<PAGE>
AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION
ON SEPTEMBER 27, 1996. REGISTRATION NO.: 2-44752
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-
Pre-Effective Amendment No. __ _
Post-Effective Amendment No. 43 X
-- -
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-
Amendment No. 43
--
(Check appropriate box or boxes.)
STRATTON GROWTH FUND, INC.
--------------------------
(Exact Name of Registrant as Specified in Charter)
610 W. Germantown Pike, Suite 300, Plymouth Meeting, PA 19462
--------------------------------------------------------------
(Address of Principal Executive Offices)
(610) 941-0255
--------------
(Registrant's Telephone Number, including Area Code)
James A. Beers, Assistant Secretary/Treasurer
---------------------------------------------
Stratton Growth Fund, Inc.
-------------------------
610 West Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
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(Name and Address of Agent for Service)
With copies to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
It is proposed that this filing will become effective
(check appropriate box)
_____ immediatelyupon filing pursuant to paragraph (b)
X on (September 30, 1996) pursuant to paragraph (b)
_____
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1).
_____ 75 days after filing pursuant to paragraph (a)(2).
_____ on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
_____ this post-effective amendment designates a new
effective date for a previously filed post-
effective amendment.
The Registrant has previously registered an indefinite number of shares of
common stock of Stratton Growth Fund, Inc. pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant's Rule 24f-2 notice for
fiscal year-ended May 31, 1996 was filed with the Commission on
July 26, 1996.
Total Number of Pages: 132 Exhibit Index begins on Page: 51
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
PART A
ITEM NO. PROSPECTUS CAPTION
- -------- ------------------
1. Cover Page......................... Cover Page
2. Synopsis........................... Fee Table
3. Condensed Financial Information.... Financial Highlights; Performance
Calculations
4. General Description of Registrant.. Introduction; The Fund's Investment
Objective, Policies, Restrictions and
Risk Considerations; Description of
Common Stock
5. Management of the Fund............ Management of the Fund; Investment
Advisor; Service Providers and
Underwriter.
5a. Management's Discussion of Fund
Performance....................... Inapplicable
6. Capital Stock and Other
Securities........................ How to Buy Fund Shares-Reinvestment of
Income Dividends and Capital Gains
Distributions; Income Dividends and
Capital Gains Distributions: Tax
Treatment; Description of Common Stock
7. Purchase of Shares Being Offered.. Service Providers and Underwriter;
Computation of Net Asset Value; How to
Buy Fund Shares; Exchange Privilege;
Retirement Plans
8. Redemption or Repurchase.......... How to Redeem Fund Shares
9. Pending Legal Proceedings......... Inapplicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
- -------- ----------------------
10. Cover Page....................... Cover Page
11. Table of Contents................ Table of Contents
12. General Information and History.. Inapplicable
13. Investment Objective and Policies. Investment Restrictions
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
PART B STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
- -------- ----------------------
14. Management of the Fund.......... Directors and Officers of the Fund
15. Control Persons and Principal
Holders of Securities........... Directors and Officers of the Fund
16. Investment Advisory and Other
Services........................ The Investment Advisor and Other Service
Providers
17. Brokerage Allocation and Other
Practices....................... Portfolio Transactions and Brokerage
Commissions
18. Capital Stock and Other
Securities...................... Covered in Part A
19. Purchase, Redemption and Pricing
of Securities Being Offered..... Covered in Part A
20. Tax Status...................... Additional Information Concerning Taxes
21. Underwriters.................... Underwriter
22. Calculation of Performance
Data............................ Additional Information on Performance
Calculations
23. Financial Statements............ Financial Statements; Report of
Independent Certified Public Accountants
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
item so numbered in Part C of this Post-Effective Amendment No. 43 to the
Registration Statement.
<PAGE>
PROSPECTUS
SEPTEMBER 30, 1996
[LOGO OF NO-LOAN MUTUAL FUND COUNCIL APPEARS HERE]
Stratton Growth Fund, Inc. is a no-load mutual fund seeking as its primary
objective possible growth of capital with current income from interest and
dividends as a secondary objective. The Fund's investments will normally
consist of common stock and securities convertible into or exchangeable for
common stock.
This Prospectus sets forth concisely the information about the Fund that
prospective investors ought to know before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by
calling or writing the Fund at the telephone number or address below. The
"Statement of Additional Information" bears the same date as this Prospectus
and is incorporated by reference into this Prospectus in its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
[LOGO OF STRATTON GROWTH FUND, INC. APPEARS HERE]
A NO-LOAD FUND
PROSPECTUS / SEPTEMBER 30, 1996
PLYMOUTH MEETING EXECUTIVE CAMPUS . 610 W. GERMANTOWN PIKE, SUITE 300
PLYMOUTH MEETING, PA 19462-1050 . 610-941-0255
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction............................................................. 3
Fee Table................................................................ 3
Financial Highlights..................................................... 4
The Fund's Investment Objective, Policies, Restrictions & Risk
Considerations.......................................................... 5-6
Management of the Fund................................................... 6-7
Investment Advisor....................................................... 7-8
Computation of Net Asset Value........................................... 8
How to Buy Fund Shares................................................... 9-11
Investing by Mail....................................................... 9
Investing by Wire....................................................... 9
Automatic Investment Plan............................................... 10
Direct Deposit Program.................................................. 10
Reinvestment of Income Dividends and Capital Gains Distributions........ 10
Additional Information.................................................. 11
Investment Application................................................... 12-a
How to Redeem Fund Shares................................................ 11-13
By Written Request...................................................... 11
By Automated Clearing House ("ACH")..................................... 12
Systematic Cash Withdrawal Plan......................................... 12
Additional Information.................................................. 13
Exchange Privilege....................................................... 14
Retirement Plans......................................................... 15
Income Dividends and Capital Gains Distributions: Tax Treatment.......... 15-16
Performance Calculations................................................. 16
Description of Common Stock.............................................. 17
General Information...................................................... 17
Service Providers & Underwriter.......................................... 18
Audits and Reports....................................................... 18
Automatic Investment Plan Application.................................... 20
</TABLE>
- -------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND'S "DISTRIBUTOR", FUND/PLAN BROKER SERVICES, INC., 2 W.
ELM STREET, P.O. BOX 874, CONSHOHOCKEN, PA 19428-0874, OR BY TELEPHONING 800-
634-5726.
2
<PAGE>
INTRODUCTION
Stratton Growth Fund, Inc. (the "Fund") is a no-load open-end diversified
mutual fund which seeks as its primary objective possible growth of capital
with current income from interest and dividends as a secondary objective.
The Fund's investments will normally consist of common stock and securities
convertible into or exchangeable for common stock. Preferred stocks and debt
securities which are not convertible will normally not be purchased. Due to
the inherent risks of investments there can be no assurance that the objective
of the Fund will be achieved.
FEE TABLE
Below is a summary of the Operating Expenses that the Fund incurred during its
last fiscal year. A hypothetical example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees...................................................... 0.75%
Other Expenses....................................................... 0.41%
----
Total Fund Operating Expenses........................................ 1.16%
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming: (1) a 5% annual
return; and (2) redemption at the end of each
time period: $12 $37 $63 $140
</TABLE>
WHILE THE FOREGOING EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN MORE OR LESS THAN 5%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN.
The purpose of this Fee Table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load or redemption or exchange
fees, nor does it bear any fees pursuant to a Rule 12b-1 Plan; however, the
Transfer Agent currently charges investors who request redemptions by wire
transfer a fee of $9 for each such payment. For more complete descriptions of
the various costs and expenses, see Investment Advisor, How to Buy Fund
Shares, How to Redeem Fund Shares, Retirement Plans and Service Providers &
Underwriter in this Prospectus and the financial statements and related notes
contained in the Statement of Additional Information.
The investment advisory fee is payable monthly at an annual rate of 3/4 of
1% of the Fund's daily net asset value. Due to the complexities in researching
and investing in equity markets, the investment advisory fee paid by the Fund
is higher than that paid by most other investment companies. The Fund believes
that the fee is comparable to, and in some cases lower than, the fees paid by
other investment companies with similar investment objectives and policies.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information provides financial highlights for a share of the
Fund outstanding during the period stated. The information for each of the
five years in the period ended May 31, 1996 has been audited by Tait, Weller &
Baker, certified public accountants, whose report thereon appears in the
Fund's Statement of Additional Information dated September 30, 1996. This data
should be read in conjunction with the other financial statements and notes
thereto, also included in the Fund's Statement of Additional Information.
Additional information about the performance of the Fund is contained in the
Fund's annual report, which can be obtained without charge by calling 800-634-
5726.
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991* 1990* 1989* 1988* 1987*
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR....... $ 22.35 $ 20.65 $ 20.89 $ 20.55 $ 19.75 $ 19.66 $ 21.84 $ 19.48 $ 22.24 $ 24.25
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.556 0.537 0.51 0.56 0.64 0.72 0.82 0.55 0.58 0.37
Net Gains or Losses on
Securities
(both realized and
unrealized)............. 5.759 2.978 0.66 1.16 1.32 0.65 0.20 3.83 (1.11) (0.03)
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
Total from Investment
Operations........... 6.315 3.515 1.17 1.72 1.96 1.37 1.02 4.38 (0.53) 0.34
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)...... (0.540) (0.540) (0.510) (0.565) (0.725) (0.82) (0.71) (0.53) (0.70) (0.28)
Distributions (from
capital gains).......... (0.945) (1.275) (0.905) (0.815) (0.435) (0.46) (2.49) (1.49) (1.53) (2.07)
Returns of Capital...... -- -- -- -- -- -- -- -- -- --
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
Total Distributions.. (1.485) (1.815) (1.415) (1.38) (1.16) (1.28) (3.20) (2.02) (2.23) (2.35)
------- -------- --------- -------- -------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR.................... $ 27.18 $ 22.35 $20.65 $ 20.89 $ 20.55 $ 19.75 $ 19.66 $ 21.84 $ 19.48 $ 22.24
======= ======== ========= ======== ======== ======= ======= ======= ======= =======
TOTAL RETURN............ 29.62% 18.61% 5.92% 8.91% 10.57% 7.58% 4.94% 24.25% (2.17%) 1.85%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year
(in 000's).............. $42,880 $ 31,719 $ 25,475 $ 25,315 $ 25,311 $25,111 $23,407 $20,268 $16,859 $19,326
Ratio of Expenses to
Average Net Assets...... 1.16% 1.31% 1.34% 1.39% 1.35% 1.41% 1.38% 1.41% 1.48% 1.50%
Ratio of Net Income to
Average Net Assets...... 2.28% 2.70% 2.51% 2.76% 3.20% 3.94% 4.09% 2.79% 2.80% 1.74%
Portfolio Turnover Rate. 15.41% 42.54% 49.81% 35.34% 59.76% 56.78% 54.80% 49.85% 34.42% 22.69%
</TABLE>
*Not covered by independent accountants report.
The Fund's portfolio turnover is calculated by dividing the lesser of the
Fund's annual aggregate purchases or sales of its portfolio securities by the
average monthly value of the Fund's portfolio securities during the year.
4
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE, POLICIES, RESTRICTIONS AND
RISK CONSIDERATIONS
The primary objective of the Fund is to seek possible growth of capital for
its shareholders' investments, with current income from interest and dividends
as a secondary objective. Of course, there is no assurance that this objective
will be achieved.
On an overall portfolio basis, the Investment Advisor will seek appreciation
of capital for the Fund by continuously reviewing both individual securities
and relevant economic and social conditions so that in the view of the
Investment Advisor, and reviewed by the Fund's Board of Directors, the Fund's
portfolio has the greatest possible potential for capital growth consistent
with reasonable risk. The Fund's investments will normally consist of common
stock and securities convertible into, or exchangeable for, common stock. In
making its investment decision, the Investment Advisor examines the securities
of domestic companies, generally those with dividend payment records, with a
view to selecting those securities which it believes will provide a greater
opportunity for growth and return of capital. Preferred stocks and debt
securities which are not convertible into common stock will normally not be
purchased. However, when the Board of Directors of the Fund, upon the advice
of the Investment Advisor, determines that a temporary defensive position is
warranted, it may invest in non-convertible preferred stocks, debt securities
and domestic corporate and Government fixed income obligations without
limitation and to the extent such investments are made, the Fund will not be
achieving growth of capital. The Fund's relative equity and cash (or cash
equivalent) positions may also be changed as the Fund alters its evaluation of
trends in general securities price levels.
As a matter of fundamental policy, which cannot be changed without the vote of
a majority of the Fund's outstanding shares, the Fund will not invest more
than 25% of the value of its total assets in any one industry. The Fund does
not intend to obtain short-term trading profits. It is anticipated that the
Fund's annual portfolio turnover rate will generally fall within a 40% to 70%
range; but the rate of portfolio turnover is not a limiting factor when the
Fund's management deems changes appropriate and could be less than 40% or
greater than 70% in any particular year, depending upon market and other
considerations.
The Fund may also invest in real estate investment trusts ("REITs"). Equity
REITs invest directly in real property while mortgage REITs invest in
mortgages on real property. REITs may be subject to certain risks associated
with the direct ownership of real estate including declines in the value of
real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, and variations in rental income. Generally, increases in
interest rates will decrease the value of high yielding securities and
increase the costs of obtaining financing, which could decrease the value of
the portfolio's investments. In addition, equity REITs may be affected by
changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified and
are subject to the risks of financing projects. REITs are also subject to
heavy cash flow dependency, defaults by borrowers, self liquidation and the
possibility of failing to qualify for tax-free pass-through of income under
the Internal Revenue Code and to maintain exemption
5
<PAGE>
from the Investment Company Act of 1940, as amended (the "1940 Act"). REIT's
pay dividends to their shareholders based upon available funds from
operations. It is quite common for these dividends to exceed the REIT's
taxable earnings and profits resulting in the excess portion of such dividends
being designated as a return of capital. The Fund intends to include the gross
dividends from such REIT's in its distributions to its shareholders and,
accordingly, a portion of the Fund's distributions may also be designated as a
return of capital.
The following investment restrictions are deemed fundamental policies and
they, in addition to the Fund's investment objective stated above, may be
changed only by the approval of the holders of a "majority" of the Fund's
shares (as defined under "General Information"):
THE FUND WILL NOT:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer, except for securities of the United States Government or
agencies thereof.
2. Invest in more than 10% of any class of securities of any one issuer
(except for government obligations) or in more than 10% of the voting
securities of any one issuer.
3. Invest more than 5% of the value of its total assets in securities of
companies which (including operations of their predecessors and of
subsidiaries if the company is a holding company) have not had a record of
at least three years of continuous operations and in equity securities
which are not readily marketable (that is, with a limited trading market).
4. Borrow money, except from banks for temporary or emergency purposes (but
not for investment purposes), provided that such borrowing shall not exceed
5% of its total assets (at the lower of cost or market value).
5. Purchase or sell real estate or interests in real estate. This will not
prevent the Fund from investing in publicly-held real estate investments
trusts or marketable securities which may represent indirect interests in
real estate.
A complete list of those restrictions on the Fund's investment activities
which cannot be changed without the approval of the holders of a majority of
the Fund's shares as defined in the 1940 Act, appears in the Statement of
Additional Information.
MANAGEMENT OF THE FUND
Overall responsibility for management and supervision of the Fund rests with
the Fund's Directors. There are currently seven Directors, five of whom are
not "interested persons" of the Fund within the meaning of that term under the
1940 Act. The Board meets regularly five times each year, and at other times
as necessary.
By virtue of the functions performed by Stratton Management Company as
Investment Advisor, the Fund requires no employees other than its executive
officers, all of whom are employed by the Advisor. Three of the Advisor's
employees devote full-time to the affairs and administration of the Fund,
Stratton Monthly Dividend Shares, Inc. and The Stratton Funds, Inc.
(collectively, the "Stratton Group"). Three other employees of the Advisor
also devote a significant amount of time to the affairs of the Stratton Group.
6
<PAGE>
The Statement of Additional Information contains the names of and general
background information regarding each Director and Executive officer of the
Fund.
INVESTMENT ADVISOR
The Investment Advisor to the Fund is Stratton Management Company (the
"Advisor"), Plymouth Meeting Executive Campus, 610 W. Germantown Pike, Suite
300, Plymouth Meeting, PA 19462-1050.
The Advisor provides investment advisory services, consisting of portfolio
management, for a variety of individuals and institutions and had
approximately $1.311 billion in assets under management at June 30, 1996. The
principal executive officer of the Advisor is James W. Stratton, who owns all
the Advisor's issued and outstanding voting securities. Since 1972, Mr.
Stratton has been primarily responsible for the day-to-day investment
management of the Fund's portfolio. Mr. Stratton also serves as Chairman of
the Board of the Fund, Stratton Monthly Dividend Shares, Inc. and The Stratton
Funds, Inc. As of August 31, 1996 the Profit Sharing Plan of the Advisor owned
47,204 shares or 2.8% of the Fund's outstanding shares.
The Advisor also provides investment advice to Stratton Monthly Dividend
Shares, Inc. ("SMDS"), a no-load fund, whose objective is a high rate of
return from dividend and interest income on its investments in common stock
and securities convertible into common stock and to Stratton Small-Cap Yield
Fund ("SSCY"), a no-load series of The Stratton Funds, Inc., whose objective
is to achieve both dividend income and capital appreciation through investment
in the equity securities of companies with total market capitalizations at the
time of investment of less than $500 million and which are outside the
Standard & Poor's 500 Index. As of August 31, 1996, SMDS and SSCY had net
assets of $102.9 million and $19.8 million, respectively.
The Fund entered into its current Investment Advisory Agreement (the
"Agreement") with the Advisor as of July 1, 1989. The agreement was approved
by the Fund's shareholders on June 22, 1989 and was last approved by the
Fund's Board of Directors on June 25, 1996. Subject to the supervision and
direction of the Fund's Board of Directors, the Advisor manages the Fund's
investment portfolio in accordance with the Fund's stated investment objective
and policies, makes investment decisions for the Fund and places orders to
purchase and sell securities on behalf of the Fund.
The Advisor performs these services for an investment advisory fee payable
monthly at an annual rate of 3/4 of 1% of the Fund's daily net asset value.
Due to the complexities in researching and investing in equity markets, the
investment advisory fee paid by the Fund is higher than that paid by most
other investment companies. The Fund believes that the fee is comparable to,
and in some cases lower than, the fees paid by other investment companies with
similar investment objectives and policies.
The Advisor may also charge the Fund a portion of the costs of: (1) any
equipment used solely in Fund operations; and (2) certain administrative and
accounting services for the Fund; provided, however, that such reimbursement
shall be limited to the amount which would cause the ratio of net operating
expenses to average net assets for the remaining fiscal year not to exceed 2%.
This reimbursement is in addition to the fee paid to the Advisor for
investment advisory services.
7
<PAGE>
For a more complete description of the terms of the Investment Advisory
Agreement, as well as for the guidelines followed by the Advisor in seeking to
obtain the best price and execution of the purchase and sale of securities for
the Fund, refer to the Statement of Additional Information.
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent and responsibility for certain accounting services
(e.g. computation of the net asset value of the Fund's shares and maintenance
of the Fund's books and financial records) were transferred from the Advisor
to Fund/Plan. At that time the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense reimbursements from the Fund in the foreseeable future.
Fund/Plan currently receives a fee at the annual rate of $20,000 for these
services.
The Fund has also entered into an Administration Agreement with Fund/Plan
dated March 1, 1990. As a result of the Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan including responsibility for all federal and state
compliance matters. Fund/Plan receives a fee payable monthly at the annual
rate of $30,000 for providing these services. Although the Advisor was
entitled to receive reimbursement from the Fund for the expenses incurred in
the performance of these services, such reimbursement was never sought.
Accordingly, the Advisor has voluntarily agreed to waive $15,000 annually of
the advisory fees due it under the Investment Advisory Agreement to offset a
significant portion of the fee that the Fund will incur under the
Administration Agreement. This fee waiver can be terminated or reduced by the
Advisor upon 60 days prior written notice to the Fund.
COMPUTATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once each business day
as of the close of regular trading hours (currently 4:00 p.m. Eastern time) on
the New York Stock Exchange. Such determination will be made by dividing the
value of all securities and other assets (including dividends accrued but not
collected) less any liabilities (including accrued expenses), by the total
number of shares outstanding.
Portfolio securities are valued as follows:
1. Securities listed or admitted to trading on any national securities
exchange are valued at their last sale price on the exchange where the
securities are principally traded or, if there has been no sale on that
date, at the mean between the last reported bid and asked prices.
2. Securities traded in the over-the-counter market are valued at the last
sale price, if carried in the National Market Issues section by NASDAQ;
other over-the-counter securities are valued at the mean between the
closing bid and asked prices obtained from a principal market maker.
3. All other securities and assets are valued at their fair value as
determined in good faith by the Board of Directors of the Fund, which may
include the amortized cost method for securities maturing in sixty days or
less and other cash equivalent investments.
Determination of the net asset value may be suspended when the right of
redemption is suspended as provided under "How to Redeem Fund Shares" on pages
xx through xx.
8
<PAGE>
HOW TO BUY FUND SHARES
Shares of the Fund are offered on a continuous basis at their net asset value.
The net asset value per share of the Fund, and hence the purchase price of the
shares, will vary with the value of securities held in the Fund's portfolio.
Purchasers of the Fund's shares pay no "sales load"; the full amount of the
purchase price goes toward the purchase of shares of the Fund. Purchases are
made at the net asset value next determined following receipt of a purchase
order by the Fund's Transfer Agent, Fund/Plan, at the address set forth below,
accompanied by payment for the purchase. The Fund may also from time to time
accept wire purchase orders from broker/dealers and institutions who have been
approved previously by the Fund.
Orders for shares of the Fund received prior to the close of regular trading
hours on the New York Stock Exchange (currently 4:00 p.m. Eastern time) are
confirmed at the net asset value determined at the close of regular trading
hours on the Exchange on that day.
Orders received at the address set forth below subsequent to the close of
regular trading hours on the New York Stock Exchange will be confirmed at the
net asset value determined at the close of regular trading hours on the next
day the Exchange is open.
INVESTING BY MAIL
- -----------------
An account may be opened and shares of the Fund purchased by completing the
Investment Application enclosed within this Prospectus and sending the
Application, together with a check for the desired amount, payable to
"Stratton Growth Fund, Inc.," to the Fund c/o Fund/Plan Services, Inc., 2 W.
Elm Street, P.O. Box 874, Conshohocken, PA 19428. The minimum amount for the
initial purchase of shares of the Fund is $2,000. Subsequent purchases may be
made in amounts of $100 or more. (Note: There are no minimum investment
amounts applied to retirement plans). After each purchase you will receive an
account statement for the shares purchased. Once a shareholder's account has
been established, additional purchases may be made by sending a check payable
to "Stratton Growth Fund, Inc.," to the Fund c/o Fund/Plan Services, Inc.,
P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your
account statement and include your Fund account number on your check (as well
as the attributable year for retirement plan investments, if applicable).
PLEASE NOTE: A $20 FEE WILL BE CHARGED TO YOUR ACCOUNT FOR ANY PAYMENT CHECK
RETURNED TO THE CUSTODIAN.
INVESTING BY WIRE
- -----------------
You may also pay for shares by instructing your bank to wire Federal funds to
the Fund's Transfer Agent. Federal funds are monies of member banks within the
Federal Reserve System. Your bank must include the full name(s) in which your
account is registered and your Fund account number, and should address its
wire as follows:
UNITED MISSOURI BANK KC NA
ABA #10-10-00695
For: Fund/Plan Services, Inc.
Account #98-7037-071-9
FBO: "STRATTON GROWTH FUND, INC."
Account of (exact name(s) of account registration)
Shareholder Account #
----------------------------
9
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If you are opening a new account by wire transfer, you must first telephone
the Fund's Transfer Agent at 800-441-6580 to request an account number and
furnish the Fund with your social security or other tax identification number.
A completed application with signature(s) of registrant(s) must be filed with
the Fund immediately subsequent to the initial wire. Your bank will generally
charge a fee for this wire. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve
wire systems.
PLEASE NOTE: YOUR INITIAL FUND ACCOUNT MUST SATISFY THE $2,000 MINIMUM BALANCE
REQUIREMENT IN ORDER TO PARTICIPATE IN THE FOLLOWING PROGRAMS OR PLANS.
AUTOMATIC INVESTMENT PLAN
- -------------------------
Shares of the Fund may be purchased through our "AUTOMATIC INVESTMENT PLAN"
(tear-out application in back of this Prospectus). The Plan provides a
convenient method by which investors may have monies deducted directly from
their checking, savings or bank money market accounts for investment in the
Fund. The minimum investment pursuant to this Plan is $100 per month. The
account designated will be debited in the specified amount, on the date
indicated, and Fund shares will be purchased. Only an account maintained at a
domestic financial institution which is an Automated Clearing House ("ACH")
member may be so designated. The Fund may alter, modify, or terminate this
Plan at any time.
DIRECT DEPOSIT PROGRAM
- ----------------------
This program enables a shareholder to purchase additional shares by having
payments from the Federal government ONLY (i.e. Federal salary, Social
Security and certain veterans, military or other payments) automatically
deposited into the shareholder's account in the Fund. The minimum investment
is $100.
To elect this privilege, a shareholder must complete a Direct Deposit
Enrollment Form for each type of payment desired. The form may be obtained by
contacting the Fund's Transfer Agent, Fund/Plan Services, Inc., at the address
or telephone number shown below. Death or legal incapacity will terminate a
shareholder's participation in this program. A shareholder may terminate his
or her participation by notifying, in writing, the appropriate Federal agency.
In addition, the Fund may terminate participation upon 30 days' notice to the
shareholder.
REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- ----------------------------------------------------------------
Any shareholder may at any time request and receive automatic reinvestment of
any Fund income dividends and capital gains distributions, or income dividends
only, or capital gains distributions only, in additional shares of the Fund
unless the Fund's Board of Directors determines otherwise. The Fund will send
the shareholder an account statement reflecting all such reinvestments. The
$100 minimum requirement for subsequent investments does not apply to the
reinvestments of income dividends and/or capital gain distributions.
