated January 15, 1996, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and 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 verification by
examination of securities owned and confirmation with securities
brokers as of December 31, 1998. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Kenilworth Fund, Inc. as of December
31, 1998, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the
period then ended, and financial highlights for each of the three
years in the period then ended, in conformity with generally
accepted accounting principles.
McGladrey & Pullen, LLP
Chicago, Illinois
January 8, 1999
<PAGE>