The election to reinvest may be made on the Investment Application enclosed
within this Prospectus or by writing to Stratton Growth Fund, Inc., c/o
Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA
19428-0874. Any such election will automatically continue for subsequent
dividends and/or distributions until written revocation is received by the
Fund. If no election is chosen the Fund will automatically reinvest your
dividends and capital gains.
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ADDITIONAL INFORMATION
- ----------------------
Shares of the Fund may be purchased or redeemed through certain broker/dealers
who may charge a transaction fee, which would not otherwise be charged if the
shares were purchased directly from the Fund.
The Fund reserves the right to reject purchases under circumstances or in
amounts considered disadvantageous to the Fund. CERTIFICATES WILL NOT BE
ISSUED UNLESS REQUESTED IN WRITING BY THE REGISTERED SHAREHOLDER(S).
The Fund is required by Federal tax law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions)
paid to shareholders who have not complied with IRS regulations regarding Tax
ID Certification. In order to avoid this withholding requirement, you must
certify via signature on your Application, or on a separate W-9 Form supplied
by the Transfer Agent, that your Social Security or Taxpayer Identification
Number is correct (or you are waiting for a number to be issued to you), and
that you are currently not subject to backup withholding, or you are exempt
from backup withholding.
While the Fund provides most shareholder services, certain special services,
such as a request for a historical transcript of an account, may involve an
ADDITIONAL FEE. To avoid having to pay such a fee for these special services,
it is important that you SAVE your last Year-to-Date Confirmation Statement
received each year.
PLEASE REFER ALL QUESTIONS AND CORRESPONDENCE ON NEW AND EXISTING ACCOUNTS
(SUCH AS PURCHASES OR REDEMPTIONS, OR STATEMENTS NOT RECEIVED), DIRECTLY TO
THE FUND'S TRANSFER AGENT, BY WRITING TO FUND/PLAN SERVICES, INC., 2 W. ELM
STREET, P.O. BOX 874, CONSHOHOCKEN PA 19428-0874, OR BY CALLING FUND/PLAN'S
CUSTOMER SERVICE DEPARTMENT AT 800-441-6580. PLEASE REFERENCE YOUR FUND NAME
AND ACCOUNT NUMBER.
HOW TO REDEEM FUND SHARES
BY WRITTEN REQUEST
- ------------------
Shareholders may redeem shares of the Fund by mail, by writing directly to the
Fund's Transfer Agent, Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box
874, Conshohocken, PA 19428-0874, and requesting liquidation of all or any
part of their shares. The redemption request must be signed exactly as the
shareholder's name appears in the registration and must include the Fund name
and account number. If shares are owned by more than one person, the
redemption request must be signed by all owners exactly as their names appear
in the registration. Shareholders holding stock certificates must deliver them
along with their signed redemption requests. To protect your account, the
Transfer Agent and the Fund from fraud, signature guarantees are required for
certain redemptions. SIGNATURE GUARANTEES ARE REQUIRED FOR: (1) all
redemptions of $5,000 or more; (2) any redemptions if the proceeds are to be
paid to someone other than the person(s) or organization in whose name the
account is registered; (3) any redemptions which request that the proceeds be
wired to a bank; (4) requests to transfer
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<PAGE>
the registration of shares to another owner; and (5) any redemption if the
proceeds are to be sent to an address other than the address of record. The
Transfer Agent requires that signatures be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934. Eligible guarantor institutions include banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. The
Transfer Agent cannot accept guarantees from notaries public. In certain
instances, the Fund may require additional documents, such as certified death
certificates or proof of fiduciary or corporate authority. (NOTE: PLEASE CALL
OUR TRANSFER AGENT TO VERIFY REQUIRED LANGUAGE FOR ALL RETIREMENT PLAN
REDEMPTION REQUESTS). No redemption shall be made unless a shareholder's
investment application is first on file. In addition, the Fund will not accept
redemption requests until checks (including certified checks or cashier's
checks) received for the shares purchased have cleared, which can be as long
as 15 days.
Redemption requests mailed to the Fund's Advisor located in Plymouth Meeting,
PA must be forwarded to the Transfer Agent and will not be effected until they
are received in good order by the Transfer Agent. The Transfer Agent cannot
accept redemption requests which specify a particular forward date for
redemption.
BY AUTOMATED CLEARING HOUSE ("ACH")
- -----------------------------------
A shareholder may elect to have redemption proceeds, cash distributions or
systematic cash withdrawal payments transferred to his or her bank, savings
and loan association or credit union that is an on-line member of the ACH
system. There are no fees associated with the use of the ACH service.
Written ACH redemption requests must be received by the Fund's Transfer Agent
before 4 p.m. Eastern time to receive that day's closing net asset value. ACH
redemptions will be sent on the day following the shareholder's request; funds
will be available two days later.
Redemption proceeds (including systematic cash withdrawals), as well as
dividend and capital gains distributions, may be sent to a shareholder via
Federal Funds wire. However, the Fund's Transfer Agent will charge a $9 fee
for each Federal Funds wire transmittal, which will be deducted from the
amount of the payment.
SYSTEMATIC CASH WITHDRAWAL PLAN
- -------------------------------
The Fund offers a Systematic Cash Withdrawal Plan as another option which may
be utilized by an investor who wishes to withdraw funds from his or her
account on a regular basis. To participate in this option, an investor must
either own or purchase shares having a value of $10,000 or more. Automatic
payments by check will be mailed to the investor on either a monthly,
quarterly, semi-annual or annual basis in amounts of $50 or more. All
withdrawals are processed on the 25th of the month or, if such day is not a
business day, on the next business day and paid promptly thereafter. Please
complete the appropriate section on the Investment Application enclosed within
this Prospectus, indicating the amount of the distribution and the desired
frequency.
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<PAGE>
An investor should realize that if withdrawals exceed income dividends and
capital gains distributions, the invested principal will be depleted. Thus,
depending on the size of the withdrawal payments and fluctuations in the value
of the shares, the original investment could be exhausted entirely. An
investor may change or stop the Plan at any time by written notice to the
Fund. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS MUST BE AUTOMATICALLY
REINVESTED TO PARTICIPATE IN THIS PLAN. Stock certificates cannot be issued
under the Systematic Cash Withdrawal program.
ADDITIONAL INFORMATION
- ----------------------
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem shares in any account for its then
current net asset value (which will be paid to the shareholder within five
business days, or such shorter time period as may be required by applicable
S.E.C. rules) if at any time the total investment does not have a value of at
least $500. The shareholder will be notified that the value of his or her
account is less than the required minimum and will be allowed at least 45 days
to bring the value of the account up to at least $500 before the redemption is
processed.
The redemption price will be the net asset value of the shares to be redeemed
as determined at the close of regular trading hours on the New York Stock
Exchange after receipt at the address set forth above of a request for
redemption in the form described above and the certificates (if any)
evidencing the shares to be redeemed. No redemption charge will be made.
Payment for shares redeemed will be made within five business days, or such
shorter time period as may be required by applicable S.E.C. rules, after
receipt of the certificates (or of the redemption request where no
certificates have been issued) by mailing a check to the shareholder's address
of record. PLEASE NOTE, A $9 FEE WILL BE CHARGED TO YOUR ACCOUNT AT THE TIME
OF REDEMPTION IF INSTRUCTIONS TO WIRE PROCEEDS ARE GIVEN; THERE IS NO FEE TO
MAIL PROCEEDS.
THE FUND MAY ALSO FROM TIME TO TIME ACCEPT TELEPHONE REDEMPTION REQUESTS, FROM
BROKER/DEALERS AND INSTITUTIONS WHO HAVE BEEN APPROVED PREVIOUSLY BY THE FUND.
Neither the Fund nor any of its service contractors will be liable for any
loss, expense or cost in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use such procedures as are considered
reasonable, including requesting a shareholder to correctly state his or her
Fund account number, the name in which his or her account is registered, his
or her banking institution, bank account number and the name in which his or
her bank account is registered. To the extent that the Fund fails to use
reasonable procedures to verify the genuineness of telephone instructions, it
and/or its service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized. During times of unusual market
conditions it may be difficult to reach the Fund by telephone. If the Fund
cannot be reached by telephone, shareholders should follow the procedures for
redeeming by mail as set forth above.
The right of redemption may not be suspended or payment upon redemption
deferred for more than five business days, or such shorter time period as may
be required by applicable S.E.C. rules, except: (1) when trading on the New
York Stock Exchange is restricted as determined by
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<PAGE>
the Securities and Exchange Commission or such Exchange is closed for other
than weekends and holidays; (2) when the Securities and Exchange Commission
has by order permitted such suspension; or (3) when an emergency, as defined
by the rules of the Securities and Exchange Commission, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable. In case of a suspension of the determination of the
net asset value, the right of redemption is also suspended and unless a
shareholder withdraws his request for redemption, he or she will receive
payment at the net asset value next determined after termination of the
suspension.
As provided in the Fund's Articles of Incorporation, payment for shares
redeemed may be made either in cash or in-kind, or partly in cash and partly
in-kind. However, the Fund has elected, pursuant to Rule 18f-1 under the 1940
Act, to redeem its 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. Payments in excess of this limit will also be made wholly in
cash unless the Board of Directors believes that economic conditions exist
which would make such a practice detrimental to the best interests of the
Fund. Any portfolio securities paid or distributed in-kind will be in readily
marketable securities, and will be valued as described under "Computation of
Net Asset Value" on page x. Subsequent sale of such securities would require
payment of brokerage commissions by the investor.
The value of a shareholder's shares on redemption may be more or less than the
cost of such shares to the shareholder, depending upon the net asset value of
the Fund's shares at the time of redemption.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the other Funds managed by
Stratton Management Company, Stratton Monthly Dividend Shares, Inc. ("SMDS")
or The Stratton Funds, Inc.--Stratton Small-Cap Yield Fund ("SSCY"), provided
such other shares may legally be sold in the state of the investor's
residence. SMDS has an investment objective of seeking a high rate of return
from dividend and interest income on its investments in common stock and
securities convertible into common stock. SSCY has an investment objective of
achieving both dividend income and capital appreciation by investing in equity
securities, primarily common stock and securities convertible or exchangeable
for common stock of companies with total market capitalizations at the time of
investment of less than $500 million and which are outside the Standard &
Poor's 500 Index.
For more complete information about SMDS and SSCY, including charges and
expenses, a current Prospectus of SMDS or SSCY should be obtained and read
prior to seeking any such exchange. Shares may be exchanged by: (1) written
request; or (2) telephone if a special authorization form has been completed
and is on file with the Transfer Agent in advance. See "How to Redeem Fund
Shares--Additional Information" for a description of the Fund's policy
regarding telephone instructions.
PLEASE NOTE: Shareholders who have certificated shares in their possession
MUST surrender these shares to the Fund's Transfer Agent to be held on account
in unissued form PRIOR to taking advantage of either exchange privilege. When
returning certificates for this purpose only,
14
<PAGE>
signature(s) need NOT be guaranteed. There are no sales charges involved.
Shareholders who engage in frequent exchange transactions may be prohibited
from further exchanges or otherwise restricted in placing future orders. The
Fund reserves the right to suspend the telephone exchange privilege at any
time. An exchange for tax purposes constitutes the sale of one fund and the
purchase of another. Consequently, the sale may involve either a capital gain
or loss to the shareholder for Federal income tax purposes.
RETIREMENT PLANS
The Fund has available three types of tax-deferred retirement plans for its
shareholders: Defined Contribution Plans, for use by both self employed
individuals and corporations; an Individual Retirement Account, for use by
certain eligible individuals with compensation (including earned income from
self employment); and a 403(b)(7) Retirement Plan, for use by employees of
schools, hospitals, and certain other tax-exempt organizations or
associations. More detailed information about how to participate in these
plans, the FEES charged by the custodian, and the limits on contributions can
be found in the Statement of Additional Information. TO INVEST IN ANY OF THE
TAX-DEFERRED RETIREMENT PLANS, PLEASE CALL THE FUND FOR INFORMATION AND THE
REQUIRED SEPARATE APPLICATION.
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS:
TAX TREATMENT
The Fund expects to distribute semi-annually substantially all of its net
investment income and net realized capital gains, if any. Any distribution
paid necessarily reduces the Fund's net asset value per share by the amount of
the distribution. Distributions may be reinvested in additional shares of the
Fund (see "Reinvestment of Income Dividends and Capital Gains Distributions"
on pages xx & xx).
For the fiscal year ended May 31, 1996, the Fund distributed dividends of
$1.485, $.540 of which was ordinary income, and $.945 of which was capital
gains.
For the fiscal year ended May 31, 1996, the Fund met the requirements for the
special tax treatment afforded certain investment companies and their
shareholders under Subchapter M of the Internal Revenue Code, and the Fund
expects that the requirements for special tax treatment under the Code will
continue to be met. Under such circumstances, the Fund is not subject to
Federal income tax on such part of its ordinary taxable income or net realized
long-term capital gains that it distributes to shareholders. Distributions
paid by the Fund from net investment income and short-term capital gains (but
not distributions paid from long-term capital gains) will be taxable as
ordinary income to shareholders, whether received in cash or reinvested in
additional shares of the Fund. Such ordinary income distributions will qualify
for the dividends received deduction for corporations to the extent of the
total qualifying dividends from domestic corporations received by the Fund for
the year. Shareholders who are citizens or residents of the United States will
be subject to Federal taxes with respect to long-term realized capital gains
15
<PAGE>
which are distributed to them, whether or not reinvested in the Fund and
regardless of the period of time such shares have been owned by the
shareholders. These distributions do not qualify for the dividends received
deduction. Due to the nature of REITs' dividends, the Fund may or may not
realize a return of capital. Consequently, a portion of the Fund's total
distributions might also include return of capital. Shareholders will be
advised after the end of each calendar year as to the Federal income tax
consequences of dividends and distributions of the Fund made each year.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months, will be deemed for
Federal tax purposes to have been received by the shareholders and paid by the
Fund on December 31 of such year in the event such dividends are paid during
January of the following year.
Prior to purchasing shares of the Fund, the impact of dividends or capital
gains distributions which are expected to be announced or have been announced
but not paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares by an investor
prior to the record date will have the effect of reducing the per share net
asset value of his or her shares by the per share amount of the dividends or
distributions. All or a portion of such dividends or distributions, although
in effect a return of capital to the shareholder, is subject to taxes, which
may be at ordinary income tax rates.
A taxable gain or loss may be realized by an investor upon his or her
redemption, transfer or exchange of shares of the Fund, depending upon the
cost of such shares when purchased and their price at the time of redemption,
transfer or exchange. If a shareholder has held Fund shares for six months or
less and received a distribution taxable as capital gains attributable to
those shares, any loss he realizes on the disposition of those shares will be
treated as a capital loss to the extent of the earlier capital gain
distribution.
The information above is only a short summary of some of the important Federal
tax considerations generally affecting the Fund and its shareholders. Income
and capital gains distributions may also be subject to state and local taxes.
Investors should consult their tax advisor with respect to their own tax
situation.
PERFORMANCE CALCULATIONS
From time to time, performance information such as total return for the Fund
may be quoted in advertisements or in communications to shareholders. The
Fund's total return may be calculated on an average annual total return basis,
and may also be calculated on an aggregate total return basis, for various
periods. Average annual total return reflects the average annual percentage
change in value of an investment in the Fund over the measuring period.
Aggregate total return reflects the total percentage change in value over the
measuring period. Both methods of calculating total return assume that
dividends and capital gains distributions made by the Fund during the period
are reinvested in Fund shares.
The total return of the Fund may be compared to that of other mutual funds
with similar investment objectives and to bond and other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of
16
<PAGE>
mutual funds. For example, the total return of the Fund's shares may be
compared to data prepared by Lipper Analytical Services, Inc. and to indices
prepared by Dow Jones & Co., Inc. and Standard & Poor's Ratings Group.
Performance quotations of the Fund represent the Fund's past performance, and
should not be considered as representative of future results. The investment
return and principal value of an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by broker/dealers, banks or other financial
institutions directly to their customer accounts in connection with
investments in shares of the Fund will not be included in the Fund's
calculations of total return. Further information about the performance of the
Fund is included in the Fund's most recent Annual Report which may be obtained
without charge by contacting the Fund at (800) 634-5726.
DESCRIPTION OF COMMON STOCK
The Fund is a Maryland corporation organized on June 21, 1985, as successor to
a Delaware corporation organized on June 5, 1972. The Fund's authorized
capital is 10,000,000 shares of Common Stock, par value $0.10 per share. Each
share has equal voting, dividend, distribution and liquidation rights. The
outstanding shares are, and when issued for a consideration in excess of the
par value the shares offered by this Prospectus will be, fully-paid and non-
assessable. Shares have no preemptive or conversion rights and are freely
transferable.
Shares may be issued as full or fractional shares and each fractional share
has proportionately the same rights as provided for full shares.
VOTING
- ------
The Fund's shares have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they choose to do so and, in such event,
the holders of the remaining shares voting for the election of directors will
not be able to elect any directors.
The Fund does not presently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The law under
certain circumstances provides shareholders with the right to call for a
meeting of shareholders to consider the removal of one or more directors. To
the extent required by law, the Fund will assist in shareholder communication
in such matters.
GENERAL INFORMATION
As used in this Prospectus the term "majority" of the Fund's outstanding
shares means with respect to the approval of an investment advisory agreement
or change in a fundamental policy, the holders of the lesser of: (1) 67% of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more than 50% of
the Fund's outstanding shares.
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SERVICE PROVIDERS AND UNDERWRITER
Pursuant to an arrangement among the Fund, The Bank of New York and Fund/Plan
Services, Inc. ("Fund/Plan"),The Bank of New York serves as Custodian of all
securities and cash owned by the Fund. The Custodian performs no managerial or
policy-making functions for the Fund.
Pursuant to an agreement between the Custodian and Fund/Plan, Fund/Plan
performs certain administrative and recordkeeping services for the Custodian.
The Custodian reallows a portion of its custody fee to Fund/Plan for providing
such services.
Fund/Plan serves as the Fund's Transfer Agent, Administrator and Fund
Accounting/Pricing Agent. Fund/Plan was acquired by FinDaTex, Inc. on January
1, 1986. Certain directors and officers of Stratton Management Company, the
Advisor to the Fund, and certain directors and officers of the Fund are
controlling shareholders of FinDaTex, Inc. During the Fund's last fiscal year,
Fund/Plan received fees of $28,154 for providing shareholder services, $30,000
for certain administrative services and $20,000 for accounting/pricing
services. Fund/Plan Broker Services, Inc. ("FPBS") was paid $3,000 for
underwriting services in connection with the registration of the Fund's shares
under state securities laws.
FPBS, 2 W. Elm Street, Conshohocken, PA 19428-0874, acts as underwriter for
the Fund pursuant to an agreement dated June 22, 1993. Also, Fund/Plan and
FPBS are affiliates of the Advisor inasmuch as FPBS, Fund/Plan and the Advisor
are under common control.
AUDITS AND REPORTS
Investors in the Fund will be kept informed of its progress through quarterly
reports showing diversification of portfolio, principal security changes,
statistical data and other significant data and annual reports containing
audited financial statements. The Fund's independent certified public
accountants for the fiscal year ended May 31, 1996 were Tait, Weller & Baker.
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AUTOMATIC INVESTMENT PLAN APPLICATION
- --------------------------------------------------------------------------------
HOW DOES IT WORK?
1. Fund/Plan Services, Inc., through our bank, United Missouri Bank KC NA,
draws an automatic clearing house (ACH) debit electronically against your
personal checking account each month, according to your instructions.
2. Choose any amount ($100 or more) that you would like to invest regularly and
your debit for this amount will be processed by Fund/Plan Services, Inc. as
if you had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the forms and the Fund Application Form if you do not already have
an existing account.
2. Mark one of your personal checks VOID, attach it to the forms below and mail
to Fund/Plan Services, Inc., P.O. Box 874, Conshohocken, PA 19428-0874.
3. As soon as your bank accepts your authorization, debits will be generated
and your Automatic Investment Plan started. In order for you to have ACH
debits from your account, your bank must be able to accept ACH transactions
and/or be a member of an ACH association. Your branch manager should be able
to tell you your bank's capabilities. We cannot guarantee acceptance by your
bank.
4. Please allow one month for processing of your Automatic Investment Plan
before the first debit occurs.
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN APPLICATION
TO: Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428-0874
Please start an Automatic Investment Plan for me and invest ___________________.
($100 or more)
on the [ ] 10th [ ] 15th [ ] 20th of each
month, in shares of STRATTON GROWTH FUND, INC.
Check one:
[ ] I am in the process of establishing an
account.
or
[ ] My account number is: ______________________________________________________
________________________________________________________________________________
Name as account is registered
________________________________________________________________________________
Street
________________________________________________________________________________
City State Zip + ext.
I understand that my ACH debit will be dated on the day of each month as
indicated above or as specified by written request. I agree that if such debit
is not honored upon presentation, Fund/Plan Services, Inc. may discontinue this
service and any share purchase made upon deposit of such debit may be
cancelled. I further agree that if the net asset value of the shares purchased
with such debit is less when said purchase is cancelled than when the purchase
was made, Fund/Plan Services, Inc. shall be authorized to liquidate other
shares or fractions thereof held in my account to make up the deficiency. This
Automatic Investment Plan may be discontinued by Fund/Plan Services, Inc. upon
30-days written notice or at any time by the investor by written notice to
Fund/Plan Services, Inc. which is received not later than 5 business days prior
to the above designed investment date.
Signature(s):____________________________
_______________________________
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<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
- --------------------------------------------------------------------------------
BANK REQUEST AND AUTHORIZATION
TO: ______________________________ _______________________________________
Name of Your Bank Bank Checking Account Number
_______________________________________________________________________________
Address of Bank or Branch Where Account is
Maintained
As a convenience to me, please honor ACH debits on my account drawn by
Fund/Plan Services, Inc., United Missouri Bank KC NA and payable to "STRATTON
GROWTH FUND, INC."
I agree that your rights with respect to such debit shall be the same as if it
were a check drawn upon you and signed personally by me. This authority shall
remain in effect until you receive written notice from me changing its terms or
revoking it, and until you actually receive such notice, I agree that you shall
be fully protected in honoring such debit.
I further agree that if any debit is dishonored, whether with or without cause
or whether intentionally or inadvertently, you shall be under no liability
whatsoever.
DEPOSITOR'S ____________________________________________________________________
Signature of Bank Depositor(s) as shown on bank records.
NOTE: Your bank must be able to accept ACH transactions and/or be a member of
an ACH association in order for you to use this service.
- -------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
TO: The bank named above
So that you may comply with your Depositor's request and authorization,
STRATTON GROWTH FUND, INC. agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising from
or in connection with the payment by you of a debit drawn by Fund/Plan
Services, Inc. to the order of STRATTON GROWTH FUND, INC. designated on the
account of your depositor(s) executing the authorization including any costs
or expenses reasonably incurred in connection with such loss. STRATTON
GROWTH FUND, INC. will not, however, indemnify you against any loss due to
your payment of any debit generated against insufficient funds.
2. To refund to you any amount erroneously paid by you to Fund/Plan Services,
Inc. on any such debit if claim for the amount of such erroneous payment is
made by you within 3 months of the date of such debit on which erroneous
payment was made.
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This is your
INVESTMENT APPLICATION
Detach and mail to:
Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
12a
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LOGO
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MAIL TO: FUND/PLAN SERVICES, INC., P.O. BOX 874, CONSHOHOCKEN, PA 19428
1. INITIAL INVESTMENT ($2,000 MINIMUM)
FORM OF PAYMENT
[ ]Check for $ enclosed (payable to "Stratton Growth Fund, Inc.")
[ ]BY WIRE An initial purchase of $ was wired on by
Date
__________________________ to account # ________________________
Name of your Bank or Broker Number assigned by
F/P/S
2.REGISTRATION (PLEASE PRINT) NO CERTIFICATES WILL BE ISSUED UNLESS REQUESTED
IN WRITING.
INDIVIDUAL
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First name Middle Initial Last Name Social Security #
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Jt. Owner First Name*Middle Initial Last Social Security #
Name
*(Joint ownership with rights of survivorship unless otherwise noted).
GIFT TO MINORS
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Name of Custodian (name one only) As Custodian For (name one only)
Under the Uniform Gift to Minors Act
-- --
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State Minor's Social Security
#
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS**
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Name of Corporation, Partnership, Trust or Other
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Tax I.D. # Name of Trustee(s) Date of Trust
**Complete Corporate Resolution attached, if applicable.
3.MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
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Street Address & Apt. #
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City State Zip & ext.
( ) ____________________ ( ) ____________________
Residence Telephone Business Telephone Number
Number
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4.DISTRIBUTION OPTIONS (SEE PAGE 10 FOR MORE DETAIL)
<TABLE>
<S> <C> <C> <C> <C>
Income Dividends (check one box/line only) [ ] reinvested [ ] paid in cash [refer to box 7 below for instructions
Capital Gains Distributions (check one box/line only) [ ] reinvested [ ] paid in cash if cash option via ACH is desired]
</TABLE>
5.SYSTEMATIC WITHDRAWAL PLAN (MINIMUM INITIAL INVESTMENT $10,000) SEE PAGE 12
FOR MORE DETAIL.
A check in the amount of $ (minimum $50) will be sent to you at your
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address of record unless otherwise noted.
Please select desired frequency:
[ ] Monthly, prior to last day
[ ] Quarterly, prior to last day of , , , and .
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[ ] Semi-Annual or Annual, prior to the last day of , , or .
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6.TELEPHONE PRIVILEGE (SEE PAGE 14 FOR MORE DETAIL)
[ ] Exchange: Permits switching at any time between Stratton Growth Fund,
Inc., Stratton Monthly Dividend Shares, Inc. and Stratton
Small-Cap Yield Fund, provided such other shares may
legally be sold in the state of the investor's residence.
7.SPECIAL PROGRAMS (SEE PAGES 10 & 12 FOR MORE DETAIL)
To participate in the Direct Deposit Program, or to send cash distributions
via the Automated Clearing House System ("ACH"), please contact the Fund's
Transfer Agent at (800) 441-6580 to obtain the proper form(s).
8.SIGNATURE AND CERTIFICATION
The following is required by Federal tax law to avoid 31% backup
withholding; "By signing below, I certify under penalties of perjury that
the social security or taxpayer identification number entered above is
correct (or I am waiting for a number to be issued to me), and that I have
not been notified by the IRS that I am subject to backup withholding unless
I have checked the box." If you have been notified by the IRS that you are
subject to backup withholding, check box [ ].
Citizen of:[ ] United States[ ] Other (Please indicate)_____________________
Receipt of current Prospectus is hereby acknowledged. I (we) authorize
Fund/Plan Services, Inc. to act upon instructions for exchanges between
Funds received by telephone believed by it to be genuine.
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Signature [ ] Owner [ ] Custodian [ ] Trustee Date
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Signature of Joint Owner (if applicable) Date
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RESOLUTIONS
(This Section to be Completed by Corporations, Trusts, and Other
Organizations).
RESOLVED: That this corporation or organization become a shareholder of
Stratton Growth Fund, Inc. (the "Fund") and that
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(Name of Trustee)
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and take any action for it as may be
necessary or appropriate with respect to its shareholders account(s) with the
Fund, and it is FURTHER RESOLVED: That any one of the above noted officers is
authorized to sign any documents necessary or appropriate to appoint Fund/Plan
Services, Inc. as redemption agent of the corporation or organization for
shares of the Fund, to establish or acknowledge terms and conditions governing
the redemption of said shares or to otherwise implement the privileges elected
on the application.
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CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the ______________________
(Name of Corporation)
incorporated or formed under the laws of ______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum
was present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
- --------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------
Witness my hand and the seal of the corporation or organization this day
of , 19_____________________________________________________________.
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*Secretary-Clerk Other Authorized Officer (if
required)
* If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
September 30, 1996
This Statement of Additional Information is not a Prospectus but should be read
in conjunction with the current Prospectus for Stratton Growth Fund, Inc. (the
"Fund"), dated September 30, 1996. A copy of the Prospectus for the Fund
may be obtained by contacting the Fund's "Distributor", Fund/Plan Broker
Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874, or
by telephoning (800) 634-5726.
1
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TABLE OF CONTENTS
Page
Statement of Additional Information.....................................
Investment Restrictions.................................................
Directors and Officers of the Fund......................................
The Investment Advisor and Other Service Providers......................
The Investment Advisor.............................................
Accounting Agent...................................................
The Administrator & Transfer Agent.................................
Auditor & Custodian................................................
Portfolio Transactions and Brokerage Commissions........................
Retirement Plans........................................................
Underwriter.............................................................
Additional Information Concerning Taxes.................................
Additional Information on Performance Calculations......................
Miscellaneous...........................................................
Financial Statements....................................................
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction with the
Prospectus of the Fund having the same date as this Statement of Additional
Information. Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No investment
in shares of the Fund should be made without first reading the Prospectus of the
Fund.
INVESTMENT RESTRICTIONS
A list of the Fund's Investment policies and restrictions, including those
policies and restrictions that can be changed by the Board of Directors without
shareholder approval, can be found on pages 5 & 6 of the Fund's Prospectus.
The following investment restrictions are deemed fundamental policies and may be
changed only by the approval of the holders of a "majority " of the Fund's
shares (as defined under "General Information" in the Fund's Prospectus):
THE FUND WILL NOT:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer, except for securities of the United States Government or
agencies thereof.
2. Invest in more than 10% of any class of securities of any one issuer (except
for government obligations) or in more than 10% of the voting securities of
any one issuer.
3. Invest more than 5% of the value of its total assets in securities of
companies which (including operations of their predecessors and of
subsidiaries if the company is a holding company) have not
2
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had a record of at least three years of continuous operations and in equity
securities which are not readily marketable (that is, with a limited trading
market).
4. Borrow money, except from banks for temporary or emergency purposes (but not
for investment purposes), provided that such borrowings shall not exceed 5%
of its total assets (at the lower of cost or market value).
5. Underwrite the securities of other issuers or invest in securities under
circumstances where, if sold, the Fund might be deemed to be an underwriter
under the Securities Act of 1933.
6. Pledge, mortgage or hypothecate its assets.
7. Invest for purposes of exercising management or control.
8. Invest in securities of other investment companies or in options, puts,
calls, straddles, spreads or similar devices, or engage in arbitrage
transactions or short sales.
9. Purchase securities on margin, but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities.
10. Make loans to other persons except that this restriction shall not apply to
government obligations, commercial paper or notes or other evidences of
indebtedness which are publicly distributed.
11. Purchase or sell real estate or interests in real estate. This will not
prevent the Fund from investing in publicly-held real estate investment
trusts or marketable securities which may represent indirect interests in
real estate.
12. Purchase or sell commodities or commodity contracts or invest in interests
in oil, gas or other mineral exploration or development programs.
13. Invest more than 2% of the value of its total assets in warrants. This
restriction does not apply to warrants initially attached to securities
purchased by the Fund. This restriction may be changed or eliminated at any
time by the Board of Directors of the Fund without action by the Fund's
shareholders.
14. Purchase or hold securities of any issuer, if, at the time of purchase or
thereafter, any officer or director of the Fund or its Investment Advisor
owns beneficially more than 1/2 of 1%, and such officers and directors
holding more than 1/2 of 1% together own beneficially more than 5% of the
issuer's securities.
In order to permit the sale of shares in certain states, the Fund may make
commitments more restrictive than the investment policies and limitations
described above. To permit the sale of shares of the Fund in Texas, the Fund
has agreed to the following additional, but not fundamental, restrictions:
1. The Fund will not invest more than 15% of its net assets in illiquid
or restricted securities.
2. The Fund will not invest in real estate limited partnerships.
3. The Fund will not invest in oil, gas or mineral leases.
3
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Should the Fund determine that these commitments or any other commitments are no
longer in its best interests, it will revoke such commitments by terminating
sales of its shares in the state involved.
The percentage limitations of investments are applied at the time an investment
is made. An actual percentage in excess of a stated percentage limitation does
not violate the limitation unless such excess exists immediately after an
investment is made and results from the investment. In other words,
appreciation or depreciation of the Fund's investments will not cause a
violation of the limitations. In addition, the limitations will not be violated
if the Fund receives securities by reason of a merger or other form of
reorganization.
DIRECTORS AND OFFICERS OF THE FUND
The directors and executive officers of the Fund, their position with the Fund,
their addresses, affiliations, if any, with the Investment Advisor, and
principal occupations during the past five years are set forth below. Each of
the directors named below is also a director of Stratton Monthly Dividend
Shares, Inc. and The Stratton Funds, Inc. and each of the officers named below
also holds the same position, unless otherwise noted, with Stratton Monthly
Dividend Shares, Inc. and The Stratton Funds, Inc.:
James W. Stratton* Mr. Stratton is the Chairman of the Board
Director/Chairman of Directors and President of the
610 W. Germantown Pike Investment Advisor, Stratton Management
Suite 300 Company. He is a Director of ALCO
Plymouth Meeting, PA 19462 Standard (diversified distribution and
manufacturing company), Amerigas
Propane Ltd. (energy), FinDaTex, Inc.
(financial Services), Teleflex, Inc.
(aerospace controls and medical
products) and UGI Corp., Inc.
(utility-natural gas).
Lynne M. Cannon* Ms. Cannon is a Senior Vice President of
Director Relationship Management of Fund/Plan
2 W. Elm Street Services, Inc. She was formerly
Conshohocken, PA 19428 employed as Vice President of Mutual
Funds of Independence Capital Management,
Inc. (investment advisor). Prior to
Independence Capital, she was Vice
President of AMA Investment Advisors,
Inc. (investment advisor &
broker/dealer).
John J. Lombard, Jr. Mr. Lombard is a partner in the law firm
Director of Morgan, Lewis & Bockius LLP.
2000 One Logan Square
Philadelphia, PA 19103
Henry A. Rentschler Mr. Rentschler is a private investor.
Director He was formerly the President of Baldwin-
P.O. Box 962 Hamilton Company, a division of Joy
Paoli, PA 19301 Environmental Equipment Co. (manufacturer
of renewal parts for Baldwin locomotives
and diesel engines) and was also
formerly a Director of the Society for
Industrial Archeology (which promotes the
study and preservation of the physical
survivals of our technological and
industrial past).
4
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Merritt N. Rhoad, Jr. Mr. Rhoad is a private investor. He
Director was formerly a senior systems engineer
640 Bridle Road with International Business Machines
Custis Woods Corporation.
Glenside, PA 19038
Alexander F. Smith Mr. Smith is a private investor. He was
Director formerly the Chairman and Director of
Cricket Springs Gilbert Associates, Inc. (engineering
Geigertown, PA 19523 /consulting services).
Richard W. Stevens Mr. Stevens is an attorney in private
Director practice. He was formerly a partner in
One Jenkintown Station the law firm of Clark, Ladner,
115 W. Avenue, Suite 108 Fortenbaugh and Young.
Jenkintown, PA 19046
John A. Affleck Mr. Affleck is a Senior Vice President
President and Director of the Investment Advisor,
610 W. Germantown Pike Stratton Management Company. He is
Suite 300 Vice President of Stratton Monthly
Plymouth Meeting, PA 19462 Dividend Shares, Inc. and The Stratton
Funds, Inc.
Gerard E. Heffernan Mr. Heffernan is a Senior Vice
Vice President President and Director of the
610 W. Germantown Pike Investment Advisor, Stratton Management
Suite 300 Company. He is President of Stratton
Plymouth Meeting, PA 19462 Monthly Dividend Shares, Inc. and Vice
President of The Stratton Funds, Inc.
He is Secretary of FinDaTex, Inc.
Frank H. Reichel, III Mr. Reichel is a Vice President, a
Vice President Director and the Director of Research
610 W. Germantown Pike of the Investment Advisor, Stratton
Suite 300 Management Company. He is President
Plymouth Meeting PA 19462 of The Stratton Funds, Inc. and Vice
President of Stratton Monthly
Dividend, Shares, Inc.
Joanne E. Kuzma Mrs. Kuzma is the Director of Trading
Vice President and a Managing Partner of the Investment
610 W. Germantown Pike Advisor, Stratton Management Company.
Suite 300 She is Vice President of Compliance for
Plymouth Meeting PA 19462 The Stratton Funds, Inc. and Stratton
Monthly Dividend Shares, Inc.
Patricia L. Sloan Ms. Sloan is an employee of the
Secretary/Treasurer Investment Advisor, Stratton
610 W. Germantown Pike Management Company.
Suite 300
Plymouth Meeting, PA 19462
5
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James A. Beers Mr. Beers is an employee of the
Assistant Secretary/Treasurer Investment Advisor,Stratton
610 W. Germantown Pike Management Company.
Suite 300
Plymouth Meeting PA 19462
Carol L. Royce Mrs. Royce is an employee of the
Assistant Secretary/Treasurer Investment Advisor, Stratton Management
610 W. Germantown Pike Company.
Suite 300
Plymouth Meeting PA 19462
*As defined in the 1940 Act, Mr. Stratton is an "interested person" of the Fund
by reason of his position with the Fund's Investment Advisor and Ms. Cannon is
an "interested person" of the Fund by reason of her employment with Fund/Plan
Services, Inc. Several of the Directors and officers of the Fund are controlling
shareholders of FinDaTex, Inc., which acquired Fund/Plan on January 1, 1986.
The officers and directors of the Fund who are also officers or employees of the
Advisor or Fund/Plan Services, Inc. receive no direct compensation from the Fund
for services to it. The Directors who are not "interested persons" of the Fund
receive fees and expenses for each meeting of the Board of Directors they
attend. Such Directors currently receive $750 for each Board Meeting attended,
and an annual retainer of $4,000. The Directors serve in the same capacity for
the other two funds in the Stratton Family of Funds complex. There are no
separate audit, compensation or nominating committees of the Board of Directors.
Set forth below are the total fees which were paid to each of the directors
who are not "interested persons" during the fiscal period ended May 31, 1996:
<TABLE>
<CAPTION>
Aggregate Fees Total Fees Paid
Director Paid by the Company By the Fund Complex
- -------- ------------------- -------------------
<S> <C> <C>
John J. Lombard, Jr. $1,653.33 $7,750
Rose J. Randall* $1,653.33 $7,750
Henry A. Rentschler $1,653.33 $7,750
Merritt N. Rhoad, Jr. $1,653.33 $7,750
Alexander F. Smith $1,653.33 $7,750
Richard Stevens $1,653.33 $7,750
</TABLE>
* Ms. Randall resigned from the Board of Directors on June 25, 1996.
As of August 31, 1996, the directors and officers as a group beneficially
owned 222,246 shares or 13.4 % of the Fund's outstanding shares.
As of August 31, 1996, James W. Stratton beneficially owned
136,753 shares, or 8.2% of the outstanding shares of the Fund; as of
that same date, the Profit Sharing Plan of the Investment Advisor owned
47,204 shares, or 2.8% of the Fund.
6
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THE INVESTMENT ADVISOR AND OTHER SERVICE PROVIDERS
THE INVESTMENT ADVISOR
The Investment Advisory Agreement (the "Agreement") requires the Advisor to
furnish research, statistical and administrative services and advice, reports
and recommendations with respect to the Fund's portfolio, and to compute the net
asset value of the Fund's shares and maintain the books and records of the Fund.
The Agreement provides that the Advisor is not required to give the Fund
preferential treatment as compared with the treatment given to any other
customer or investment company. In addition, the Advisor furnishes to the Fund
office space and facilities necessary in connection with the operation of the
Fund. The Fund pays, or arranges for others to pay, all other expenses in
connection with its operations.
The investment advisory fee payable under the Agreement is payable monthly, at
an annual rate of 3/4 of 1% of the daily net asset value of the Fund. During
the fiscal years ended May 31, 1994, 1995 and 1996, the fees paid
to the Advisor were $170,554, $189,594 and $266,741 respectively.
The Advisor may charge the Fund monthly for its cost in providing (1) any
equipment used in the Fund's operations; and (2) any administrative and
accounting services for the Fund including, without limitation, maintaining
financial records and bookkeeping, daily computation of net asset value per
share, registration of the Fund and its securities with the SEC and under
various state laws, and holding shareholders' meetings. The Advisor will in no
event seek reimbursement of costs which would result in the net operating
expenses of the Fund being in excess of two percent (2%) of the average net
asset value of the Fund for any fiscal year. The Advisor's costs which are to be
reimbursed are not intended to include any profit to the Advisor.
The Advisor has agreed to reimburse the Fund in an amount equal to the expenses
of the Fund in any fiscal year which exceed the permissible limits applicable to
the Fund in any state in which its shares are qualified for sale. At the
present time, the most restrictive state limitation limits the Fund's annual
expenses (excluding interest, taxes, brokerage commissions, extraordinary
expenses and other expenses) subject to approval by state securities
administrators to 2 1/2 % of the first $30 million, 2% of the next $70 million,
and 1 1/2 % of the remaining average net assets. The operating expenses of the
Fund will be accrued daily and any excess over the above described limitation
will be reimbursed monthly. For the fiscal years ended May 31, 1994,
1995 and 1996, no such reimbursement of expenses was necessary.
ACCOUNTING AGENT
Commencing in 1988, Fund/Plan Services, Inc. ("Fund/Plan") became the Fund's
accounting services agent, and responsibility for certain accounting services
(e.g. computation of the net asset value of the Fund's shares and maintenance of
the Fund's books and financial records) were transferred from the Advisor to
Fund/Plan. At that time the Advisor stopped receiving a monthly expense
reimbursement from the Fund, and the Fund started to pay a monthly fee to
Fund/Plan for these services. For this reason, the Advisor is not expected to
receive expense reimbursements from the Fund in the foreseeable future.
For the fiscal years ended May 31, 1994, 1995 and 1996, the
Fund paid Fund/Plan $20,000 in fees pursuant to the accounting services
agreement.
THE ADMINISTRATOR & TRANSFER AGENT
The Fund has also entered into an Administration Agreement with Fund/Plan dated
March 1, 1990. As a result of this Administration Agreement, certain
administrative responsibilities previously performed by the Advisor were
transferred to Fund/Plan, including responsibility for all federal and state
compliance matters. Fund/Plan
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<PAGE>
is entitled to receive a fee payable monthly at the annual rate of $30,000. For
the fiscal years ended May 31, 1994, 1995 and 1996 the Fund
paid Fund/Plan $30,000. Although the Advisor was entitled to receive
reimbursement from the Fund for the expenses incurred in the performance of
these services, such reimbursement was never sought. Accordingly, the Advisor
has voluntarily agreed to waive $15,000 annually of the compensation due it
under the Investment Advisory Agreement, to offset a significant portion of the
fee that the Fund will incur under the Administration Agreement. This fee
waiver can be terminated or reduced by the Advisor upon 60 days prior written
notice to the Fund.
The Fund's transfer agent and dividend-paying agent is Fund/Plan Services, Inc.,
2 W. Elm Street, Conshohocken, PA 19428. Fund/Plan was acquired by FinDaTex,
Inc. on January 1, 1986. Certain directors and officers of Stratton Management
Company, the Advisor to the Fund, and certain directors and officers of the Fund
are controlling shareholders of FinDaTex, Inc. Fund/Plan annually
receives $13.00 per account for providing this service.
AUDITOR AND CUSTODIAN
The Fund's independent auditor is Tait, Weller & Baker. Their offices are
located at 2 Penn Center Plaza, Suite 700, Philadelphia PA 19102-1707. The
auditor's responsibilities are (1) to audit the annual financial statements of
the Fund; and (2) to report to the Fund's Board of Directors on the internal
control structure of the Fund.
The Bank of New York, 48 Wall Street, New York, NY 10286 serves as the custodian
of the Fund's assets pursuant to a custodian agreement. Under such agreement,
The Bank of New York (1) maintains a separate account or accounts in the name of
the Fund; (2) holds and transfers portfolio securities on account of the Fund;
(3) accepts receipts and makes disbursements on money on behalf of the Fund; (4)
collects and receives all income and other payments and distributions on account
of the Fund's securities; and (5) makes periodic reports to the Board of
Directors concerning the Fund's operations.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund seeks to obtain the best price and execution in all purchases and
sales of securities, except when the authorization to pay higher commissions
for research and services, as provided for in the Investment Advisory
Agreement, is exercised. Purchases and sales of over-the-counter securities are
ordinarily placed with primary market makers acting as principals. Consistent
with its obligation to seek the best price and execution, the Fund may place
some purchases and sales of portfolio securities with dealers or brokers who
provide statistical and research information to the Advisor. Statistical and
research services furnished by brokers through whom the Fund effects securities
transactions in accordance with these procedures are ordinarily of general
application and may be used by the Advisor in servicing other accounts as well
as that of the Fund. In addition, not all such services may be used in
connection with the Advisor's activities on behalf of the Fund. Portfolio
transactions are assigned to brokers, and commission rates negotiated, based on
an assessment of the reliability and quality of a broker's services, which may
include research and statistical information such as reports on specific
companies or groups of companies, pricing information, or broad overviews of the
stock market and the economy.
Although investment decisions for the Fund will be made independently
from investment decisions made with respect to other clients advised by the
Advisor, simultaneous transactions may occur on occasion when the same security
is suitable for the investment objectives of more than one client. When two or
more such clients are simultaneously engaged in the purchase or sale of the same
security, to the extent possible the transactions will be averaged as to price
and allocated among the clients in accordance with an equitable formula. In
some cases this system could have a detrimental effect on the price or quantity
of a security
8
<PAGE>
available to the Fund. In other cases, however, the ability of the Fund to
participate with other clients of the Advisor in volume transactions may produce
better executions for the Fund.
The Investment Advisory Agreement contains provisions which authorize the
Advisor to recommend and cause the Fund to pay brokerage commissions in excess
of commissions which might be charged by other brokers, where a determination is
made that the amount of commission paid is reasonable in relation to the
brokerage and research services provided by the broker to the Fund, viewed in
terms of the particular transaction or the overall responsibilities of the
Advisor with respect to the Fund. In addition, the Investment Advisory
Agreement recognizes that the Advisor may, at its expense, acquire statistical
and factual information, advice about economic factors and trends and other
appropriate information from others in carrying out its obligations. During the
fiscal years ended May 31 1993, 1994 and 1995, no brokerage commissions
were paid by the Fund pursuant to the provision in the Investment Advisory
Agreement permitting the Fund to pay commissions for brokerage and research
services in excess of commissions that might have been charged by other brokers.
During the fiscal years ended May 31, 1994, 1995 and 1996, the
Fund paid $44,751, $33,383 and $13,398 respectively, in brokerage
commissions, substantially all of which were paid to brokers which had provided
research, statistical data or pricing information to the Advisor. The variation
in these commissions from year to year reflects primarily the amount of total
net assets in the Fund and to a lesser extent the annual turnover rate. For
the fiscal years ended May 31, 1994, 1995 and 1996, the Fund's
portfolio turnover rate was 49.81%, 42.54 % 15.41 % respectively.
RETIREMENT PLANS
DEFINED CONTRIBUTION PLANS
The Fund offers a profit sharing and a money purchase plan (the "Defined
Contribution Plans") for use by both self-employed individuals (sole
proprietorships and partnerships) and corporations who wish to use shares of the
Fund as a funding medium for a retirement plan qualified under the Internal
Revenue Code.
Annual deductible contributions to the Defined Contribution Plans may generally
be made on behalf of each participant in a total amount of up to the lesser of
20% of a self-employed participant's pre-contribution earned income (after
reducing the earned income by the self-employed's deduction for 50% of his or
her self-employment tax) (25% of a non-self-employed participant's wages) or
$30,000. Unless the employer chooses to take Social Security contributions into
account, the same percentage of earned income (or wages) must be contributed on
behalf of each participant in the Defined Contribution Plans. Earned income and
wages are generally limited for this purpose to $150,000 (for 1996 ---
indexed for cost-of-living).
The Internal Revenue Code provides certain tax benefits for participants in a
Defined Contribution Plan. For example, amounts contributed to a Defined
Contribution Plan and earnings on such amounts are not taxed until distributed.
However, distributions to a participant from a Defined Contribution Plan before
the participant attains age 59 1/2 will (with certain exceptions) result in an
additional 10% tax on the amount included in the participant's gross income.
INDIVIDUAL RETIREMENT ACCOUNT
The Fund offers an individual retirement account (the "IRA") for use by
individuals with compensation for services rendered (including earned income
from self-employment) who wish to use shares of the Fund as a funding medium
for individual retirement saving. However, except for rollover contributions,
an individual
9
<PAGE>
who has attained, or will attain, age 70 1/2 before the end of the taxable year
may only contribute to an IRA for a nonworking spouse who is under age 70 1/2.
The general deductible limit for contributions to an IRA is the lesser of 100%
of compensation or $2,000 ($2,250 [to be increased to $4,000.00 in 1997]
total for the individual and the individual's nonworking spouse with two
separate accounts). However, this limit is phased out for certain individuals
who are active participants in an employer-maintained retirement plan.
If such an individual is a married person with adjusted gross income ("AGI") on
his or her joint return in excess of $40,000 but less than $50,000, or a single
person with AGI in excess of $25,000 but less than $35,000, the individual's
deduction will be decreased proportionately. A married individual with
AGI on his or her joint return of $50,000 or more, or a single individual with
AGI of $35,000 or more, may not make any deductible contribution if he or she is
an active participant in a retirement plan.
Even if the individual is not an active participant in a retirement plan, if
his or her spouse is an active participant in such a plan and if their
AGI, filed jointly, is more than $40,000, the individual and his or her spouse
will both be subject to the phase-out discussed above. If neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan, or if their AGI is less than the
$40,000 amount discussed above, the individual may continue to make
deductible contributions of up to the lesser of $2,000 ($2,250), or 100% of
compensation. (Begining in 1997, if neither spouse is an active participant
in an employer-sponsored retirement plan, or if their combined AGI is less than
$40,000, a married couple filing a joint tax return may make deductible
contributions up to the lesser of $4,000 or 100% of their combined
compensation.)
Nondeductible contributions to the IRA may be made to the extent an individual
is unable to make a deductible contribution under the phase-out rules discussed
above. In addition, an individual may rollover to the IRA funds (in any amount)
that he or she has received in a qualifying distribution from an employer's
retirement plan.
The individual's IRA assets (and earnings thereon) may generally not be
withdrawn (without the individual's incurring an additional 10% tax on the
amount included in the individual's gross income) until age 59 1/2. Earnings on
amounts contributed to the IRA are not taxed until distributed.
403(B)(7) RETIREMENT PLAN
The Fund offers a plan (the "403(b)(7) Plan") for use by schools, hospitals, and
certain other tax-exempt organizations or associations who wish to use shares of
the Fund as a funding medium for a retirement plan for their employees.
Contributions are made to the 403(b)(7) Plan based on a reduction of the
employee's regular compensation. Such contributions, to the extent they do not
exceed applicable limitations (including a generally applicable limitation of
$9,500 per year), are excludable from the gross income of the employee for
Federal income tax purposes. Assets withdrawn from the 403(b)(7) Plan are
subject to Federal income tax and to the additional 10% tax on early
withdrawals discussed above under "Defined Contribution Plans".
GENERAL INFORMATION
In all these Plans, distributions of net investment income and capital gains
will be automatically reinvested in the Fund.
The Custodian of the plans is Semper Trust Company ("Semper"), Plymouth Meeting,
Pennsylvania. Fund/Plan Services, Inc. serves as the fiduciary agent for Semper
and in such capacity is responsible for all record keeping, applicable tax
reporting and fee collection in connection with the plan accounts. Fund/Plan
10
<PAGE>
Services, Inc. is also the transfer agent for the Funds. The Custodian is
entitled to deduct its fees and administrative expenses by liquidating shares
annually in September, unless the annual maintenance fee is paid separately to
Fund/Plan Services, Inc. The annual maintenance fee is currently $12.00 per
plan account. This fee may be amended without notice by Stratton Management
Company, the Custodian or Fund/Plan Services, Inc. in the future.
The foregoing brief descriptions are not complete or definitive explanations of
the Defined Contribution, IRA, or 403(b)(7) Plans available for investment in
the Fund. Any person who wishes to establish a retirement plan account may do
so by contacting the Fund directly. The complete Plan documents and
applications will be provided to existing or prospective shareholders upon
request, without obligation. Since all these Plans involve setting aside assets
for future years, it is important that investors consider their needs and
whether the investment objective of the Fund as described in this Statement of
Additional Information and in the Prospectus is most likely to fulfill them.
The Fund recommends that investors consult their attorneys or tax advisors to
determine if the retirement programs described herein are appropriate for their
needs.
UNDERWRITER
The Fund has entered into an Underwriting Agreement with Fund/Plan Broker
Services, Inc. ("FPBS"). FPBS acts as an underwriter of the Fund's shares for
the purpose of facilitating the registration of shares. In this regard, FPBS
has agreed at its own expense to qualify as a broker/dealer under all applicable
federal or state laws in those states which the Fund shall from time to time
identify to FPBS as states in which it wishes to offer its shares for sale, in
order that state registrations may be maintained for the Fund.
FPBS is a broker/dealer registered with the Securities and Exchange Commission
and a member in good standing of the National Association of Securities Dealers,
Inc. FPBS is an affiliate of the Advisor inasmuch as both the Underwriter and
the Advisor are under common control.
For the services to be provided under the Underwriting Agreement in facilitating
the registration of the Fund shares under state securities laws, FPBS has
received an annual fee of $3,000 for providing these services in each of the
last three fiscal years. This fee is included in the net expenses of the
Fund. The Fund shall continue to bear the expense of all filing or registration
fees incurred in connection with the registration of shares of the Fund under
state securities laws. The Fund pays no compensation to FPBS for its assistance
in sales of Fund shares. The Advisor pays certain out-of-pocket expenses, plus
the cost for each employee to be licensed as a Registered
Representative by FPBS.
The Underwriting Agreement may be terminated by either party upon 60 days prior
written notice to the other party, and if so terminated, the pro-rata portion of
the unearned fee will be returned to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisors with specific reference to their own
tax situation.
As stated in the Prospectus, the Fund intends to qualify as a regulated
investment company under the Internal Revenue Code for each taxable year. The
Fund will not be treated as a regulated investment company for a taxable year
if, among other things, the Fund derives 30% or more of its gross income
from the sale or other disposition of securities and certain other investments
held for less than three months.
11
<PAGE>
Ordinary income of individuals is taxable at a maximum nominal rate of 39.6%;
although because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of
tax for certain taxpayers may be more than 39.6% in certain circumstances. Net
long-term capital gains are taxed at a maximum nominal rate of 28%. For
corporations, long-term capital gains and ordinary income are both taxable at a
maximum nominal rate of 35%.
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
If for any fiscal year the Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to Federal income tax at regular corporate rates (without any deduction
for distributions to its shareholders). In such event, dividend distributions
would be taxable as ordinary income to shareholders, to the extent of the Fund's
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS
From time to time, the Fund's total return may be quoted in advertisements,
shareholder reports or other communications to shareholders.
TOTAL RETURN CALCULATIONS
The Fund computes its average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
investment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result.
This calculation can be expressed as follows:
T= [(ERV over P) 1/ n -1 ]
Where: T = average annual total return.
ERV = computation of a hypothetical $1,000 investment
made at the ending redeemable value at the end
of the period covered by the beginning of the
period.
P = hypothetical initial investment of $1,000.
n = period covered by the computation, expressed in
terms of years.
12
<PAGE>
The Fund computes its aggregate total return by determining the aggregate
compounded rate of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
A= (ERV-P) over P
-----
Where: A = aggregate total return.
ERV = computation of a hypothetical $1,000 investment
made at the ending redeemable value at end of
the period covered by the beginning of the
period.
P = hypothetical initial investment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund cannot
necessarily be used to compare an investment in the Fund's shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.
Based on the foregoing calculations, the average annual total returns for the
Fund for the one year, five year and ten year periods ended May 31,
1996 were 29.62%, 14.42 % and 10.61% respectively. The aggregate
total returns for the same five year and ten year periods were 96.11% and
174.08%, respectively.
MISCELLANEOUS
As of August 31, 1996, the following shareholder's owned of record or
beneficially more than 5% of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
Name Address Shares Owned Percent Owned
- ---- ------- ------------ --------------
<S> <C> <C> <C>
James Stratton 610 W. Germantown 136,753 8.2%
Pike, Plymouth PA
Greenco P.O. Box 2961 107,991 6.5%
Harrisburg PA
Sandmeyer Steel
Company 1 Sandmeyer Lane 101,439 6.1%
Philadelphia PA
</TABLE>
13
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund, which appear in this Statement of
Additional Information and the Financial Highlights which appears in the Fund's
Prospectus were examined by Tait, Weller & Baker, independent certified public
accountants, whose report thereon appears elsewhere herein, and have been
included herein and in the Fund's Prospectus in reliance upon the report of said
accountants given upon their authority as experts in accounting and
auditing.
14
<PAGE>
SCHEDULE OF INVESTMENTS MAY 31, 1996
<TABLE>
<CAPTION>
Market
Number of Value
Shares Security (Note 1)
- ---------- -------- ------------
<S> <C> <C>
COMMON STOCKS - 91.8%
Banking/Financial - 10.8%
20,000 Comerica, Inc. ........................ $ 875,000
55,625 CoreStates Financial Corp. ............ 2,190,234
40,000 PNC Bank Corp. ........................ 1,215,000
10,000 Summit Bancorp, Inc. .................. 363,750
------------
4,643,984
Business Services - 5.5%
30,000 American Express Co. .................. 1,372,500
20,000 Pitney Bowes, Inc. .................... 992,500
------------
2,365,000
Capital Goods/Technology - 7.8%
90,000 EG & G, Inc. .......................... 1,957,500
20,000 Harris Corp. .......................... 1,292,500
------------
3,250,000
Chemical - 9.1%
20,000 Du Pont (E.I.) De Nemours & Co. ....... 1,595,000
25,000 Olin Corp. ............................ 2,312,500
------------
3,907,500
Consumer Products - 19.5%
14,000 Kimberly-Clark Corp. .................. 1,020,250
20,000 The Quaker Oats Co. ................... 702,500
50,000 Sturn, Ruger & Co., Inc. .............. 2,481,250
20,000 Tembrands, Inc. ....................... 922,500
20,000 UST, Inc. ............................. 660,000
------------
5,786,500
Energy - 7.9%
10,000 Atlantic Richfield Co. ................ 1,196,250
10,000 Exxon Corp. ........................... 847,500
12,000 Mobil Corp. ........................... 1,354,500
------------
3,398,250
Health Care - 6.2%
20,000 American Home Products Corp. ......... 1,070,000
10,000 SmithKline Beecham PLC ADRs .......... 510,000
20,000 U.S. Healthcare, Inc. ................ 1,085,000
------------
2,665,000
------------
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS MAY 31, 1996
Market
Number of Value
Shares Security (Note 1)
- ---------- -------- --------------
<S> <C> <C>
COMMON STOCKS - 91.8% (continued)
Insurance/Services - 7.6%
30,000 American General Corp. .............................. $ 1,065,000
15,000 Aon Corp. ........................................... 755,625
30,000 Lincoln National Corp. .............................. 1,410,000
-----------
3,230,625
-----------
Metals - 11.0%
46,000 Carpenter Technology Corp. .......................... 1,661,750
50,000 Lukens, Inc. ........................................ 1,343,750
25,000 Phelps Dodge Corp. NY ............................... 1,712,500
-----------
4,718,000
-----------
Paper - 12.6%
45,584 International Paper Co. ............................. 1,817,662
35,000 Potlatch Corp. ...................................... 1,443,750
45,000 Westvaco Corp. ...................................... 1,440,000
15,000 Weyerhaeuser Co. .................................... 680,625
-----------
5,382,037
-----------
Total Common Stocks (cost $26,614,255)............... 39,346,896
-----------
Principal
Amount
- ---------
SHORT-TERM NOTES - 7.6%
$ 1,630,000 General Electric Capital Corp. 5.25% due 06/05/96.... 1,630,000
$ 1,630,000 American Express Credit Corp. 5.30% due 06/10/96..... 1,630,000
-----------
Total Short-Term Notes (cost $3,260,000)............. 3,260,000
-----------
Total Investments - 99.4% (cost $29,874,255)*........ 42,606,896
Cash and Other Assets, Less Liabilities - 0.6%....... 273,144
-----------
NET ASSETS - 100.0%.................................. $ 42,880,040
===========
* Aggregate cost for federal income tax purposes is $29,874,255; and net unrealized appreciation is as follows:
Gross unrealized appreciation........................ $ 12,820,248
Gross unrealized depreciation........................ (87,607)
-----------
Net unrealized appreciation.......................... $ 12,732,641
===========
See accompanying notes to financial statements.
39
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities at market value (identified cost $29,874,255) (Note 1) .................. $ 42,606,896
Cash .............................................................................................. 63,688
Dividends and interact receivable ................................................................. 190,975
Receivable for capital stock sold ................................................................. 43,528
------------
Total Assets .................................................................................... 42,905,087
------------
LIABILITIES
Accrued expenses .................................................................................. 25,047
------------
Total Liabilities ............................................................................... 25,047
------------
NET ASSETS
Applicable to 1,577,380 shares; $.10 par value; 10,000,000 shares authorized ...................... $ 42,880,040
------------
------------
Net asset value, offering and redemption price per share
(942,880,040 + 1,577,380 shares) ................................................................ $ 27.18
------------
------------
SOURCE OF NET ASSETS
Paid-in capital ................................................................................... $ 27,811,970
Undistributed net Investment Income ............................................................... 431,001
Accumulated net realized gain on investments ...................................................... 1,904,428
Net unrealized appreciation of Investments ........................................................ 12,732,641
------------
Net Assets ...................................................................................... $ 42,880,040
------------
------------
STATEMENT OF OPERATIONS
Year Ended May 31, 1996
INCOME
Dividends ......................................................................................... $ 1,167,077
Interest .......................................................................................... 121,275
------------
Total Income .................................................................................... 1,288,352
------------
EXPENSES
Advisory fees (Note 2) ............................................................................ 266,741
Administrative services fees (Note 2) ............................................................. 30,000
Shareholder services fees (Note 2) ................................................................ 28,154
Registration fees (Note 2) ........................................................................ 24,772
Accounting/Pricing services fees (Note 2) ......................................................... 20,000
Custodian fees (Note 2) ........................................................................... 19,414
Audit fees ........................................................................................ 15,704
Printing and postage fees ......................................................................... 12,216
Directors' fees ................................................................................... 9,920
Legal fees ........................................................................................ 5,287
Miscellaneous fees ................................................................................ 1,811
------------
Total Expenses .................................................................................. 434,019
------------
Net Investment Income ......................................................................... 854,333
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on Investments .................................................................. 2,277,319
Net increase in unrealized appreciation of investments ............................................ 6,391,511
------------
Net gain on investments ......................................................................... 8,668,830
------------
Net increase in net assets resulting from operations .......................................... $ 9,523,163
------------
------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended May 31,
<S> <C> <C>
1996 1995
---------------- ----------------
OPERATIONS
Net investment income.......................................... $ 854,333 $ 737,061
Net realized gain on investments............................... 2,277,319 1,177,804
Net increase unrealized appreciation of investments............ 6,391,511 2,819,135
------------- -------------
Net increase in net assets resulting from operations...... 9,523,163 4,734,000
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income
($.540 and $.540 per share, respectively).................... (788,687) (692,621)
Distributions from net realized gains from security
transactions ($0.945 and $1.275 per share, respectively)..... (1,357,531) (1,590,137)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from the net change
in the number of outstanding shares (a)...................... 3,783,914 3,793,151
------------- -------------
Total increase in net assets.............................. 11,160,859 6,244,393
NET ASSETS AT THE BEGINNING OF THE YEAR............................ 31,719,181 25,474,788
------------- -------------
NET ASSETS AT THE END OF THE YEAR
(Including undistributed net investment income of
$431,001 and $365,355, respectively)......................... $ 42,880,040 $ 31,719,181
============ =============
(a) A summary of capital share transactions follows:
Year Ended May 31,
----------------------------------------------------------------
1996 1995
----------------------------------------------------------------
Shares Value Shares Value
---------- --------- --------- ---------
Shares issued....................... 234,168 $ 5,879,301 251,048 $ 5,232,197
Shares reinvested from net
investment income and capital
gains distributions.............. 80,419 1,841,377 102,301 1,968,319
---------- --------- --------- ----------
314,587 7,720,678 353,349 7,200,516
Shares redeemed..................... (156,417) (3,936,764) (167,783) (3,407,365)
---------- --------- --------- ----------
Net increase..................... 158,170 $ 3,783,914 185,566 $ 3,793,151
========== ========= ========= ==========
See accompanying notes to financial statements.
41
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
Note 1. - Significant Account Policies - Stratton Growth Fund, Inc. (the "Fund")
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's primary
investment objective is to seek possible growth of capital with current income
from interest and dividends as a secondary objective. The Fund's investments
will normally consist of common stock and securities convertible into or
exchangeable for common stock. Due to the inherent risks of investments there
can be no assurance that the objective of the Fund will be achieved. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Investments and Related Income: The investments in securities are
carried at market value in the accompanying financial statements.
Securities traded on a national exchange or securities quoted on the
NASD National Market System are valued at the last sale price. Other
over-the-counter securities and securities traded on exchanges for
which there is no sale are valued at the mean between the closing bid
and asked prices. 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 based on the specific identification
method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes: No provision is made for federal income taxes as
the Fund intends to qualify as a regulated investment company and to
make the requisite distribution of taxable income to its shareholders,
which will be sufficient to relieve it from all or substantially all
federal income taxes.
C. Use of Estimates in Financial Statements: In preparing financial
statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amounts of income and
expenses during the reporting period. Actual results may differ from
these estimates.
Note 2. - During the year ended May 31, 1996, the Fund paid advisory fees
aggregating $266,741 to Strattan Management Company (the "Advisor"). Management
services are provided by the Advisor under an agreement whereby the Advisor
furnishes all investment advice, office space and facilities to the Fund and
pays the salaries of the Fund's officers and employees, except to the extent
that those employees are engaged in administrative and accounting services
activities. In return for these services, the Fund pays to the Advisor a monthly
fee of 3/48 of 1% (annually 3/4 of 1%) of the daily net asset value of the Fund
for such month. The Advisor has voluntarily agreed to waive $15,000 annually of
the compensation due it under the agreement to offset a significant portion of
the cost of certain administrative responsibilities delegated to Fund/Plan
Services, Inc. Because of certain undertakings to comply with various state
securities laws, if in any fiscal year the expenses of the Fund (excluding
taxes, brokerage commissions and interest) exceed 2 1/2% of the first $30
million of the Fund's average net assets, 2% of the next $70 million and 1 1/2%
of the remaining, the Advisor shall reimburse the Fund for such excess. Certain
officers and directors of the Fund are also officers and directors of the
Advisor. None of the Fund's officers receives compensation from the Fund.
The Fund's Transfer Agent, Fund/Plan Services, Inc. ("Fund/Plan"), is a wholly-
owned subsidiary of FinDaTex, Inc. Certain directors and officers of the Fund
are shareholders of FinDaTex, Inc. Fund/Plan received fees of $28,164 for
providing shareholder services, $30,000 for certain administrative services and
$20,000 for accounting/pricing services during the year ended May 31, 1996.
Pursuant to an agreement between The Bank of New York (the "Custodian"), and
Fund/Plan, the Custodian reallows a portion of its custody fee to Fund/Plan for
certain services delegated to Fund/Plan. The amount is not readily determinable.
Fund/Plan Broker Services, Inc. serves as the Fund's principal underwriter and
receives no fees for services in assisting in sales of the Fund's shares but
does receive an annual fee of $3,000 for its services in connection with the
registration of the Fund's shares under state securities laws.
Note 3. - Purchases and sales of securities, excluding short-term notes,
aggregated $6,592,031 and $5,423,090, respectively, for the year ended May 31,
1996.
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Years ended May 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year...................... $22.35 $20.65 $20.89 $20.55 $19.75
-------- -------- -------- -------- --------
Income From Investment Operations
- ---------------------------------
Net investment income................................... 0.556 0.537 0.051 0.560 0.640
Net gains on securities (both realized and unrealized).. 5.759 2.978 0.665 1.160 1.320
-------- -------- -------- -------- --------
Total from Investment operations..................... 6.315 3.515 1.175 1.720 1.960
-------- -------- -------- -------- --------
Less Distributions
- ------------------
Dividends (from net Investment income).................. (0.540) (0.540) (0.510) (0.565) (0.725)
Distributions (from capital gains)...................... (0.945) (1.275) (0.905) (0.815) (0.435)
-------- -------- -------- -------- --------
Total distributions.................................. (1.485) (1.815) (1.415) (1.380) (1.160)
-------- -------- -------- -------- --------
Net Asset Value, End of Year............................ $27.18 $22.35 $20.65 $20.89 $20.55
======== ======== ======== ======== ========
Total Return............................................ 29.62% 18.61% 5.92% 8.91% 10.57%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (in 000's).................... $42,880 $31,719 $25,475 $26,315 $25,311
Ratio of expenses to average net assets............... 1.16% 1.31% 1.34% 1.39% 1.35%
Ratio of net investment income to average net
assets.............................................. 2.28% 2.70% 2.51% 2.76% 3.20%
Portfolio turnover rate............................... 15.41% 42.54% 49.81% 35.34% 59.76%
</TABLE>
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Stratton Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Stratton Growth Fund, Inc., including the schedule of investments, as of
May 31, 1996, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. 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.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and 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 May 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 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
Stratton Growth Fund, Inc. as of May 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
Philadelphia, PA
June 13, 1996 TAIT, WELLER & BAKER
43
<PAGE>
POST-EFFECTIVE AMENDMENT NO. 43
TO REGISTRATION STATEMENT NO. 2-44752
ON
FORM N-1A
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------------------------------------------
(a) Financial Statements:
(1) The Financial Highlights are included in Part A of this Registration
Statement on Form N-1A. The following Financial Statements are included
in Part B of this Registration Statement on Form N-1A for the fiscal
year ended May 31, 1996:
Schedule of Investments at May 31, 1996.
Statement of Assets and Liabilities at May 31, 1996.
Statement of Operations for the year ended May 31, 1996.
Statement of Changes in Net Assets for the years ended May 31,
1996 and May 31, 1995.
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants.
(2) All required financial statements are included or incorporated in Parts
A and B hereof. All other financial statements and schedules are
inapplicable.
(b) Exhibits:
(1) Articles of Incorporation of Registrant dated June 21, 1985 are
incorporated herein as Exhibit 1.
(2) By-Laws of Registrant, as amended, dated June 22, 1989 are incorporated
herein as Exhibit 2
(3) None.
(4) Specimen certificate for shares of common stock of Registrant is
incorporated herein by reference to Exhibit No. (4) of Post-Effective
Amendment No. 32 to Registrant's Registration Statement on Form N-1A,
filed on July 31, 1986.
(5) Investment Advisory Agreement dated July 1, 1989, between Registrant
and Stratton Management Company is incorporated herein as Exhibit 5
(6) Underwriting Agreement dated June 22, 1993 between Registrant and
Fund/Plan Broker Services, Inc is incorporated herein as Exhibit 6.
1
<PAGE>
(7) None.
(8) (a) Custodian Agreement between Registrant and The Bank of New York
dated November 1, 1994 is incorporated herein by reference to
Exhibit No. 8 (a) of Post-Effective Amendment No 42 to
Registrant's Registration Statement on Form N-1A, filed on
September 29, 1995.
(b) Custody Administration and Agency Agreement between Registrant
and Fund/Plan Services, Inc. dated November 1, 1994 is
incorporated herein by reference to Exhibit No. 8 (b) of Post-
Effective Amendment No 42 to Registrant's Registration Statement
on Form N-1A, filed on September 29, 1995.
(9) (a) Administration Agreement dated March 1, 1990 between Registrant
and Fund/Plan Services, Inc. is incorporated herein by reference
to Exhibit No. (9)(a) of Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A, filed on
September 28, 1990.
(b) Shareholder Services Agreement (formerly known as Administration
Agreement) dated September 27, 1985 between Registrant and First
Pennsylvania Bank N.A. is incorporated herein by reference to
Exhibit No. (9)(a) of Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A, filed on July
26, 1985.
(c) Amendment No. 1 to Shareholder Services Agreement (formerly known
as Administration Agreement) dated December 11, 1985 between
Registrant and Fund/Plan Services, Inc. is incorporated herein by
reference to Exhibit No. (9)(b) of Post-Effective Amendment No.
33 to Registrant's Registration Statement on Form N-1A, filed on
July 31, 1987.
(d) Amendment No. 2 to Shareholder Services Agreement (formerly known
as Administration Agreement) dated June 24, 1987 between
Registrant and Fund/Plan Services, Inc. is incorporated herein by
reference to Exhibit No. (9)(c) of Post-Effective Amendment No.
33 to Registrant's Registration Statement on Form N-1A, filed on
July 31, 1987.
(e) Amendment to Shareholder Services Agreement (formerly known as
Administration Agreement) dated February 27, 1990 changing title
of September 27, 1985 Administration Agreement to Shareholder
Services Agreement is incorporated herein by reference to Exhibit
No. (9)(e) to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A, filed on September 28, 1990.
(f) Amendment to Shareholder Services Agreement (formerly known as
Administration Agreement) dated September 24, 1991 between
Registrant and Fund/Plan Services, Inc. changing signature
guarantee minimum is incorporated herein by reference to Exhibit
No. (9)(f) of Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A, filed on September 30, 1991.
(g) Accounting Services Agreement dated June 1, 1988 between
Registrant and Fund/Plan Services, Inc. with notice of February
22, 1989 is incorporated herein by reference to Exhibit No.
(9)(d) of Post-Effective Amendment No. 35 to Registrant's
Registration Statement on Form N-1A, filed on July 28, 1989.
(10) Opinion and Consent of Counsel filed under Rule 24f-2 of the 1940 Act
as part of Registrant's Rule 24f-2 Notice filed on July 26, 1996.
2
<PAGE>
(11) (a) Consent of Tait, Weller & Baker filed herein as Exhibit 11(a).
(b) Consent of Drinker Biddle & Reath filed herein as Exhibit 11(b).
(12) None.
(13) None.
(14) (a) Form of 403(b)(7) Retirement Plan is incorporated herein as
Exhibit 14(a).
(b) Form of Individual Retirement Account (I.R.A.) is incorporated
herein by reference to Exhibit No. (14)(b) of Post-Effective
Amendment No. 37 to Registrant's Registration Statement on Form
N-1A, filed on September 30, 1991.
(c) Form of Self-Employed Retirement Plan (Defined Contribution
Plans) as amended June 30, 1994 incorporated herein by reference
to Exhibit No. 14 (C) of Post-Effective Amendment No 42 to
Registrant's Registration Statement on Form N-1A, filed on
September 29, 1995.
(15) None.
(16) Schedule of computations of performance quotations is incorporated
herein by reference to Exhibit No. (16) of Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A filed
September 30, 1994.
(17) Financial Data Schedule is incorporated herein as Exhibit 27.
(18) Powers of Attorney incorporated herein by reference to Exhibit No. 17
of Post-Effective Amendment No 42 to Registrant's Registration
Statement on Form N-1A, filed on September 29, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
- ------------------------------------------------------------------------
Registrant is controlled by its Board of Directors
3
<PAGE>
Item 26. Number of Holders of Securities.
- ------------------------------------------
Number of Record Holders
Title of Class (as of August 31,1996)
-------------- ------------------------
Capital Stock
par value $0.10 1,254
per share
Item 27. Indemnification.
- --------------------------
Section 2-418 of the Corporations and Associations Article of the Annotated
Code of Maryland gives Registrant the power to indemnify its directors and
officers under certain situations. Article VII, Section 3 of Registrant's
Articles of Incorporation, incorporated by reference as Exhibit (1) hereto,
and Article VII, Sections 7.01 and 7.02 of Registrant's By-Laws, as amended,
incorporated by reference as Exhibit (2) hereto, provide for the
indemnification of Registrant's directors and officers. Each indemnification
must be authorized by the Board of Directors of Registrant by a majority of
a quorum consisting of directors who were not parties to the action, suit or
proceeding, or by independent legal counsel in a written opinion, or by the
shareholders. Notwithstanding the foregoing, Article VI Section 1 (a) of
Registrant's By-Laws provides that no director or officer of Registrant
shall be indemnified against any liability to Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's duties to
the corporation.
In addition, the aforesaid section of the Corporations and Associations
Article of the Annotated Code of Maryland gives Registrant the power (a) to
purchase and maintain insurance for its directors and officers against any
liability asserted against them and incurred by them in that capacity or
arising out of their status as such, whether or not Registrant would have
the power to indemnify such directors and officers under such statute, and
(b) under certain circumstances to pay the reasonable expenses incurred by a
director or officer in defending an action, suit or proceeding in advance of
the final disposition of the action, suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant, pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Indemnification of the Registrant's Custodian, Transfer Agent,
Accounting/Pricing Agent and Administrator against certain stated
liabilities is provided for by the following documents:
(a) Article XVII (14) of the Custodian Agreement between the Registrant and
Bank of New York incorporated herein by reference to Exhibit 8(a) of the
Registrant's Registration Statement on Form N-1A;
4
<PAGE>
(b) Section 26 of the Shareholder Services Agreement, incorporated herein by
reference as Exhibit Nos. (9)(b) through (9)(f) of the Registrant's
Registration Statement on Form N-1A;
(c) Section 10 of the Accounting Services Agreement, incorporated herein by
reference as Exhibit No. (9)(g) of the Registrant's Registration
Statement on Form N-1A; and
(d) Section 8 of the Administration Agreement, incorporated herein by
reference as Exhibit No. (9)(a) of the Registrant's Registration
Statement on Form N-1A.
Item 28. Business and Other Connections of Investment Advisor.
- ---------------------------------------------------------------
Stratton Management Company provides investment advisory services consisting
of portfolio management for a variety of individuals and institutions, and
as of June 30, 1996 had approximately $1.311 billion in assets under
management. It presently also acts as investment advisor to two other
registered investment companies, Stratton Monthly Dividend Shares, Inc. and
The Stratton Funds, Inc.
For information as to any other business, vocation or employment of a
substantial nature in which each director or officer of the Registrant's
investment advisor has been engaged for his own account or in the capacity
of director, officer, employee, partner or trustee, reference is made to
Form ADV (File #801-8681) filed by it under the Investment Advisors Act of
1940, as amended.
ITEM 29. PRINCIPAL UNDERWRITER
- ------------------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for
the Registrant's securities, currently acts as principal underwriter
for the following entities:
The Brinson Funds
CT&T Funds
Farrell Alpha Strategies
First Mutual Funds.
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Polynous Trust
Sage/Tso Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
5
<PAGE>
(b) The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITION AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- --------------------
<S> <C> <C>
Kenneth J. Kempf Director and None
2 W. Elm Street President
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and Director
2 W. Elm Street Principal
Conshohocken, PA 19428-0874
Rocco J. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President and
Conshohocken PA 19428-0874 Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President, None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
Bruno DiStefano Principal None
2 W.Elm Street
Conshohocken, PA 19428
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
- -------------------------------------------
All records described in Section 31(a) of the 1940 Act and the Rules 17 CFR
270.31a-1 to 31a-31 promulgated thereunder, are maintained by Stratton
Management Company, the Fund's Investment Advisor, Plymouth Meeting
Executive Campus, 610 W. Germantown Pike, Suite 300, Plymouth Meeting,
Pennsylvania 19462-1050, except for those maintained by the Fund's
Custodian, The Bank of New York, 48 Wall Street, New York New York 10286,
and Fund/Plan Services, Inc., the Fund's Administrator, Transfer, Redemption
and Dividend Disbursing Agent, Administrator of its Retirement Plans and
Accounting Services Agent, 2 W. Elm Street, P.O. Box 874, Conshohocken, PA
19428-0874.
Item 31. Management Services.
- ------------------------------
Not Applicable.
Item 32. Undertakings.
- -----------------------
The Registrant undertakes to provide its Annual Report upon request without
charge to any recipient of the Fund's Prospectus.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485 (B) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 43 to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in Plymouth Meeting, PA,
on the 27th day of September, 1996.
----
STRATTON GROWTH FUND, INC.
-------------------------------------
*James W. Stratton,
Director and Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 43 to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date(s)
indicated.
Signature Title Date
- --------- ----- ----
- -------------------------- Director and September 27, 1996
*James W. Stratton Chairman of the Board
(Chief Executive Officer)
- -------------------------- Secretary/Treasurer September 27, 1996
*Patricia Sloan
* Lynne M. Cannon Director September 27, 1996
* John J. Lombard, Jr. Director September 27, 1996
* Henry A. Rentschler Director September 27, 1996
* Merritt N. Rhoad, Jr. Director September 27, 1996
* Alexander F. Smith Director September 27, 1996
* Richard W. Stevens Director September 27, 1996
* By:
/s/ William J. Baltrus
- --------------------------
William J. Baltrus
as Attorney-in-Fact and Agent, pursuant to Power of Attorney
7
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS ON FORM N-1A
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ----------- ------------------------ -------------
<S> <C> <C>
1. Articles of Incorporation
2. By-Laws
5. Investment Advisory Agreement
6. Underwriting Agreement
11(a). Consent of Tait, Weller
& Baker
11(b). Consent of Drinker Biddle
& Reath
14(a) Form of 403 (b) (7) Retirement Plan
17. Financial Data Schedule
</TABLE>
<PAGE>
ARTICLES OF INCORPORATION
OF
STRATTON GROWTH FUND, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Barbara G. Fraser, whose post office address is 1100
Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107, being at
least eighteen years of age, does hereby act as an incorporator, under and by
virtue of the General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
STRATTON GROWTH FUND, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as management
investment company under the Investment Company Act of 1940.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the
<PAGE>
vote or consent of the stockholders of the Corporation) shares of its capital
stock, in any manner and to the extent now or hereafter permitted by law and by
the Charter of the Corporation.
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management of all or part of the
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. The compensation payable by the Corporation
under any such contract shall be such as is deemed fair and equitable by the
Board of Directors.
(5) To enter into a written contract or contracts appointing one or more
distributors or agents or both for the sale of the shares of the Corporation on
such terms and conditions as the Board of Directors of this Corporation may deem
reasonable and proper, and to allow such person or persons a commission on the
sale of such shares.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the Corporation
and of its shares, such dividend disbursing agent or agents, and such transfer
agent or agents and registrar or registrars for its shares, on such terms and
conditions as the Board of Directors of the Corporation may deem reasonable and
proper for the conduct of the affairs of the Corporation, and to pay the fees
and disbursements of such custodians, dividend disbursing agents, transfer
agents, and registrars out of the income and/or any other property of the
Corporation. Notwithstanding any other provision of these Articles of
Incorporation or the By-Laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred to, or to
be acquired and held in the name of, any custodian so appointed or any nominee
or nominees of the Corporation or nominee or nominees of such custodian
satisfactory to the Board of Directors.
(7) To employ the same person in any multiple capacity under Sections
(4), (5) and (6) of this Article IV who may receive compensation from the
Corporation in as many capacities in which such person shall serve the
Corporation.
(8) No contract, transaction, arrangement, or course of dealing between
the Corporation and any other person, partnership
<PAGE>
(general or limited), association, trust, corporation or other incorporated or
unincorporated group of persons shall be affected by the fact that one or more
of the directors, officers or stockholders of the Corporation were, are or may
become directors, officers or stockholders of or otherwise in any way interested
in such other person, partnership (general or limited), association, trust,
corporation or other incorporated or unincorporated group of persons. All such
contracts, transactions, arrangements and courses of dealing, including without
limitation those referred to under Sections (4), (5) and (6) of Article IV are
hereby expressly permitted.
(9) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a corporation
of this State, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Ten Million (10,000,000) shares, of the par
value of Ten Cents $.10) per share and of the aggregate par value of One Million
Dollars ($1,000,000).
<PAGE>
(2) Any fractional share shall carry proportionately-all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the Charter and the By-Laws of the
Corporation.
ARTICLE VII
(1) The number of initial directors of the Corporation shall be eight
(8) provided that: (A) The number of directors of the Corporation may be
increased or decreased pursuant to the By-Laws of the Corporation but shall
never be less than three (3), except as provided in this Article VII; (B) if
there is no capital stock of the Corporation outstanding the number of directors
may be less than three (3) but not less than one (1); and (C) if there is
capital stock of the Corporation outstanding and so long as there are less than
three (3) stockholders of the Corporation, the number of directors may be less
than three (3) but not less than the number of stockholders. The names of the
directors who shall act until the first annual meeting of stockholders or until
their successors are duly elected and qualify are:
Carter R. Buller
John J. Lombard, Jr.
Rose J. Randall
Merritt N. Rhoad, Jr.
Richard W. Stevens
James W. Stratton
Gordon L. Wahls
Gilbert Zitin
(2) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by the Charter, or out of any
shares of the capital stock of the Corporation acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of Directors,
in its discretion, may determine.
<PAGE>
(3) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General Laws
of the State of Maryland, except to extent limited by the Investment Company Act
of 1940, as now in effect or hereafter amended, including advance of related
expenses.
ARTICLE VIII
The provisions of this Article Eighth are applicable to the Corporation
as a regulated investment company registered under the Investment Company Act of
1940, as heretofore or hereafter amended:
(1) Subject to the provisions of the last sentence of this paragraph,
the Corporation shall be required to redeem shares of Common Stock tendered to
it for redemption, at the net asset value per share as determined pursuant to
methods established from time to time by resolution of the Board of Directors.
The redemption price shall be payable in cash, except to the extent that the
Board of Directors may from time to time determine that it may be payable in
kind. The Bylaws or the Board of Directors may from time to time prescribe
regulations with respect to redemption of shares of Common Stock, but such right
of redemption shall not be suspended, nor shall the date of payment or
satisfaction upon redemption be postponed, in contravention of the applicable
provisions of the Investment Company Act of 1940 as from time to time amended,
and regulations thereunder.
(2) In lieu of redemption pursuant to subparagraph (1), the Board of
Directors may authorize the Corporation to repurchase or authorize its agent or
agents to repurchase for the Corporation, shares of Common Stock at the
applicable Net Asset Value per Share.
(3) The Board of Directors may from time to time determine that shares
of Common Stock redeemed or repurchased by the Corporation under the foregoing
provisions shall be held as treasury shares with a view to possible resale, or
that they shall be returned and upon compliance with applicable provisions of
law restored to the status of authorized by unissued shares of Common Stock.
(4) Subject to the applicable provisions of the
<PAGE>
Investment Company Act of 1940 and the Bylaws of the Corporation, both as from
time to time amended, the Board of Directors may determine or cause to be
determined the time when any offer, sale, repurchase, redemption, tender or
acceptance shall be deemed to have been made, or when the rights of any
stockholder offering or tendering shares for redemption (other than the right to
receive payment of the redemption price) shall cease, or any matter with respect
to assets, valuation of assets, debts, obligations, liabilities, charges and
reserves, or any other underlying matters.
(5) Without limiting the generality of the foregoing, the Corporation
shall, to the extent permitted by law, have the right at any time to redeem the
shares owned by any holder of Common Stock of the Corporation if the value of
such shares in the account maintained by the Corporation or its transfer agent
is less than $500.00 (Five Hundred Dollars), provided, however, that each
stockholder shall be notified that the value of his account is less than $500.00
and allowed sixty (60) days to make additional purchases of shares before
redemption is processed by the Corporation.
ARTICLE IX
The duration of the Corporation shall be perpetual.
ARTICLE X
(1) The Corporation reserves the right from time to time to make any
amendments to its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its Charter, of any of its outstanding stock by classification,
reclassification or otherwise, but no such amendment which changes such terms or
contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon by a vote at a
meeting.
(2) Notwithstanding any provision of the General Laws of the State of
Maryland requiring any action to be taken or authorized by the affirmative vote
of the holders of a designated proportion of the votes of all classes or of any
class of stock of the Corporation, such action shall be effective and valid if
taken or authorized by the affirmative vote of the holders of a
<PAGE>
majority of the total number of shares outstanding and entitled to vote thereon,
except as otherwise required by applicable law or otherwise provided herein.
(3) So long as permitted by Maryland law, the books of the Corporation
may be kept outside of the State of Maryland at such place or places as may be
designated from time to time b.y the Board of Directors or in the By-Laws of the
Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(A) To make, alter or repeal the By-Laws of the Corporation, except
where such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(B) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into shares of its stock of any class or classes, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem advisable.
(C) Without the assent or vote of the stockholders, to authorize and
issue obligations of the Corporation, secured and unsecured, as the Board of
Directors may determine.
(D) Notwithstanding anything in these Articles of Incorporation to the
contrary, to establish in its absolute discretion in accordance with the
provisions of applicable law the basis or method for determining the value of
the assets belonging to the Corporation, the amount of the liabilities belonging
to the Corporation, the times at which shares of the Corporation shall be deemed
to be outstanding or no longer outstanding and the net asset value of each share
of capital stock of the Corporation for purposes of sales, redemptions,
repurchases of shares or otherwise.
(E) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or net
assets in excess of capital, and to determine what accounting periods shall be
used by the Corporation for any purpose, whether annual or any other period,
<PAGE>
including daily; to set apart out of any funds of the Corporation such reserves
for such purposes as it shall determine and to abolish the same; to declare and
pay any dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals (which may be
as frequently as daily) or on such other periodic basis, as it shall determine;
to declare such dividends or distributions by means of a formula or other method
of determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the payment
of declared dividends on a date earlier or later than the specified payment date
in the case of stockholders of the Corporation redeeming their entire ownership
of shares of any class of the Corporation.
(F) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is authorized to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of Maryland
law, these Articles of Incorporation and the By-Laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of STRATTON GROWTH
FUND, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be her act.
Dated as of the 21st day of June, 1985.
/s/ Barbara G. Fraser
----------------------
Barbara G. Fraser
<PAGE>
Amended on June 22, 1989
BY-LAWS
of
STRATTON GROWTH FUND, INC .
(A Maryland Corporation)
ARTICLE I
Offices and Fiscal Year
-----------------------
Section 1.01 Registered Office. The registered office of the corporation
-----------------
in the State of Maryland shall be that specified in the charter of the
corporation, as amended from time to time.
Section 1.02 Other Offices. The corporation may also have offices at
-------------
such other places within or without the State of Maryland as the board of
directors may from time to time determine or the business of the corporation
require.
<PAGE>
which meetings may lawfully be called, may be called at any time by the chairman
of the board, a majority of the board of directors, the president, or at the
request, in writing, of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote. At
any time, upon written request of any person or persons who have duly called a
special meeting, which written request shall state the purpose or purposes of
the meeting, it shall be the duty of the Secretary to fix the date of the
meeting to be held at such date and time as the secretary may fix, not less than
ten nor more than sixty days after the receipt of the request, and to give due
notice thereof. If the secretary shall neglect or refuse to fix the time and
date of such meeting and give notice thereof, the person or persons calling the
meeting may do so.
Section 2.04 Notice of Meetings. written notice of every meeting of the
------------------
stockholders, whether annual or special, shall be given to each stockholder of
record entitled to vote at the meeting not less than ten nor more than sixty
days before the date of the meeting. Every notice of a special meeting shall
state briefly the purpose or purposes thereof.
Section 2.05 Quorum, Manner of Acting and Adjournment. The holders of a
----------------------------------------
majority of the stock issued and outstanding (not including treasury stock) and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by these by-laws. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting, at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of the holders of the majority of the stock having
voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the
<PAGE>
question is one upon which, by expressed provision of the applicable statute or
these bylaws, a different vote is required in which case such expressed
provision shall govern and control the decision of such question. Except upon
those questions governed by the aforesaid expressed provisions, the stockholders
present in person or by proxy at a duly organized meeting can continue to do
business until adjournment, notwithstanding withdrawal of enough stockholders to
leave less than a quorum.
Section 2.06 Organization. At every meeting of the stockholders, the
------------
chairman of the board, if there be one, or in the case of vacancy in office or
absence of the chairman of the board, one of the following persons present in
the order stated: the president, the vice presidents, in their order of rank, a
chairman designated by the board of directors or a chairman chosen by the
stockholders entitled to cast a majority of the votes which all stockholders
present in person or by proxy are entitled to cast, shall act as chairman, and
the secretary, or, in his absence, an assistant secretary, or in the absence of
both the secretary and the assistant secretaries, a person appointed by the
chairman shall act as secretary.
Section 2.07 Voting. Each stockholder shall at every meeting of the
------
stockhoIders be entitled to one vote in person or by proxy for each share of
capital stock having voting power held by such stockholder. No proxy shall be
voted on after three years from its date, unless the proxy provides for a longer
period. Every proxy shall be executed in writing by the stockholder or by his
duly authorized attorney in fact and filed with the secretary of the
corporation. A proxy, unless coupled with an interest, shall be revocable at
will, notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the secretary of the corporation. A proxy shall not be
revoked by the death or incapacity of the maker unless, before the vote is
counted or the authority is exercised, written notice of such death or
incapacity is given to the secretary of the corporation. A stockholder shall not
sell his vote or execute a proxy to any person for any sum of money or anything
of value. A proxy coupled with an interest shall include an unrevoked proxy in
favor of a creditor of a stockholder and such a proxy shall be valid as long as
the debt owed by him to the creditor remains unpaid.
<PAGE>
Section 2.08 Consent of Stockholders in Lieu of Meeting
------------------------------------------
Any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 2.09 Voting Lists. The officer who has charge of the stock
------------
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder, and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting, during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 2.10 Judges of Election. The vote upon any matter, including the
------------------
election of directors, need not be by ballot. In advance of any meeting of
stockholders, the board of directors may appoint judges of election, who need
not be stockholders, to act at such meetings or any adjournment thereof. If
judges of election are not so appointed, the chairman of any such meeting may,
and upon the demand of any stockholder or by his proxy at the meeting and before
voting begins, shall, appoint judges of election. The number of judges shall be
either one or three as determined by the board of directors or the chairman or,
in the case of judges appointed upon demand of the stockholders, by stockholders
present entitled to cast a majority of the votes which all stockholders present
are entitled to cast thereon. No person who is a candidate for office shall act
as a judge. In
<PAGE>
case any person appointed as a judge fails to appear or fails or refuses to act,
the vacancy may be filled by appointment made by the board of directors in
advance of the convening of the meeting, or at the meeting by the chairman of
the meeting.
If judges of election are appointed as aforesaid, they shall determine
the number of shares outstanding, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect of proxies,
receive votes or ballots, hear and determine all challenges and questions in any
way arising in connection with the right to vote, count and tabulate all votes,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all stockholders. If there be three judges of election,
the decision, act or certificate of majority shall be effective in all respects
as the decision, act or certificate of all.
On the request of the chairman of the meeting or any stockholder or his
proxy, the judges shall make a record in writing of any challenge or question or
matter determined by them, and execute a certificate of any facts found by them.
ARTICLE III
Board of Directors
------------------
Section 3.01 Powers. The board of directors shall have full power to
------
conduct, manage and direct the business and affairs of the corporation; and all
powers of the corporation, except those specifically reserved or granted to the
stockholders by statute, the charter of the corporation or these by-laws, are
hereby granted to and vested in the board of directors.
Section 3.02 Number and Term of Office. The board of directors shall
-------------------------
consist of such number of directors, not less than three nor more than fifteen,
as may be determined from time to time by resolution of the board of directors.
Each director shall serve until the next annual meeting of the stockholders and
until his successor shall have been elected and qualified, except in the event
of his death, resignation or removal. All directors of the corporation shall be
natural persons of full age, but need not be residents of Maryland or
stockholders of the corporation. At least a majority of the board of directors
shall consist of persons who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended) of the corporation.
<PAGE>
Section 3.03 Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual meeting and until their successors are duly elected and
qualified. If there are no directors in office, then an election of directors
may be held in the manner provided by statute.
Section 3.04 Removals. The stockholders may at any meeting called for
--------
the purpose, by vote, remove from office any director and fill the vacancy on
the board thus caused.
To the extent consistent with the Investment Company Act of 1940, as
amended, the board of directors may by a vote of not less than a majority of the
directors in office, remove from office a director, officer, or agent elected or
appointed by them, and may remove any of the aforementioned elected by the
stockholders for misconduct or in the event any of the aforementioned are
declared of unsound mind by an Order of the Court, convinced of a felony or for
any proper cause, or if within sixty days after notice of his election, he does
not accept such office, either in writing, or by attending a meeting of the
board of directors.
Section 3.05 Organization. At every meeting of the board of directors,
------------
the chairman of the board, if there be one, or, in the case of vacancy in the
office or absence of the chairman of the board, one of the following officers
present in the order stated: the president, the vice presidents in their order
of rank and seniority, or a chairman chosen by a majority of the directors
present, shall preside, and the secretary, or, in his absence, an assistant
secretary, or in the absence of the secretary and the assistant secretaries, any
person appointed by the chairman of the meeting shall act as secretary.
section 3.06 Place of Meeting. The board of directors may hold its
----------------
meetings, both regular and special, at such place or places within or without
the State of Maryland as the board of directors may from time to time appoint,
or as may be designated in the notice calling the meeting.
Section 3.07 Orqanization Meetinq. The first meeting of
--------------------
<PAGE>
each newly elected board of directors shall be held immediately after the
stockholders meeting. No notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event such meeting is not so held, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors, or as shall
be specified in a written waiver signed by all of the directors.
Section 3.08 Regular Meetings. Regular meetings of the board of
----------------
directors may be held at such time and place as shall be designated from time to
time by resolution of the board of directors. Such meeting shall be held without
notice except as required by the Investment Company Act of 1940, as amended. If
the date fixed for any such regular meeting be a legal holiday under the laws of
the State where such meeting is to be held, then the same shall be held on the
next succeeding business day, not a Saturday, or at such other time as may be
determined by a resolution of the board of directors. At such meetings, the
directors shall transact such business as may properly be brought before the
meeting.
Section 3.09 Special Meetings. Special meetings of the board of
----------------
directors shall be held whenever called by the president or by two or more of
the directors. Notice of each such meeting shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone)
or 48 hours (in the case of notice by telegram) or five days (in the case of
notice by mail) before the time at which the meeting is to be held. Each such
notice shall state the time and place of the meeting to be so held.
Section 3.10 Quorum, Manner of Actinq, and Adjournment. At all meetings
------------------------------------------
of the board a majority of the directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
<PAGE>
Unless otherwise restricted by the charter of the corporation or these
by-laws, any action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken without a meeting,
if all members of the board consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board.
Section 3.11 Executive and Other Committees. The board of directors may,
-------------------------------
by resolution adopted by a majority of the whole board, designate an Executive
Committee and one or more other committees, each committee to consist of two or
more directors. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member of
any meeting of the committee. In the absence or disqualification of a member,
and the alternate or alternates, if any, designated for such member, of any
committee the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member.
Any such committee to the extent provided in the resolution establishing
such committee shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, including the power of authority to declare a dividend or to
authorize the issuance of stock, and may authorize the seal of the corporation
to be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors when required.
Section 3.12 Compensation of Directors. The board of directors shall
-------------------------
have the authority to fix the compensation of directors. Any director may be
paid his expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors and/or a stated salary as director. No such payment
<PAGE>
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
Section 3.13 Resignations. Any director of the corporation may resign at
------------
any time by giving written notice to the president or the secretary of the
corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.14 Interested Directors or Officers; Quorum. No contract or
----------------------------------------
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for such reason, or solely because the director or officer is
present at or participates in the meeting of the board which authorizes the
contract or transaction or solely because his or their votes are counted for
such purpose, if:
(a) the material facts as to his interest and as to the contract or
transaction are disclosed or are known to the board of directors and the board
in good faith authorizes the contract or transaction by a vote sufficient for
such purpose without counting the vote of the interested director or directors;
or
(b) the material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
(c) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the board of directors or the
stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors which authorizes a contract or
transaction specified in this section.
<PAGE>
ARTICLE IV
Notice - Waivers - Meetings
---------------------------
Section 4.01 Notice, What Constitutes. Whenever written notice is
------------------------
required to be given to any person under the provisions of the charter of the
corporation, these by-laws, or by statute, it may be given to such person,
either personally or by sending a copy thereof through the mail, or by
telegraph, charges prepaid, to his address appearing on the books of the
corporation, or supplied by him to the corporation for the purpose of notice. If
the notice is sent by mail or by telegraph, it shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office for transmission to such person. A notice of a meeting
shall specify the place, day and hour of the meeting.
Section 4.02 Waivers of Notice. Whenever any written notice is required
-----------------
to be given under the provisions of the charter of the corporation, these by-
laws, or by statute, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Except in the
case of a special meeting of stockholders, neither the business to be transacted
at, nor the purpose of, the meeting need to be specified in the waiver of notice
of such meeting.
Attendance of a person, either in person or by proxy, at any meeting,
shall constitute a waiver of notice of such meeting, except where a person
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
Section 4.03 Conference Telephone Meetings. One or more directors may
-----------------------------
participate in a meeting of the board, or a committee of the board, by means of
conference telephone or similar communications equipment whereby all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE V
Officers
--------
<PAGE>
Section 5.01 Number, Qualifications and Designation. The officers of the
--------------------------------------
corporation shall be chosen by the board of directors and shall be a president,
one or more vice presidents, a secretary, a treasurer, and such other officers
as may be elected in accordance with the provisions of Section 5.03 of this
Article. One person may hold more than one office. Officers, may be but need not
be directors or stockholders of the corporation. The president and secretary
shall be natural persons of full age; the treasurer, however may be a
corporation, but if a natural person shall be of full age. The board of
directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board who shall be officers of the corporation.
Section 5.02 Election and Term of Office. The officers of the
---------------------------
corporation, except those elected by delegated authority pursuant to Section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold his office until the next annual organization
meeting of directors and until his successor shall have been duly chosen and
qualified, or until his death, resignation, or removal.
Section 5.03 Subordinate Officers, Committees and Agents. The board of
-------------------------------------------
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these by-laws, or as the board of directors may from
time to time determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents.
Section 5.04 General Powers. All officers of the corporation as between
--------------
themselves and the corporation, shall, respectively, have such authority and
perform such duties in the management of the property and affairs of the
corporation as may be determined by resolution of the board of directors, or in
the absence of controlling provisions in a resolution of the board of directors,
as may be provided in these by-laws.
Section 5.05 The President. The president shall be the chief executive
-------------
officer of the corporation and shall have general supervision over the business
and operations of the corporation, subject, however, to the control of the board
of directors. He shall sign, execute, and acknowledge, in the name of the
<PAGE>
corporation, deeds, mortgages, bonds, contracts or other instruments, authorized
by the board of directors, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors, or by these by-
laws, to some other officer or agent of the corporation; and, in general, shall
perform all duties incident to the office of president, and such other duties as
from time to time may be assigned to him by the board of directors.
Section 5.06 The vice Presidents. The vice presidents shall perform the
-------------------
duties of the president in his absence and such other duties as may from time to
time be assigned to them by the board of directors or by the president.
Section 5.07 The Secretary. The secretary or an assistant secretary
-------------
shall attend all meetings of the stockholders and of the board of directors and
shall record all the votes of the stockholders and of the directors and the
minutes of the meetings of the stockholders and of the board of directors and of
committees of the board in a book or books to be kept for that purpose; see that
the notices are given and records and reports properly kept and filed by the
corporation as required by law; be the custodian of the seal of the corporation
and see that it is affixed to all documents to be executed on behalf of the
corporation under its seal; and, in general, perform all duties incident to the
office of secretary, and such other duties as may from time to time be assigned
to him by the board of directors or the president.
Section 5.08 The Treasurer. The treasurer or an assistant treasurer
-------------
shall have or provide for the custody of the funds or other property of the
corporation and shall keep a separate book account of the same to his credit as
treasurer; collect and receive or provide for the collection and receipt of
moneys earned by or in any manner due to or received by the corporation; deposit
all funds in his custody as treasurer in such banks or other places of deposit
as the board of directors may from time to time designate; whenever so required
by the board of directors, render an account showing his transactions as
treasurer, and the financial condition of the corporation; and, in general,
discharge such other duties as may from time to time be assigned to him by the
board of directors or the president.
Section 5.09 Officers' Bonds. No officer of the corporation need provide
---------------
a bond to guarantee the faithful
<PAGE>
discharge of his duties unless the board of directors shall by resolution so
require a bond in which event such officer shall give the corporation a bond
(which shall be renewed if and as required) in such sum and with such surety or
sureties, as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office.
Section 5.10 Salaries. The salaries of the officers elected by the board
--------
of directors shall be fixed from time to time by the board of directors or by
such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03 of this Article. No office-r shall be
prevented from receiving such salary or other compensation by reason of the fact
that he is also a director of the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
-------------------------------------
Section 6.01 Issuance. Each stockholder shall be entitled to a
--------
certificate or certificates for shares of stock of the corporation owned by him
upon his request therefore. The stock certificates of the corporation shall be
numbered and registered in the stock ledger and transfer books of the
corporation as they are issued. They shall be signed by the president or a vice
president and by the secretary or an assistant secretary or the treasurer or an
assistant treasurer, and shall bear the corporate seal, which may be a
facsimile, engraved or printed; but where such certificate is countersigned by a
transfer agent or a registrar the signature of any corporate officer upon such
certificate may be a facsimile, engraved or printed. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon any share certificate shall have ceased to be such officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if he were such officer, transfer agent or registrar at
the date of its issue.
Section 6.02 Stockholder Open Accounts. The corporation may maintain or
-------------------------
cause to be maintained for each stockholder a stockholder open account in which
shall be recorded such
<PAGE>
stockholder's ownership of stock and all changes therein, and certificates need
not be issued for shares so recorded in a stockholder open account unless
requested by the stockholder.
Section 6.03 Transfer. In cases where certificates for shares have not
--------
been issued, the shares of the corporation shall be transferable on the books of
the corporation by the person in whose name the shares are held on the books of
the corporation or by his duly authorized attorney or legal representative upon
receipt by the corporation or the transfer agent of written notice from such
person, his duly authorized attorney or legal representative requesting the
transfer of such shares accompanied by proper instruments of assignment and with
such proof of the authenticity of the signatures as the corporation or transfer
agent may reasonably require. In case of shares of the corporation for which
certificates have been issued, the shares shall be transferable on the books of
the corporation by the holder thereof in person or by his duly authorized
attorney or legal representative, upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, whereupon the corporation will issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction on its
books.
Section 6.04 Lost, Stolen, Destroyed or Mutilated Certificate. The
------------------------------------------------
holder of any shares of the corporation shall immediately notify the corporation
of any loss, theft, destruction or mutilation of the certificate therefor, and
the board of directors may, in its discretion, cause a new certificate or
certificates to be issued to him, in case of mutilation of the certificate, upon
the surrender of the mutilated certificate, or, in case of loss, theft or
destruction of the certificate, upon satisfactory proof of such loss, theft or
destruction, and, if the board of directors shall so determine, the deposit of a
bond in such form and in such sum, and with such surety or sureties, as it may
direct.
Section 6.05 Record Holder of Shares. The corporation shall be entitled
------------------------
to treat the person in whose name any share or shares of the corporation stand
on the books of the corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.
<PAGE>
Section 6.06 Determination of Stockholders of Record. The board of
---------------------------------------
directors may fix a date, not more than sixty nor less than ten days preceding
the date of any meeting of stockholders, or the date fixed for the payment of
any dividend or distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of shares will be made or go into
effect, as a record date for the determination of the stockholders entitled to
notice of, or to vote at, any such meeting, or entitled to receive payment of
any such dividend or distribution, or to receive any such allotment of rights,
or to exercise the rights in respect to any such change, conversion or exchange
of shares; and in such case, if otherwise entitled, all stockholders of record
on the date so fixed, and no others, shall be entitled to notice of, or to vote
at, such meeting, or to receive payment of such dividend or distribution or to
receive such allotment of rights, or exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
any such record date fixed as aforesaid.
If no record date is fixed:
(1) The record date for determining stockholders entitled to notice of
or to vote a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(3) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
ARTICLE VII
Indemnification
---------------
Section 7.01 Third Party Actions. The corporation shall indemnify any
-------------------
person who was or is a party or is threatened to be
<PAGE>
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 7.02 -Derivative Actions. The corporation shall indemnify any
-------------------
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that court in which such action or suit was brought or any other
court having jurisdiction in the premises, shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses
<PAGE>
which such court shall deem proper.
Section 7.03 Expenses. To the extent that a director, officer, employee
--------
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 7.01 or 7.02,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith, without the necessity for the determination as to
the standard of conduct as provided in Section 7.04.
Section 7.04 Action by Board of Directors. Any indemnification under
----------------------------
Sections 7.01 or 7.02 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 7.01 or 7.02. Such determination shall be made (i) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Section 7.05 Advancing Expenses. Expenses incurred in defending a civil
------------------
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding, as authorized by
the board of directors in the particular case, upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the corporation as authorized in this Article VII.
Section 7.06 Insurance. The corporation shall have the power to purchase
---------
and maintain insurance on behalf of any person who is or was serving at the
request of the corporation as a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
irector, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation
<PAGE>
would have the power to indemnify him against such liability under the
provisions of this Article VII.
Section 7.07 Scope of Article. Any indemnification pursuant to this
----------------
Article VII shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. Provided,
however, nothing contained in this article shall be deemed to protect any
director or officer of the corporation against any liability to the corporation
or to its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE VIII
Custodian
---------
Section 8.01 Securities and Cash to be Held by Custodian.
-------------------------------------------
(a) The corporation shall have as custodian or custodians one or more
banks, each having a capital, surplus and undivided profits aggregating not less
than $500,000, or companies which are members of a national securities exchange
as defined in the Securities Exchange Act of 1934, as amended; and the funds and
securities held by the corporation shall be kept in the custody of one or more
such custodians, provided such custodian or custodians can be found ready and
willing to act and further provided that the corporation may use as sub-
custodians, for the purpose of holding any foreign securities and related funds
of the corporation, such foreign banks as the board of directors may approve and
as shall be permitted by law.
(b) The corporation shall enter into a written contract with the
custodian regarding the powers, duties and compensation of the custodian with
respect to the cash and securities of the corporation held by the custodian.
Said contract and all amendments thereto shall be approved by the board of
directors of this corporation.
(c) The corporation shall, upon the resignation or inability to serve of
its custodian or upon change of the custodian:
<PAGE>
(1) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian;
(2) require that the cash and securities owned by the corporation be
delivered directly to the successor custodian;
(3) in the event that no successor custodian can be found, submit to the
stockholders before permitting delivery of the cash and securities owned by the
corporation otherwise than to a successor custodian, the question whether or not
the corporation shall be liquidated or shall function without a custodian;
provided that the foregoing provision shall not prevent the termination of the
agreement between the corporation and the custodian by the vote of the holders
of a majority of the outstanding shares of the corporation.
ARTICLE IX
Regulations
-----------
Section 9.01 Investment and Related Matters. The corporation will not:
------------------------------
(a) Invest more than 5% of the market value of its total assets in the
securities of any one issuer, except for securities of the United States
Government or agencies thereof.
(b) Invest in more than 10% of any class of securities of any one issuer
(except for government obligations), or in more than 10% of the voting
securities of any one issuer.
(c) Invest more than 5% of the market value of its total assets in
securities of companies which (including the operations of subsidiaries, if the
company is a holding company, and of predecessor companies or divisions of
companies) have not had a record of at least three years of continuous
operations and in equity securities which are "not readily marketable", as
defined from time to time to time, consistent with applicable laws and
regulations, by the board of directors.
(d) Borrow money, except from banks for temporary or emergency purposes,
provided that such borrowings shall not exceed 5% of its total assets (at the
lower of cost or market value).
<PAGE>
(e) Underwrite the securities of other issuers, or invest in securities
under circumstances where, if sold, the Fund might be deemed to be an
underwriter under the Securities Act of 1933.
(f) Invest more than 5% of the market value of its total assets in
illiquid securities.
(g) Pledge, mortgage or hypothecate its assets.
(h) Invest for purposes of exercising management or control.
(i) Invest in securities of other investment companies, options, puts,
calls, straddles, spreads or similar devices, or engage in arbitrage
transactions or short sales.
(j) Purchase securities on margin, but the Fund may obtain such short-
term credits as may be necessary for the clearance of purchases and sales of
securities.
(k) Make loans to other persons, except that this restriction shall not
apply to government obligations, commercial paper or notes or other evidences of
indebtedness which are publicly distributed.
(l) Purchase or sell real estate or interests in real estate. This will
not prevent the Fund from investing in publicly-held real estate investment
trusts or marketable securities which may represent indirect interests in real
estate.
(m) Purchase or sell commodities or commodity contracts or invest in
interests in oil, gas or other mineral exploration or development programs.
(n) Invest more than 2% of the market value of its total assets in
warrants. This restriction does not apply to warrants initially attached to
securities issued to the Fund. This restriction may be changed or eliminated at
any time by the Board of Directors of the Fund without action by the Fund's
shareholders.
(o) Purchase or hold securities of any issuer, if, at the time of
purchase or thereafter, any officer or director of the Fund or its Investment
Adviser owns beneficially more than 1/2 of 1% and such officers and directors
holding more than 1/2 of 1%
<PAGE>
together own beneficially more than 5% of the issuer's securities.
(p) Invest more than 25% of the market value of its total assets in any
one industry.
The percentage limitations on investments stated herein shall be
calculated at the time any investment is made. In the event the corporation
holds investments in excess of the limitations stated herein, no violation of
the provisions of this Article shall be deemed to have occurred unless such
excess exists immediately after an investment has been made and is a result of
the investment. In addition, the limitations will not be violated if the
corporation receives securities by reason of a merger or other form of
reorganization or if the corporation exercises conversion rights of securities
held in its portfolio.
ARTICLE X
General Provisions
------------------
Section 10.01 Dividends. The board of directors may distribute dividends
---------
from funds legally available therefore in such amounts, including, without
limitation, dividends payable in authorized but unissued stock or treasury
stock, and in such manner and to the stockholders of record as of such date, as
the board of directors may determine, but if a dividend is declared from any
source other than net income the source of such dividend shall be disclosed to
the stockholders receiving the same prior to or concurrently with payment
thereof.
Section 10.02 Annual Statements. The board of directors shall present at
-----------------
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 10.03 Contracts. Except as otherwi~e provided in these by-laws,
---------
the board of directors may authorize any officer or officers including the
chairman and vice-chairman of the board of directors, or any agent or agents, to
enter into any contract or to execute or deliver any instrument on behalf of the
corporation, and such authority may be general or confined to specific
instances.
<PAGE>
Section 10.04 Checks. All checks, notes, bills of exchange or other
------
orders in writing shall be signed by such person or persons as the board of
directors may from time to time designate.
Section 10.05 Corporate Seal. The corporate seal shall be in such form
--------------
as the board of directors shall prescribe. The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 10.06 Amendment of By-Laws. These by-laws may be amended or
--------------------
added to, altered or repealed at any annual or special meeting of the
stockholders by the affirmative vote of at least a majority of the votes which
all stockholders present in person or by proxy are entitled to cast or at any
meeting of the board of directors by vote of a majority of the directors then in
office, provided that the board of directors may not amend Article III to permit
removal by said board without cause of any director elected by the stockholders
and no provision of Article IX shall be amended by the board of directors except
as specifically provided therein and except that the board of directors may
amend Article IX for the purpose of adding such further investment or other
restrictions as may be required by any regulatory authorities.
<PAGE>
STRATTON GROWTH FUND, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of July 1, 1989 between Stratton Growth Fund, Inc., a
-------
Maryland corporation (the "Fund"), an investment company registered under the
Investment Company Act of 1940, and Stratton Management Company, a Pennsylvania
corporation (the "Adviser"), a registered investment adviser under the
Investment Advisors Act of 1940. The Fund hereby engages the Adviser to act as
its investment adviser subject to the terms and conditions herein set forth.
SECTION 1. Investment Advisory Services.
-----------------------------
The Adviser shall use its staff and other facilities to conduct and
maintain a continuous review of the Fund's portfolio of securities and
investments, and shall from time to time recommend to the Fund what securities,
in the Adviser's opinion, should be purchased or sold by the Fund, what portion
of the assets of the Fund should remain uninvested, and the extent to which the
Fund should otherwise use its investment powers. In conducting such review and
making such recommendations, the Adviser shall be guided by the Fund's
investment policies as delineated and limited by the statements contained in
documents filed with the Securities and Exchange Commission as amended from time
to time, by policies adopted by the Fund's Board of Directors (the "Board"), and
by the provisions of the Investment Company Act of 1940 and the rules
promulgated thereunder, so that at all times the Fund shall be in compliance
with its policies and the Investment Company Act of 1940. The Fund agrees to
supply the Adviser with copies of all such documents and to notify the Adviser
of any changes in the Fund's investment policies and restrictions.
In rendering such investment advisory services to the Fund pursuant to
this Agreement, the Adviser may at its own expense employ, retain or otherwise
avail itself of the services or facilities of other persons or organizations,
for the purpose of providing the Adviser or the Fund with such statistical and
other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities and such other
information, advice or assistance as the Adviser may deem necessary, appropriate
or convenient for the discharge of the Adviser's obligations hereunder or
otherwise helpful to the Fund.
<PAGE>
The Adviser and any person performing executive, administrative or
trading functions for the Fund whose services were made available to the Fund by
the Adviser is authorized to recommend that the Fund pay, or cause the Fund to
pay, brokerage commissions to any member of a securities exchange or securities
broker or dealer which may be in excess of the amount which another member of
such an exchange or broker or dealer would have charged for effecting such
transaction, if the Adviser or such officer or employee determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services (as such term is defined in Section 28(e)(3) of
the Securities Exchange Act of 1934 and the rules, regulations and releases of
the Securities and Exchange Commission thereunder) provided by such member or
broker or dealer with respect to the Adviser's services hereunder, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund.
SECTION 2. Resumes and Reports, Etc.
-------------------------
The Adviser should maintain a continuous record of all the investments
and securities which comprise the Fund's portfolio and shall furnish to the
Board, at any time it so requests, a resume of such portfolio in the form
prescribed by the Board. The Adviser shall also render to the Board, at its
regularly scheduled meetings, and at such other times as the Board may request,
a report on all matters pertaining to the Adviser's services hereunder, in the
form prescribed by the Board. In addition, the Adviser shall furnish the Fund
with such reports and other data as the Board shall request, including, without
limitation, industry surveys, news of recent developments, statistical data, and
such other information as may keep the Board properly informed on developments
relating to the Fund's portfolio, or similar data relating to securities which
the Adviser recommends for inclusion in the portfolio of the Fund.
SECTION 3. Other Duties and Services.
-------------------------
The Adviser, or any other entity approved by the Fund's Board, whether
or not such entity is affiliated with the Adviser and directors and officers of
the Fund, shall keep the books and financial records of the Fund, and on behalf
of the Fund shall compute the net asset value of the Fund's shares (in
accordance
<PAGE>
with any instructions of the Board) at such times as the Board may direct. In
compliance with the requirements of Rule 31a-3 of the Rules and Regulations of
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended, the Adviser hereby agrees it will surrender and will cause any other
entity that maintains the Fund's books and financial records hereunder to
surrender promptly to the Fund any of such records upon the Fund's request, and
the Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
of such Rules any such records as are required to be maintained by Rule 31a-1
thereof. If requested to provide such services, the Adviser or such other entity
may obtain, at the Fund's expense, pricing information from brokers, dealers or
others to assist the Adviser or such other entity in computing such net asset
value, and the Adviser or such other entity shall perform such other services as
are reasonably incidental to the foregoing duties. The Adviser or such other
entity shall furnish to the Fund and to such other persons as the Fund may
direct, any statements with respect to the net asset value of the Fund and the
net asset value per share, at such times, and in such forms, as the Fund may
prescribe.
When and if the Board so requests, the Adviser or such other entity
shall furnish the Fund with the services of a person or persons satisfactory to
the Fund whose duties shall include (except for the legal and auditing aspects
thereof) the supervision of the Fund's financial statements and reports, the
preparation of reports to shareholders and others, and any statements or reports
required by regulatory authorities of the United States, or states thereof in
which the Fund has registered or qualified its shares for sale.
In addition, the Adviser shall furnish, or arrange and pay for others to
furnish to the Fund, such office space and facilities, including, without
limitation, stenographic, telephone, telegraphic, mailing, and other facilities
as the Board shall request in connection with the operations of the Fund. It is
the intent of this Agreement that through the staff of the Adviser or of another
entity furnishing such services, the Adviser or such other entity shall supply
such services as are deemed by the Board to be necessary or desirable and proper
for the continuous operation of the Fund. However, neither the Adviser nor such
other entity shall be required to perform (a) those services customarily
performed by members of the Board; or (b) those services customarily performed
by the custodian,
<PAGE>
transfer agent, registrar, dividend disbursing agent, independent accountants,
brokers, dealers or legal counsel.
SECTION 4. Multiple Capacities.
-------------------
The Fund understands that the Adviser may act in one or more capacities
on behalf of other investments companies and customers. While information and
recommendations supplied to the Fund shall, in the Adviser's judgment, be
appropriate under the circumstances and in light of the investment objective of
the Fund, they may be different from the information and recommendations
supplied by the Adviser or such affiliate to other investment companies and
customers. The Adviser shall give the Fund equitable treatment under the
circumstances in receiving information, recommendations and any other services
requested of the Adviser, but the Adviser shall not be required to give
preferential treatment to the Fund as compared with the treatment given by the
Adviser to any other investment company or customer.
SECTION 5. Payment of Expenses.
The Adviser shall assume and pay all of its costs and expenses incurred
in performing its duties under this Agreement except that the Fund shall
reimburse the Adviser, or such other entity approved by the Board, whether or
not such entity is affiliated with the Adviser and directors and officers of the
Fund, monthly for (i) the Adviser's or such other entity's costs in providing
any equipment used for the Fund's operations, and (ii) to the extent the Adviser
or such other entity are required or requested by the Fund to provide such
services and the Adviser or such other entity so provides them, the costs of the
Adviser or charges of such other entity in providing administrative and
accounting services to the Fund including costs or charges, as the case may be,
without limitation, for maintaining financial records and bookkeeping, in
connection with the daily computation of net asset value per share, in
connection with registering or qualifying the Fund or shares of the Fund for
sale under applicable federal or state securities laws, in connection with the
annual or special meeting of stockholders, and the allocable portion of the
compensation paid to employees of the Adviser for furnishing the above-mentioned
services to the Fund; provided that, the reimbursement to the Adviser for any
-------------
such costs shall not exceed an amount which would cause the Fund's ratio of net
operating expenses to average net assets during any fiscal year to exceed two
percent (2%). The operating expenses of the Fund
<PAGE>
shall be accrued daily and an interim computation shall be made at the end of
each month with respect to such limitation of expenses for the current fiscal
year. If the expenses do not exceed the limitation and the Adviser has
previously made payments to the Fund with respect to the current fiscal year,
the Adviser shall be entitled to the return of such payments up to the amount of
the difference between the limitation and the expenses. Any final adjustment for
the fiscal year shall be made promptly following the completion of the Fund's
annual audit for such year. The Fund agrees to assume and pay, or reimburse the
Adviser or such other entity for, the Fund's operating expenses, including,
without limitation, taxes, interest charges, fees of its attorneys, independent
accountants, accounting services agents, custodians, transfer agents and
registrars, certain directors' fees and costs incurred in producing shareholder
reports and proxy materials. The Fund will also pay brokerage commissions on its
portfolio transactions.
SECTION 6. Compensation for Services.
-------------------------
As compensation for the Adviser's services, the Fund will pay to the
Adviser, except as otherwise provided in Section 5 hereof, on the last day of
each month a fee at the annual rate of 3/4 of 1% of the Fund's average daily net
asset value. The fee shall be prorated for any portion of a month during which
the fee is payable.
The net asset value of the Fund shall be defined as the total assets of
Fund, less its liabilities, and shall be determined in accordance with
instructions of the Board.
SECTION 7. Liability of the Investment Adviser.
-----------------------------------
The Adviser shall be liable only for willful misfeasance, bad faith or
gross negligence in the performance of its duties or reckless disregard of its
obligations under this Agreement, and nothing herein shall protect the Adviser
against any such liability to the Fund or its shareholders. The Adviser shall
not be liable for the acts and omissions of any agent (other than a director,
officer or employee of the Adviser) employed by the Adviser, nor for those of
any bank, trust company, broker or other person with whom or into whose hands
any moneys, shares of the Fund or securities and investments may be deposited or
come, pursuant to the provisions of this Agreement. The Adviser shall not be
liable for any defects in title of any property acquired,
<PAGE>
nor for any loss unless it shall occur through the Adviser's own willful
default.
SECTION 8. Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective on the first day of the month
following approval of this Agreement by the vote of a majority of the
outstanding shares of the Fund, and unless sooner terminated as provided herein,
this Agreement shall continue until June 30, 1991, and from year to year
thereafter for successive annual periods ending on June 30, but only so long as
such continuance is specifically approved at least annually (i) by the Board,
including a majority of the directors who are not parties to the Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval; or (ii) by vote of a majority of the
outstanding shares of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty, by vote of the Board or by vote of a majority of the outstanding shares
of the Fund, or by the Adviser, on sixty (60) days' written notice to the other
party.
This Agreement shall automatically terminate in the event of its
assignment.
SECTION 9. Use of the Name "Stratton" by the Fund.
--------------------------------------
The Adviser, whose principal shareholder and chief executive officer is
James W. Stratton, hereby consents to use by the Fund of the name "Stratton" in
its corporate name. The Fund shall be entitled to use such name so long as the
Adviser acts as investment adviser to the Fund. The Fund agrees that its use of
the name "Stratton" in its corporate name shall not prevent the Adviser or any
other corporation affiliated with it, or its successors or assigns, from using
or permitting the use of the name "Stratton," alone or with any other word or
words, for, by or in connection with any other entity or business, whether or
not the same directly or indirectly competes or conflicts with the Fund or its
business.
In the event that the Adviser shall cease to act as investment adviser
to the Fund, the Fund shall cease to use the name "Stratton," and the Fund shall
take all appropriate or necessary steps to change its corporate name and to
terminate use
<PAGE>
of the name "Stratton" in connection with its business; provided, however, at
the sole option of the Adviser, the Fund may continue to use the name "Stratton"
so long as all prospectuses and other material intended for investors is
appropriately marked to indicate that the Adviser is no longer the Fund's
investment adviser.
SECTION 10. Definitions.
------------
When used in this Agreement, the terms "assignment," "interested person"
and "vote of a majority of the outstanding shares" shall have the meanings given
such terms in Sections 2(a)(4), 2(a)(19) and 2(a)(42), respectively, of the
Investment Company Act of 1940, as amended.
SECTION 11. Notices.
-------
Until further notice to the other party, it is agreed that the address
of the Fund and of the Adviser to which any notice hereunder is to be delivered
or mailed shall be 610 W. Germantown Pike, Suite 361, Plymouth Meeting,
Pennsylvania 19462.
SECTION 12. Concerning Applicable Provisions of Law, Etc.
--------------------------------------------
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the Investment
Company Act of 1940, as amended. To the extent that any provisions herein
contained conflict with any such applicable provisions of law, the latter shall
control.
The laws of the Commonwealth of Pennsylvania shall be controlling and
shall govern the construction, validity and effect of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
STRATTON MONTHLY DIVIDEND
SHARES, INC.
Attest: /s/ Patricia L. Sloan By: /s/ John A. Affleck
-------------------------- ---------------------
Secretary John A. Affleck
President
STRATTON MANAGEMENT COMPANY
Attest: /s/ Patrica Sloan By: /s/ James W. Stratton
-------------------------- ----------------------
Secretary James W. Stratton
President
<PAGE>
FEE WAIVER
Stratton Management Company("SMC"), Investment Adviser to Stratton
Monthly Dividend Shares, Inc., ("the Fund"), does hereby waive $15,000 per year
of its Advisory Fee from the Fund in order to offset a significant portion of
the $20,000 annual Administrative Fees that will he incurred hy the Fund by the
delegation of certain administrative responsibilities] to Fund/Plan Services,
Inc. This waiver is being executed in connection with the execution of an
Administration Agreement dated as of March 1, 1990 between the Fund and
Fund/Plan Services, Inc. This waiver may be terminated or reduced by SMC upon 60
days prior written notice to the Fund.
STRATTON MANAGEMENT COMPANY
By:
--------------------------
Title:
-----------------------
Date: March 1, 1990
------------------------
<PAGE>
UNDERWRITING AGREEMENT
----------------------
This agreement, made as of June 22, 1993 by and between Stratton Growth
Fund, Inc. (the "Fund"), and Fund/Plan Broker Services, Inc. (the
"Underwriter").
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and Underwriter are desirous of entering into an
agreement providing for the promotion and distribution by Underwriter of shares
of the Fund (the "Shares");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
------------
The Fund hereby appoints Underwriter as its agent for the distribution of
the Shares, and Underwriter hereby accepts such appointment under the terms of
this Agreement.
2. Sale and Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Fund, to sell
Shares to the public against orders therefor at the public offering price (as
defined in sub-paragraph 2(d) hereof.)
(b) Underwriter will also have the right, as agent for the Fund, to
sell Shares at their net asset value to such persons as may be approved by the
Board of Directors of the Fund, all such sales to comply with the provisions of
the Act, the Securities Act of 1933 and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
(c) Underwriter will also have the right to take, as agent for the
Fund, all actions which, in Underwriter's judgement, are necessary to carry into
effect the distribution of the Shares.
(d) The public offering price shall be the net asset value of Shares.
(e) The net asset value of the Shares shall be determined in the
manner provided in the then current prospectus and statement of additional
information relating to the Shares (the "Prospectus"), and when determined shall
be applicable to transactions as provided for in the Prospectus. The net asset
value of the Shares shall be calculated by the Fund or by another entity on
behalf of the Fund. Underwriter shall have no duty to inquire into or liability
for the accuracy of the net asset value per Share as calculated.
<PAGE>
(f) If Underwriter receives any funds for the purchase of shares, it will
deliver the applicable net asset value of the Shares promptly.
(g) Upon receipt of purchase or redemption instructions, Underwriter will
transmit such instructions to the Fund or its transfer agent for registration of
the Shares purchased or redeemed.
(h) Nothing in this Agreement shall prevent Underwriter or any affiliated
person (as defined in the Act) of Underwriter from acting as underwriter or
distributor for any other person, firm or corporation (including other
investment companies) or in any way limit or restrict Underwriter or such
affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly agrees that it will not
for its own account purchase any shares of the Fund except for investment
purposes and that it will not for its own account sell any such shares except by
redemption of such shares by the Fund, and that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Fund under this Agreement.
(i) Underwriter will maintain all regulatory books and records in correct
form with its obligations under this Agreement.
3. Rules of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Fund, undertakes to sell Shares on a best efforts
basis only against orders therefor.
The Fund reserves the right to refuse at any time or times to sell any of
its Shares for any reason deemed adequate by it.
4. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of Fair Practice of the NASD and
the securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
selling agreement to conform to the applicable provisions of the Prospectus,
with respect to the public offering price of the Shares, and Underwriter shall
not withhold the placing of purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Fund sufficient copies of any
agreements, plans or other materials it intends to use in connection with any
sales of Shares in adequate time for the Fund to file and clear them with the
proper authorities before they are put in use, and not to use them until so
filed and cleared.
(d) Underwriter, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order that the
Shares may be sold in
<PAGE>
such states as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or authorize any representative, Service
Organization, broker or dealer to make, in connection with any sale or
solicitation of a sale of the Shares, any representations concerning the Shares
except those contained in the Prospectus covering the Shares and in sales
materials approved by the Underwriter as information supplemental to such
Prospectus. Copies of the Prospectus will be supplied by the Fund to
Underwriter in reasonable quantities upon request.
5. Records to be Supplied by the Fund.
-----------------------------------
The Fund shall furnish to Underwriter copies of all information, financial
statements and other papers which Underwriter may reasonably request for use in
connection with the distribution of the Shares, and this shall include, but
shall not be limited to, one certified copy, upon request by Underwriter, of all
financial statements prepared for the Fund by independent public accountants.
6. Expenses.
---------
(a) The Fund will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies
of the prospectus and statements of additional information for
distribution to shareholders, and the distribution of same to the
shareholders.
(ii) preparation, printing and distribution or reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualifications of the Shares for sale in the jurisdictions
mutually agreed upon by the Fund and the Underwriter;
(v) qualification of the Fund as a dealer under the laws of
jurisdictions designated by Underwriter if Underwriter determines that
such qualification is necessary or desirable for the purpose of
facilitating sales of the Share s:
(vi) maintaining facilities for the issue and transfer of the Shares;
(vii) supplying information, prices and other data to be furnished by
the Fund under this Agreement; and
(viii)any original issue taxes or transfer taxes applicable to the
sale or delivery of the Shares or certificates therefor.
<PAGE>
(b) Underwriter will pay all other expenses incident to the sale and
distribution of the Shares sole hereunder.
7. Fee.
----
(a) For its services under this Agreement, The Underwriter shall be
entitled to the fees contained on Schedule B attached hereto, as amended from
time to time. The services provided include acting as primary
underwriter/distributor of the Fund and licensing/regulatory agent for Stratton
Management Company personnel including employees who are registered as Fund/Plan
Broker Services, Inc. representatives, and maintaining the regulatory books and
records of Fund/Plan Broker Services in connection with this agreement on behalf
of the Fund.
8. Liability of Underwriter.
-------------------------
(a) Underwriter, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgement or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Underwriter in the
performance of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of Underwriter, who may be or become an officer, director,
trustee, employee or agent of the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund (other than services or
business in connection with Underwriter's duties hereunder), to be rendering
such services to or acting solely for the Fund and not as a director, officer,
employee, shareholder or agent, or one under the control or direction of
Underwriter even though paid by it.
(c) The Fund agrees to indemnify and hold harmless Underwriter, and
each person, if any, who controls Underwriter within the meaning of Section 15
of the Securities Act of 1933 (the "Securities Act") or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") against any and all losses,
claims, damages and liabilities, joint or several (including any reasonable
investigative, legal and other expenses incurred in connection therewith) to
which they, or any of them, may become subject under the 1940 Act, the
Securities Act, The Exchange Act or other federal or state law or regulation, at
common law or otherwise insofar as such losses, claims, damages or liabilities
(or actions, suits or proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in a Prospectus, Statement of Additional Information, supplement
thereto, sales literature or other written information prepared by the Fund and
furnished by it to Underwriter for Underwriter's use hereunder, disseminated by
the Fund or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. Such indemnity shall not, however, inure
to the benefit of Underwriter (or any person controlling Underwriter) on account
of any losses, claims, damages or liabilities (or actions, suits or proceedings
in respect thereof) arising from the sale of the shares of the Fund to any
person by
<PAGE>
Underwriter (i) if such untrue statement or omission or alleged untrue statement
or omission was made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by Underwriter specifically for use
therein or (ii) if such losses, claims, damages or liabilities arise out of or
are based upon an untrue statement or omission or alleged untrue statement or
omission in the Prospectus, Statement of Additional Information, or supplement,
sales or other literature, if the Fund shall correct the untrue statement or
omission or the alleged untrue statement or omission which is the basis of the
loss, claim, damage or liability for which indemnification is sought and a copy
of the Prospectus was not sent or given to such person at or before the
confirmation of the sale to such persons, unless such failure to deliver the
prospectus was a result of noncompliance by the Fund with the obligation to
furnish copies of the Prospectus and any supplements thereto.
(d) Underwriter agrees to indemnify and hold harmless the Fund, each
person, if any, who controls the Fund within the meaning of Section 15 of the
Securities Act of Section 20 of the Exchange Act, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement of a material fact contained
in a Prospectus or Statement of Additional Information or any supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if based upon information furnished in
writing to the Fund by Underwriter specifically for use therein.
9. Termination of this Agreement.
------------------------------
This Agreement shall automatically terminate in the event of its
assignment. This Agreement may be terminated with respect to the Fund at any
time, without payment of any penalty, by vote of a majority of the members of
the Board of Directors of the Fund including a majority of the directors who are
not interested persons of the Fund or by vote of a majority of the outstanding
voting securities of the Fund or by Underwriter on sixty (60) days' written
notice to the other party.
10. Effective Period of this Agreement.
-----------------------------------
This Agreement shall be effective on June 22, 1993 and shall remain in
full force and effect for a period of two (2) years thereafter (unless
terminated as set forth in Paragraph 10), and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Board of Directors of the Fund or by a majority of the outstanding
voting securities of the Fund, (ii) by a majority of the Directors of the Fund
who are not parties to this Agreement or interested persons of any such party by
vote cast in person at a meeting called for the purpose of voting on such
approval, and (iii) By Underwriter.
The provisions of paragraph 8 hereof shall survive the termination of
this Agreement.
11. Amendments.
-----------
No amendments to this Agreement shall be executed or become effective
unless its terms have been approved; (a) by a majority of the directors of the
Fund or by the vote of a majority
<PAGE>
of the outstanding voting securities of the Fund, and (b) by a majority of those
directors who are not interested persons of the Fund or of any party to this
Agreement.
12. Reports.
--------
Underwriter shall prepare reports for the Board of Directors of the Fund
on a quarterly basis showing such information as from time to time shall be
reasonably requested by such Board.
13. Severability.
-------------
In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of the
Agreement, which shall continue to be in force.
14. Governing Law.
--------------
This agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the Fund and Underwriter have each caused this
Agreement to be signed in duplicate, as of the day and year first above written.
WITNESS: FUND:
/s/ Patricia L. Sloan
- --------------------------- STRATTON GROWTH FUND, INC.
By: /s/ James W. Stratton
------------------------------------------
Name: James W. Stratton
Title: Chairman
WITNESS: UNDERWRITER:
/s/ Mary P. Estration
- --------------------------- FUND/PLAN BROKER SERVICES, INC.
By: /s/ Nancy E. Kuhn
------------------------------------------
Name: Nancy E. Kuhn
Title: President
<PAGE>
FUND/PLAN BROKER SERVICES, INC.
FEE SCHEDULE
FOR
STRATTON GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Underwriter will serve as sole underwriter of Stratton Monthly Dividend Shares,
Inc., a no-load fund, for the exclusive purpose of facilitating the registration
of its shares of beneficial interest for sale in various states.
Fee: $3,000 per portfolio, annually
$2.00 per kit for inquiry/fulfillment
Underwriter will license employees of the Fund's Advisor, Stratton Monthly
Company, who are engaged in the sale of shares.
Fee: $1,000 per licensed representative, annually
All fees will be paid by the Fund's Advisor, Stratton Management Company.
Out-of-pocket expenses, including telephone, postage, telecommunications and
travel, will be billed separately.
<PAGE>
AMENDMENT TO UNDERWRITING AGREEMENT
===================================
This AGREEMENT, dated as of the 25th day of June, 1996 made by and
---- ----------
between Stratton Growth Fund, Inc. (the "Fund") operating as an open-end
management investment company registered under the Investment Company Act of
1940, as amended, duly organized and existing under the laws of the State of
Maryland and Fund/Plan Broker Services, Inc. ("FPBS"), a corporation duly
-------------------------------
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund and FPBS have entered into an Agreement dated June
22, 1993, wherein FPBS agreed to provide underwriting services and other related
services to the Fund (Underwriting Agreement); and
WHEREAS, the Parties wish to amend the Underwriting Agreement to
indicate the portion of fees payable under the Underwriting Agreement by the
Fund and the portion payable by Stratton Management Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend the Fee Schedule to the Underwriting Agreement in the form
attached hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with an amended fee schedule, to be
signed by their duly authorized officers, as of the day and year first above
written.
<TABLE>
<S> <C>
Stratton Growth Fund, Inc. Fund/Plan Broker Services, Inc.
/s/ James W. Stratton /s/ Gerald J. Holland
- ------------------------------------ ------------------------------------------
By: James W. Stratton, Chairman By: Gerald J. Holland, Vice President
/s/ Patricia L. Sloan /s/ Mary P. Efstration
- ------------------------------------ ------------------------------------------
Attest: Patricia L. Sloan, Secretary Attest: Mary P. Efstration, Secretary
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement, (Form N-
1A), and related Statement of Additional Information of Stratton Growth Fund,
Inc. and to the inclusion of our report dated June 13, 1996 to the Shareholders
and Board of Directors of Stratton Growth Fund, Inc.
/s/ TAIT WELLER & BAKER
---------------------------
TAIT WELLER & BAKER
Philadelphia, Pennsylvania
September 26, 1996
<PAGE>
Exhibit 11(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Legal Counsel" in the Prospectus that is included in Post-
Effective Amendment No. 43 to the Registration Statement (No. 2-44752) on Form
N-1A under the Securities Act of 1933 and the Investment Company Act of 1940, as
amended, of Stratton Growth Fund, Inc. This consent does not constitute a
consent under Section 7 of the Securities Act of 1933, and in consenting to the
use of our name and the references to our Firm under such caption we have not
certified any part of the Registration Statement and do not otherwise come
within the categories of persons whose consent is required under Section 7 or
the rules and regulations thereunder of the Securities and Exchange Commission.
/s/ Drinker Biddle & Reath
-------------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
September 23, 1996
<PAGE>
Ex 99B.14.a
403 (B) (7) PLAN
Dear Investor:
Enclosed are instructions, applications and a summary of Stratton Management
Company's 403 (b) (7) Plan, along with appropriate prospectuses and financial
reports. The Plan is set up to permit you to choose either or all of our funds:
STRATTON MONTHLY DIVIDEND SHARES invests in high yielding common stocks as
well as convertible bonds and preferred stocks. The Fund offers high
current monthly income as well as solid growth potential for the future.
STRATTON SMALL-CAP YIELD FUND is a small company stock portfolio of
dividend-paying companies in various industries. The Fund attempts to
capture the capital appreciation potential of small-cap stocks while
reducing the variability of return typically associated with small-cap
portfolios.
STRATTON GROWTH FUND holds a diversified portfolio of common stocks of well
established, high dividend paying companies. The Fund seeks long-term
appreciation of capital with reasonable current income.
If you sign and return the enclosed telephone exchange form along with your
403 (b) (7) applications, you may switch your investment at a later date
simply by calling the number on the form.
Complete step-by-step instructions on how to open your 403 (b) (7) account
are enclosed. If you should have any questions, please feel free to call
(800) 634-5726. Thank you for considering Stratton Mutual Funds.
Sincerely,
John L. Grieco
Director of Mutual Fund Services
JLG/clr
enclosures
2/94
<PAGE>
403 (b) (7)
-----------
NEW ACCOUNT
-----------
SHAREHOLDER INSTRUCTIONS
------------------------
1) Stratton Management Company will provide employee with:
-------------------------------------------------------
1 Instruction Sheet
1 Features of the Plan Booklet
1 403 (b) (7) Retirement Plan Document
1 Open Account Application
1 Designation of Beneficiary Form
2 Salary Reduction Agreements
1 Business Reply Envelope
1 Exclusion Allowance Worksheet
Financial Reports & Prospectus on Fund(s)
2) Employee will complete:
-----------------------
1 Open Account Application
1 Designation of Beneficiary Form
2 Salary Reduction Agreements
1 Exclusion Allowance Worksheet (working with the Employee Benefits
Department of his/her institution)
3) Employee will ask Employer to:
------------------------------
Approve Exclusion Allowance Worksheet
Sign 2 copies of Salary Reduction Agreement (Employer retains 1 copy)
Arrange with the Payroll Department to reduce employee's salary
periodically, in accordance with the Salary Reduction Agreement, and have a
check made payable to the Fund(s) selected, mailed to Fund/Plan Services,
Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874, Attn:
Retirement Plans Department.
4) Employee will return to Stratton Mutual Funds, 2 W. Elm Street, P.O. Box
------------------------------------------------------------------------
874, Conshohocken, PA 19428-0874, Attn: Retirement Plans Department:
---------------------------------------------------------------------
1 completed Open Account Application
1 completed Designation of Beneficiary Form
1 completed Salary Reduction Agreement
An investment will be made in the fund shares you have selected and a
confirmation of the purchase will be provided.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
403 (B)(7) RETIREMENT PLAN
FEATURES OF THE PLAN
--------------------
The Employee Retirement Income Security Act of 1974 (the "Act") allows
employees of certain exempt organizations and schools to have a portion of their
compensation set aside for their retirement years in a mutual fund custodial
account plan. The employee is not taxed on the amount set aside or the earnings
thereon until he draws out his/her accumulated funds, normally at retirement.
In the past these plans were available only if the employee was willing to
have his/her funds used to purchase an annuity contract from an insurance
company. Customarily, a significant portion of the employee's contribution was
used to pay front end commissions to an insurance salesman, and unless the
employee was willing to purchase a so-called "variable annuity", the rate of
return was fixed for the duration of the contract and there was no possibility
of capital growth.
Now, it is possible for you to specify a mutual fund for the investment of
your employer's contributions. This means that no sales commissions are
deducted from the contribution. Under the Stratton Management Company Plan your
contributions are invested in shares of one or more of the investment companies
advised by Stratton Management Company, Stratton Monthly Dividend Shares, Inc.,
Stratton Growth Fund, Inc. or Stratton Small-Cap Yield Fund.
If you think you would like to participate, please read on for a further
explanation of the key features of the Act and Plan. If you would like
additional information or assistance in enrolling in the Plan, please contact
our Transfer Agent, Fund/Plan Services, Inc. at 800-634-5726.
ELIGIBILITY
- -----------
Any employee of a qualifying tax-exempt organization is eligible to
participate. Thus, teachers, administrators, ministers, employees of hospitals,
libraries, community chests, funds, and foundations, and many others may be
eligible. The employer must be an organization described in Section 501 (C) (3)
of the Internal Revenue Code and must be exempt from tax under Section 501 (a)
of the Code. In addition, any employee of most public educational institutions
is eligible if his/her employer is a State or a political subdivision of a
State, or an agency or instrumentality of either. The text of Section 501 (C)
(3) is set forth below for your convenience in determining whether your employer
may be one of the many qualifying organizations.
Code Section 501 (C) (3)
------------------------
"Corporations, and any community chest, fund, or foundation,
organized and operated exclusively for religious, charitable,
scientific, testing for public safety, literary, or educational
purposes, or for the prevention to cruelty of children or
animals, no part of the net earnings of which inures to the
benefit of any private shareholder or individual, no substantial
part of the activities of which is carrying on propaganda, or
otherwise attempting to influence legislation, and which does not
participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of
any candidate for public office."
<PAGE>
- 2 -
As noted above, an employer organization that is one of the types of
organizations described in Section 501 (C) (3) must also be exempt under Section
501 (a) to be a qualified employer organization.
An eligible individual is not disqualified from participation by reason of
the fact that his/her employer provides a retirement plan for its employees.
However, the contributions under this or any other 403 (b) plan will be affected
by the employer's contributions to the retirement plan. The employer does not
have to adopt this Plan, but is required to cooperate to the extent of agreeing
to reduce the employee's salary and applying the amount of the reduction to
contributions for the employee under this Plan. In lieu of or in addition to a
salary reduction arrangement, an employer may be willing to make contributions
on behalf of all of his/her employees, but an employer is not obligated to do
so. Unlike most corporate and Keogh plans, where the employer is required to
include all qualified employees and contribute funds on their behalf, the 403
(b) (7) Plan may be set up for one person, a few employees or all, and the rate
of contributions may vary from person to person up to the maximum allowable
contribution.
CONTRIBUTIONS
- -------------
The amount you may have your employer contribute to the Plan and which you
may exclude from your taxable income is subject to the following limitations.
You may wish to refer to the Contribution Worksheet which appears later in this
descriptive material for assistance in determining how those limitations would
apply to your own situation.
Contributions may not exceed (I) 25% of compensation, or (ii) $25,000,
whichever is less, in any one year. The dollar limit increases each year based
on the increases in the cost of living which is $41,500 for 1981. Within that
overall limitation, your employer may contribute to the Plan and you may exclude
from your taxable income, an amount equal to the excess, if any, of (I) 20% of
includible compensation times your number of years of service, over (ii) the
aggregate amount contributed by the employer previously for 403 (b) plans for
other qualified retirement plans and excluded from your gross income for prior
tax years. "Includible Compensation" is current compensation from the school or
organization plus any excluded sick pay. It does not include (I) amounts paid
by a public school system to a teacher's retirement Plan which were not
currently taxed to the teacher or (ii) 403 (b) contributions.
If you are employed by an educational institution, hospital or home health
service agency, you may elect to be governed by one of three alternate
limitations. First, you may elect contributions which are equal to the lesser
of (I) 25% of includible compensation plus $4,000 or (ii) the limit explained in
the above paragraph. Such contributions may not exceed $15,000 in any one year.
Second, you may, in the alternative, elect to be governed by one simple
limitation which is the lesser of 25% of your compensation or $25,000 (as
adjusted as discussed above). Finally, for the year in which employment
terminates, contributions can be made in an amount which is equal to the
contributions which could have been made, but were not, under Code Section 403
(b) during the ten-year period ending on the date of termination. This final
"catch-up" contribution cannot exceed $25,000 (as adjusted as discussed above)
and may only be used once.
The optional limitations available to employees of educational
institutions, hospitals and home health service agencies are mutually exclusive.
An election of one of the options is irrevocable.
<PAGE>
- 3 -
EARNINGS AND CHARGES
- --------------------
Your contributions will be used to purchase shares of one or more of the
investment companies advised by Stratton Management Company -- Stratton Monthly
Dividend Shares, Inc., Stratton Growth Fund, Inc. or Stratton Small-Cap Yield
Fund -- all no load, which means that no sales commission is charged. Any
dividends or capital gains distributions on the shares will be reinvested in
additional shares of the same fund automatically. These additional shares will
represent your earnings in the account.
The Custodian of the Plan is Semper Trust Company. Fund/Plan Services,
Inc. serves as the fiduciary agent for Semper Trust Company and in such capacity
is responsible for all record keeping, applicable tax reporting and fee
collection in connection with the Plan account. Fund/Plan Services, Inc. is
also the transfer agent for the Funds.
The law states that the shares must be held by the Custodian, but you will
be entitled to vote the shares. The Custodian charges an annual fee of $12.00.
The Custodian shall be entitled to deduct this fee by liquidating shares
annually in September, unless the annual maintenance fee is paid to Fund/Plan
Services, Inc.
The Custodian will send you a statement of the account annually, including
such information as the law may require, and in particular, a statement of the
exact amount of contributions, earnings, distributions and total value at the
end of the year. The Custodian will also send the statement to the Internal
Revenue Service as required by law.
DISTRIBUTIONS
- -------------
You may withdraw funds from your account when you terminate employment by
retirement or otherwise. You may also withdraw funds in the event you become
disabled. Provided you do so at least sixty (60) days before you terminate your
employment, you may make an irrevocable election to postpone the date of
withdrawal to any specific subsequent date you wish so long as that date is not
later than your 75th birthday.
Your account may at your option be distributed to you in the following
ways: (1) a lump sum payment of your entire account, in cash or Fund shares; (2)
monthly, quarterly or annual payments over any period you designate which is no
longer than your life expectancy; or (3) installment payments over the joint
life expectancy of yourself and your spouse. You must elect the form that
distribution will take at least sixty (60) days prior to the date when you will
first be entitled to distribution of your funds. If you fail to specify the
form of the distribution you prefer, distribution will be made in the form of a
single sum cash payment.
In the event of death, your beneficiary or beneficiaries will receive the
balance in your account. You may designate a beneficiary and change
beneficiaries from time to time. If you do not designate a beneficiary and are
not survived by a spouse to whom you have been married for one year at the time
of your death, your estate will receive the balance in your account.
<PAGE>
- 4 -
HOW TO PARTICIPATE
- ------------------
You may establish a 403 (b) (7) account by completing the Account
Application, and Salary Reduction Agreement, which you will find at the end of
the Plan. Then mail the Application, a copy of the Agreement, and the Ruling
Request to the Custodian with your Employer's first contribution. Be sure not to
----------
send your own funds.
PLAN QUALIFICATION
- ------------------
A Ruling Request was submitted to Internal Revenue Service for a
determination that the Plan meets the requirements of the Act and the Code.
The filing was made on behalf of one of the employees of the No-Load Mutual
Fund Association, a tax-exempt organization. This filing was found to be in
compliance with the requirements of the Act and the Code. However, a favorable
ruling on the Plan in one instance does not provide any assurance that it will
be found acceptable in other similar circumstances. Consequently, you may
consider it prudent to submit a Ruling Request on your own behalf. A form or
request is enclosed with the Plan for your convenience. It should be understood
-----------------------
that neither the Fund nor the Custodian is in a position to render legal or tax
- -------------------------------------------------------------------------------
advice and that the information contained in and the documents furnished with
- -----------------------------------------------------------------------------
this description merely represent the Fund's understanding of the statues and
- -----------------------------------------------------------------------------
regulations affecting the establishment and qualification of a 403 (b) (7) plan.
- --------------------------------------------------------------------------------
Accordingly, you are urged to consult your attorney or tax advisor in connection
- --------------------------------------------------------------------------------
with the adoption of the Plan and the submission of a ruling request on your
- ----------------------------------------------------------------------------
behalf.
- -------
PLEASE NOTE
- -----------
The foregoing is not a complete or definitive explanation of the Plan or of the
provisions of the Act or Code. Please do not complete the Application without
reading the Plan and the Fund prospectus which must always accompany the Plan.
Consult your financial or tax advisor if you are uncertain that a 403 (b) (7)
Plan is an appropriate program. You may obtain additional information about 403
(b) (7) Plans from your nearest Internal Revenue Service district office.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
SECTION 403 (B)(7) RETIREMENT PLAN
----------------------------------
A Retirement Plan under Section 403 (b)(7) has been established by Stratton
Management Company ("Stratton"), (Investment Adviser to Stratton Monthly
Dividend Shares, Inc., Stratton Growth Fund, Inc. and Stratton Small-Cap Yield
Fund, all regulated investment companies), and is intended for the use of
eligible persons who may wish to have their Employer's contributions invested in
shares of one or a combination of these investment companies, herein called
"fund shares", upon the following terms and conditions and in accordance with
the provisions of the Employee Retirement Income Security Act of 1974 (the
"Act") and the Internal Revenue Code of 1954, as amended (the "Code").
I. ELIGIBILITY
-----------
Any person who performs services as an employee for an employer which is an
organization described in Section 501 (C) (3) of the Code and is exempt
from tax under Section 501 (a) of the Code, or who performs services for an
educational institution (as defined in Section 151 (e) (4) of the Code)
maintained by an employer which is a State or a political subdivision of a
State or an agency or instrumentality of either, and who obtains the
consent of such employer (the "Employer") to participate herein, is
eligible to adopt this Plan.
II. PARTICIPATION
-------------
An eligible person who wishes to adopt this Plan (the "Individual") may do
so by signing and mailing to the bank named in the Account Application, as
Custodian (the "Custodian") a copy of the Account Application, Designation
of Beneficiary Form and Salary Reduction Agreement which are incorporated
herein by reference as part of the Plan. Acceptance by Semper Trust
Company, as Custodian is evidenced by the statement confirmation issued by
Fund/Plan Services, Inc., the Custodian's fiduciary agent, reflecting the
investment of your monies in the selected Stratton Fund(s).
III. An Employer may contribute cash to the Individual's account (the "Custodial
Account") in any taxable year in any amount which is not an "excess
contribution" as that expression is defined in Section 4973 (C) of the
Code. In addition, the Employer may transfer or cause to be transferred to
the Custodial Account the cash surrender or redemption value of an annuity
or variable annuity for which the Employer previously made contributions on
the Individual's behalf.
Neither Stratton or the Custodian shall be responsible for determining the
amount an Employer may contribute on behalf of the Individual, or shall
either be responsible to recommend or compel Employer contributions to the
Custodial Account. If during any taxable year the Employer contributes an
amount which is an "excess contribution", such excess contribution and any
income attributable thereto shall, upon the written request of the
Individual, be paid to him by the Custodian, or, at the Individual's
election, be applied toward a contribution for the current or the next
subsequent year.
<PAGE>
- 2 -
The interest of the Individual in the Custodial Account shall be non-
forfeitable at all times, may not be assigned, and shall not be subject to
alienation, assignment, trustee process, garnishment, attachment, execution or
levy of any kind, except with regard to payment of the expenses of the Custodian
as authorized by the provisions of this Plan.
IV. INVESTMENT OF CONTRIBUTIONS
---------------------------
All contributions made by or at the instigation of the Employer shall be
used by the Custodian to purchase fund shares. The Individual may specify the
shares of either one or more of the Stratton Funds for the investment of the
Employer's contributions, and may direct the transfer of Custodial Account
assets from one to another at any time and from time to time. All income
dividends and capital gains distributions shall be reinvested in additional fund
shares in the same proportion as designed by the Individual.
V. DISTRIBUTIONS
-------------
A. Except as provided in Paragraph B, below, the Individual, or his/her
beneficiary or estate in the event of his/her death, shall be entitled to
distribution of the assets in his/her Custodial Account as follows:
1. Upon termination of his employment;
2. Upon becoming disabled;
3. At his retirement;
4. At his death.
For the purpose of this Plan the Individual shall be considered disabled if
he/she is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long continued and indefinite duration.
B. The Individual shall be entitled to distribution of the assets in his/her
Custodial Account upon termination of employment by retirement or otherwise
unless he/she makes an irrevocable election at least sixty (60) days prior to
the expected date of termination of defer distribution, or the commencement of
distribution, to any specific date subsequent to termination which he/she may
specify, provided the date is not later than the date of his/her 75th birthday.
Such election shall be made by notice in writing to the Custodian.
C. The Individual may elect a form of distribution from among the following
alternatives:
1. A single sum payment in cash or fund shares; or
2. Equal or substantially equal monthly, quarterly or annual payments
over a period certain not extending beyond the life expectancy of the
Individual and his/her spouse; or
3. Equal or substantially equal monthly, quarterly or annual payments
over a period certain not extending beyond the joint life and last
survivor of the Individual and his/her spouse.
<PAGE>
- 3 -
Such election shall be made at least sixty (60) days prior to the date on
which distribution is expected to be made or to begin. Such election shall be
irrevocable and shall be made in writing in such form as shall be acceptable to
the Custodian. In no event shall the Custodian have any responsibility for
determining, or giving advice with respect to life expectancies.
D. If the Individual fails to elect any of the methods of distribution
described above within the time specified for such election, then distribution
shall be made in the form of a single sum cash payment. If the individual elects
a mode of distribution under subparagraphs 2 or 3 of Paragraph C above, the
amount of the monthly, quarterly or annual payments shall be determined by
dividing the entire interest of the Individual in the Custodial Account at the
beginning of each year by the number of years remaining in the period specified
by the Individual's said election.
E. If the Individual dies before his/her entire interest in the Custodial
Account is distributed to him/her, or if distribution has been commenced as
provided in C (3) above to his/her surviving spouse and such surviving spouse
dies before the entire interest is distributed to such spouse, the entire
interest or the remaining undistributed balance of such interest shall be
distributed in the form of a single sum cash payment to the beneficiary or
beneficiaries, if any, designated by the Individual or his/her spouse as the
case may be, or if no such beneficiary has been designated, then to the
Individual's surviving spouse, or to the Individual's estate, in that order,
each to take to the exclusion of those following.
F. The Individual and the spouse of the Individual, if such spouse is entitled
to distribution payments by reason of the Individual's election under Paragraph
C (3) hereof, may designate a beneficiary or beneficiaries of his/her own
choosing, and may, in addition, name a contingent beneficiary. Such designation
shall be made in writing in a form acceptable to the Custodian. The Individual,
or his/her spouse, may at any time revoke his/her designation of a beneficiary
or change the beneficiary by filing notice of such revocation or change with the
Custodian. If no designation of a beneficiary shall have been made,
distribution shall be made to the estate of the Individual or his/her spouse, as
the case may be.
VI. ADMINISTRATION
--------------
The Custodian shall have the following duties:
(1) To receive contributions pursuant to the provisions of this Plan
(2) To hold, invest and reinvest the contributions in Stratton Fund shares
(3) To register any property held by the Custodian in its own name, or in
nominee or bearer form that will pass delivery and
(4) To make distributions from the Custodial Account in cash or in
Stratton Fund shares
<PAGE>
- 4 -
The Custodian shall mail to the Individual all proxies, proxy soliciting
materials, and periodic reports or other communications that may come into the
Custodian's possession by reason of its custody of fund shares. The Custodian
shall sign all proxies prior to mailing them to the Individual, it being
intended that the Individual shall vote the proxy, notwithstanding the fact that
the Custodian may be the registered owner of the fund shares, and the Custodian
shall have no further liability or responsibility with respect to the voting of
such shares.
The Custodian shall keep accurate and detailed account of its receipts,
investments and disbursements. As soon as practicable after December 31st each
year, and whenever required by Regulations adopted by Internal Revenue Service
under the Act or the Code, the Custodian shall file with the Individual a
written report of the Custodian's transactions relating to the Custodial Account
during the period from the last previous account, and shall file such other
reports with Internal Revenue Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a report
within 60 days after its receipt, the Individual shall be deemed to have
approved such report, and in such case the Custodian shall be forever released
and discharged with respect to all matters and things included therein. The
Custodian may seek a judicial settlement of its accounts. In any such
proceeding the only necessary party thereto in addition to the Custodian shall
be the Individual.
All written notices or communications to the Individual or the Employer
shall be effective when sent by first class mail to the last known address of
the Individual or the employer on the Custodian's records. All written notices
or communications to the Custodian shall be mailed or delivered to the Custodian
at its designated mailing address, and no such written notice or communication
shall be effective until the Custodian's actual receipt thereof. The Custodian
shall be entitled to rely conclusively upon, and shall be fully protected in any
action taken by it in good faith in reliance upon the authenticity of signatures
contained in all written notices or other communications which it receives and
which appear to have been sent by the Individual, the Employer, or any other
person.
The Custodian shall make payments from the Custodial Account in accordance
with written directions received from the Individual, and it need not make
inquiry as to the rightfulness of such distribution. If the Custodian has
reason to believe that a distribution may be due, it may, but shall not be
required to make the distribution at the request of any beneficiary who appears
to be entitled thereto.
The Custodian shall use ordinary care and reasonable diligence in the
performance of its duties as Custodian. The Custodian shall have no
responsibilities other than those provided for herein or in the Act or Code and
shall not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence, except as
provided by the Act or regulations promulgated thereunder.
<PAGE>
- 5 -
The Individual agrees to indemnify and hold the Custodian harmless from and
against any liability that the Custodian may incur in the administration of the
Custodial Account, unless arising from the Custodian's own negligence or willful
misconduct or from a violation of the provisions of the Act or regulations
promulgated thereunder.
The Custodian shall be under no duty to question any direction of the
Individual in respect to the investment of contributions, or to make suggestions
to the Individual with respect to the investment, retention or disposition of
any contributions or assets held in the Custodial Account.
The Custodian shall pay out of the Custodial Account expenses of
administration, including the fees of counsel employed by the Custodian, taxes
and its fees for maintaining the Custodial Account which are set forth in the
Application or in accordance with any schedule of fees subsequently adopted by
the Custodian. The Custodian may sell Fund shares and use the proceeds of sale
to pay the foregoing expenses.
The Custodian may resign as Custodian of any Individual's Custodial Account
upon sixty (60) days prior notice to the Fund and thirty (30) days prior notice
to each Individual who will be affected by such resignation.
VII. AMENDMENT AND TERMINATION
-------------------------
The Individual delegates to Stratton the power to amend this Plan
(including retroactive amendment).
The Individual may amend his/her Application (including retroactive
amendment) by submitting to the Custodian: (1) a copy of such amended
Application, and (2) evidence satisfactory to the Custodian that the Plan as
amended by such amended Application will continue to qualify under the
provisions of Section 403 (b) (7) of the Code.
No amendment shall be effective if it would case or permit: (a) any part
of the Custodial Account to be diverted to any purpose that is not for the
exclusive benefit of the Individual and his/her beneficiaries; (b) the
Individual to be deprived of any portion of his/her interest in the Custodial
Account, or (C) the imposition of an additional duty on the Custodian without
its consent.
The Individual reserves the right to terminate further contributions to
this Plan by agreement with the Employer provided that the Individual shall file
with the Custodian an executed copy of such agreement. The Individual also
reserves the right to terminate his/her adoption of the Plan in the event that
he/she shall be unable to secure a favorable ruling from the Internal Revenue
Service with respect to this Plan. In the event of such termination, the
Custodian shall distribute the Custodial Account to the Individual. The
Individual also reserves the right to transfer the assets of his/her Custodial
Account to such other form of the 403 (b) (7) Retirement Plan as he may
determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require.
<PAGE>
- 6 -
VIII. PROHIBITED TRANSACTIONS
-----------------------
Except as provided in Section 408 of the Act or Section 4975 of the Code,
the Custodian:
(a) Shall not cause the plan to engage in a transaction if it knows or
should know that such transaction constitutes a direct or indirect--
1. sale or exchange, or leasing, or any property between the plan
and a party in interest;
2. lending of money or other extension of credit between the plan
and a party in interest;
3. furnishing of goods, services, or facilities between the plan and
a party in interest;
4. transfer to, or use by or for the benefit of, a party in
interest, of any assets of the plan; or
5. acquisition, on behalf of the plan, of any employer security or
employer real property in violation of Section 407 (a) of the
Act.
(b) Shall not permit the plan to hold any employer security or employer
real property if it knows or should know that holding such security or
real property violates Section 407 (a) of the Act,
(C) Shall not deal with the assets of the plan in its own interest or for
its own account,
(d) Shall not in any capacity act in any transaction involving the plan on
behalf of a party (or represent a party) whose interests are adverse
to the interests of the plan or the interests of its participants or
beneficiaries, and
(e) Shall not receive any consideration for its own account from any party
dealing with the Plan in connection with a transaction involving the
assets of the Plan; provided that nothing in this Section VIII shall
be construed to prohibit the payment to the Custodian of any fees
otherwise authorized under the terms of this Plan.
IX. STRATTON MANAGEMENT COMPANY
---------------------------
The Individual delegates to Stratton the following powers with respect to
the Plan: (a) to remove the Custodian and select a successor Custodian; and (b)
to amend this Plan as provided in Section VII hereof.
The powers herein delegated to Stratton shall be exercised by such officer
thereof as Stratton may designate from time to time, and shall be exercised only
when similarly exercised with respect to all other Individuals adopting the
Plan.
<PAGE>
- 7 -
Neither Stratton or its investment adviser, nor any officer, director,
board committee employee or member of the Funds or the adviser shall have any
responsibility with regard to the administration of the Plan except as provided
in this Section IX or the Plan, and none of them shall incur any liability of
any nature to the Individual or beneficiary or other person in connection with
any act done or omitted to be done in good faith in the exercise of any power or
authority herein delegated to Stratton.
The Individual agrees to indemnify and hold Stratton harmless from and
against any and all liabilities and expenses, including attorney's and
accountant's fees, incurred in connection with the exercise of, or omission to
exercise, any of the powers delegated to it under this Section, except such
liabilities and expenses as may arise from Stratton's willful misconduct.
If Stratton shall hereafter determine that it is no longer desirable for it
to continue to exercise any of the powers hereby delegated to it, it may relieve
itself of any further responsibilities hereunder by notice in writing to the
Individual at least sixty days prior to the date on which it proposes to
discontinue the exercise of the powers delegated to it.
STRATTON MANAGEMENT COMPANY
BY:____________________
(President)
CUSTODIAN:
SEMPER TRUST COMPANY
Fund/Plan Services, Inc., Plan Administrator
BY:____________________
<PAGE>
STRATTON MANAGEMENT COMPANY
403 (B)(7) RETIREMENT PLAN
APPLICATION
I. REGISTRATION OF SHARES
I have received a copy of the current prospectus of the Fund or Funds
selected below, and of the Plan Document of the 403 (b) (7) Retirement
Plan, the provisions of which shall be governed by the law of the State of
Pennsylvania.
Name: _________________________________________________________________
Address: _________________________________________________________________
_________________________________________________________________
Social Security Number*______________________Date of Birth________________
Telephone Number: Residence_________________Business______________________
Name of Employer:_________________________________________________________
Address of Employer:______________________________________________________
_____________________________________________________________________
II. CONTRIBUTIONS
Contributions under the Plan by my Employer may be invested in one or more
of the Funds advised by Stratton Management Company. Indicate the initial
dollar amount of investment being made and check the Fund(s) whose shares
you wish to acquire:
Stratton Growth Fund, Inc. $______________
Stratton Monthly Dividend Shares, Inc. $______________
Stratton Small-Cap Yield Fund $______________
Subsequent contributions in the amount of $________________ each will be
made, until further notice in each Fund indicated above.
Check One: Weekly _____ Monthly _____ Annually____
Bi-weekly____ Quarterly ___ Other _____
I previously participated in a plan, meeting the requirements of Section
403 (b) of the Internal Revenue Code, entitled: (If none, so indicate)
________________________________________________________
(Name of previous plan)
with _______________________as Trustee or Custodian, and hereby ELECT to
transfer the assets of said plan to this Plan, in the amount of
$__________________.
<PAGE>
STRATTON MANAGEMENT COMPANY
DESIGNATION OF BENEFICIARY
For:______________________ Name of Fund(s):________________________
(type of plan)
I, the undersigned, having adopted the foregoing Plan, hereby designate the
following persons as my beneficiary and contingent beneficiary under the Plan:
PRIMARY BENEFICIARY:
_________________________________________________________
(name in full)
___________________________________________________________________
(address)
___________________________________________________________________
_______ _________________________ ___________________________
(age) (relationship) (social security number)
Note: If beneficiar(y)(ies) other than spouse is designated, consent of spouse
must be obtained:
________________________________ Date_____________________
(signature of spouse)
CONTINGENT BENEFICIARY:
If my primary beneficiary fails to survive me, then I designate the following
person as my beneficiary:
_________________________________________________________
(name in full)
___________________________________________________________________
(address)
___________________________________________________________________
_______ _________________________ ___________________________
(age) (relationship) (social security number)
__________________________________
(signature of Plan participant)
__________________________________
Dated:_____________ __________________________________
(address)
IMPORTANT NOTICES:
1. You and your spouse may change your beneficiaries at any time by simply
filling out another of these forms and submitting it to the Plan Custodian.
Additional copies are available upon request from the Fund.
2. Be sure to use your full name as it appears on the Account Application when
you sign this form.
<PAGE>
STRATTON MANAGEMENT COMPANY
---------------------------
403 (b) (7) RETIREMENT PLAN
---------------------------
SALARY REDUCTION AGREEMENT
--------------------------
AGREEMENT made this _________ day of ___________________, 19____, by and
between _________________________________________________, (the "Employer") and
_________________________________________________ (the "Employee") whereby the
Employer and Employee agrees as follows:
1. The monthly salary of the Employee will be reduced by $ _________________;
or by _________% (minimum of $ _______________ per month).
2. The amount of such reduction shall be paid by the Employer to:
_________________________ (name of Fund selected), Semper Trust Company c/f
_________________________ (name of employer) under Section 403(b)7 of
Internal Revenue Code.
3. The foregoing arrangements shall be subject to the limitation provided
under Section 415 of the Internal Revenue Code as added by the Employee
Retirement Income Security Act of 1974 as well as the limitations of
Section 403 of the Code.
4. This Salary Reduction Agreement is legally binding and irrevocable with
respect to all amounts earned by the Employee while this Agreement is in
effect, provided, however, that the Employee may terminate the entire
Agreement with respect to amounts not earned at the time of termination. It
is further understood and agreed that the Employee will not be permitted to
make more than one Salary Reduction Agreement or vary the amount of the
reduction during any one taxable year of the Employee.
EXECUTED as of the date first written above.
_____________________________
(Employer)
___________________ BY: _________________________
(Employee)
_____________________________
(Title)
<PAGE>
EXCLUSION ALLOWANCE WORKSHEET
-----------------------------
The following method for determining the amount which may be contributed to a
403 (b) (7) Plan is based upon the basic provisions of Sections 403 (b) and 415
of the Internal Revenue Code. It is not feasible to portray all of the possible
variations which may arise from the application of these sections to particular
situations. Accordingly, this form should not be relied upon as a substitute
for advice from competent tax advisers.
A. PRIMARY METHOD
<TABLE>
<CAPTION>
Example 1 Example 2 Yours
--------- --------- -----
<S> <C> <C> <C>
1. Salary (before reduction)
expected from the institution
during the calendar year for
which the calculation is being
made. $ 18,000 $ 50,000 $ _______
2. Contributions by the insti-
tution under its retirement plan
during the current calendar year
(this figure should include all
annuity contributions paid by
your employer which will vest in
the year for which this calculation
is being made). $ 1,800 $ 5,000 $ _______
3. Total tax-deferred contri-
butions made by this institution
in prior years (i.e. the insti-
tution's regular contributions
and other vested employer contri-
butions and any amounts remitted
by the institution for you through
salary reduction). $ 10,200 $ 185,000 $ _______
4. Total of lines 1, 2 and 3 $ 30,000 $ 240,000 * $ _______
5. Enter service factor from
table on last page, based on
your years of service. .66667 .80000 _______
6. Multiply line 4 by line 5 $ 20,000 $ 192,000 $ _______
</TABLE>
* Do not include the figure on line 2 in this total if the institution's plan
is qualified under Section 401 of the Internal Revenue Code.
<PAGE>
<TABLE>
<S> <C> <C> <C>
7. Line 2 plus line 3 $ 12,000 * $ 190,000 * $ _______
8. Line 6 minus line 7 $ 8,000 $ 2,000 $ _______
9. 20% of line 1 $ 3,600 $ 10,000 $ _______
10. 80% of line 2 $ 1,440 $ 4,000 $ _______
11. Line 9 minus line 10 $ 2,160 $ 6,000 $ _______
12. $25,000 minus line 2 $ 23,200 $ 20,000 $ _______
13. Exclusion allowance is
----------------------
the smallest of line 8,
line 11 and line 12 $ 2,160 $ 2,000 $ _______
------- -------
</TABLE>
B. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL, OR HOME HEALTH SERVICE AGENCY, AVAILABLE ONLY
IF OPTIONS C OR D HAVE BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
14. 25% of line 1, plus $4,000 $ 8,500 $ 16,500 $ _______
15. Line 14 divided by 1.25 $ 6,800 $ 13,200 $ _______
16. Exclusion allowance is
-------------------
the smallest of line 8,
line 15 and $15,000 $ 6,800 $ 2,000 $ _______
------- -------
</TABLE>
C. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL OR HOME HEALTH SERVICE AGENCY IN YEAR EMPLOYMENT
TERMINATES, AVAILABLE ONLY ONE TIME, AND IF OPTIONS B OR D
HAVE NEVER BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
17. Line 4 $ 30,000 $ 240,000 $ _______
18. Service factor from table
on last page, unless your years
of service equal or exceed 10 years,
in which case enter .66667. .66667 .66667 _______
19. Line 17 multiplied by
line 18 $ 20,000 $ 160,000 $ _______
20. Line 2 plus line 3 $ 12,000 * $ 190,000 * $ _______
21. Subtract line 20 from line 19 $ 8,000 $ 0 $ _______
22. Exclusion allowance is the
smallest of line 21 and
$25,000 $ 8,000 $ 0 $ _______
------- -------
</TABLE>
* Do not include the figure on line 2 in the total if the institution's plan is
qualified under Section 401 of the Internal Revenue Code.
<PAGE>
D. OPTIONAL METHOD FOR EMPLOYEE OF EDUCATIONAL INSTITUTION,
HOSPITAL OR HOME HEALTH SERVICE AGENCY, AVAILABLE ONLY IF
OPTION B OR C HAVE NEVER BEEN EXERCISED.
<TABLE>
<S> <C> <C> <C>
23. Line 1 $ 18,000 $ 50,000 $ _______
24. 25% of line 1 $ 4,500 $ 12,500 $ _______
26. Exclusion allowance is
-------------------
the smaller of line 24
or $25,000 $ 4,500 $ 12,500 $ _______
------- -------
</TABLE>
Factor for Years of Service
Through End of Calendar Year
----------------------------
<TABLE>
<CAPTION>
Years Factor Years Factor Years Factor
- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
1 .16667 11 .68750 21 .80769
2 .28571 12 .70588 22 .81481
3 .37500 13 .72222 23 .82143
4 .44444 14 .73684 24 .82759
5 .50000 15 .75000 25 .83333
6 .54545 16 .76190 26 .83871
7 .58333 17 .77273 27 .84375
8 .61538 18 .78261 28 .84848
9 .64286 19 .79167 29 .85294
10 .66667 20 .80000 30 .85714
</TABLE>
The formula for calculating a service factor is N , with N equal to
-----
N + 5
the total years of service through December 31 of the year for which the
calculation is being made. (After the first year of service, N must reflect
fractional years of service, e.g., for two and one half years of service N =
2.5.) This formula should be used where service is not in whole years or is
more than 30 years.
<PAGE>
STRATTON MUTUAL FUNDS - TELEPHONE EXCHANGE AUTHORIZATION FORM
- ---------------------
STRATTON GROWTH FUND, INC.
--------------------------
STRATTON MONTHLY DIVIDEND SHARES, INC.
--------------------------------------
STRATTON SMALL-CAP YIELD FUND
-----------------------------
The undersigned hereby authorizes Fund/Plan Services, Inc. (the "Transfer
Agent"), acting as the undersigned's attorney in fact, to surrender for
redemption any and all or part of the shares held for the undersigned's account
in any of the three funds listed above comprising the Stratton Mutual Funds
group, pursuant to any telephone request without a signature guarantee,
provided, however, that the proceeds of such redemptions are to be used to
purchase shares for the undersigned's account in the other fund(s) in the
Stratton Mutual Funds group. It is understood that such redemptions of shares
that are to be used to purchase shares in the other fund(s) in the Stratton
Mutual Funds group may be effected only by procedures described in the current
prospectus of the Fund(s) being redeemed. PLEASE NOTE: Shareholders who have
certificated shares in their possession, MUST surrender these shares to our
Transfer Agent, to be held on account in unissued form PRIOR to taking advantage
of this exchange privilege. When returning your certificates for this purpose
only, your signature(s) need NOT be guaranteed.
It is understood that this Authorization Form will continue in effect until the
Transfer Agent receives written notice of its cancellation from the undersigned.
This service may be discontinued or modified without notice. The undersigned
hereby authorizes the Transfer Agent to honor any telephone transfer believed by
the Transfer Agent to be genuine and agrees to be bound by the Transfer Agent's
records of such instructions. Furthermore, the undersigned and his assigns and
successors release and indemnify the Transfer Agent and the Funds in the
Stratton Mutual Funds group and their respective officers and employees from any
and all liability or losses for so acting. A current Prospectus of the Fund(s)
being purchased has been read in advance of purchase hereunder.
Telephone exchanges among the Stratton Mutual Funds can be made by calling the
Transfer Agent directly at (800)-441-6580. Please make a note of this phone
number for future use.
_________________________________ _______________________________________
(print investor's name) (signature of investor)
_________________________________ _______________________________________
(print joint investor's name) (signature of joint owner)
Account Number and Fund if an existing account:
__________________ _______________________________________
(account number) (fund)
__________________ _______________________________________
(account number) (fund)
__________________ _______________________________________
(account number) (fund)
Mail to: STRATTON MUTUAL FUNDS, C/O FUND/PLAN SERVICES, INC., P.O. BOX 874,
CONSHOHOCKEN, PA 19428
<PAGE>
STRATTON MANAGEMENT COMPANY
ACCOUNT TRANSFER INSTRUCTIONS
-----------------------------
To: ____________________________
____________________________
____________________________
(Employer)
Please discontinue payments to the 403 (b) annuity plan heretofore
established by you for me with:
_________________________________________
_________________________________________
(Existing Plan Description)
and direct the insurer to forward the cash-surrender or redemption value
thereof directly to:
SEMPER TRUST COMPANY
P. O. Box 874
Conshohocken, PA 19428
for my account.
Very truly yours,
_________________________
(Employee)
<PAGE>
To:
Sir/Madam:
You are currently acting as custodian for my 403(b)(7) plan.
It is my desire to change the vehicle of investment to the 403(b)(7) plan at
Stratton Management Company. Application has been made to transfer the account
to Semper Trust Company, and they have agreed to assume custodianship of the
plan, as per their attached letter.
You are hereby requested and authorized to:
1) liquidate my entire account in your custody,
2) Remit a check for the proceeds to Fund/Plan Services, Inc.,
fiduciary agent for Semper Trust Co.
403(b)(7) plan account # _____________________
name _________________________________________
3) Mail the check directly to Stratton Funds, c/o Fund/Plan
Services, P.O. Box 874, Conshohocken, PA 19428, Attn: 403(b)(7)
plan.
Following distribution of the proceeds of the above assets, you are relieved of
all responsibility as custodian for said account(s).
Very truly yours,
Date ______________ _________________________________
(signature)
Signature Guaranteed By:
______________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 29,874,255
<INVESTMENTS-AT-VALUE> 42,606,896
<RECEIVABLES> 234,503
<ASSETS-OTHER> 63,688
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,905,087
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,047
<TOTAL-LIABILITIES> 25,047
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,811,970
<SHARES-COMMON-STOCK> 1,577,380
<SHARES-COMMON-PRIOR> 1,419,210
<ACCUMULATED-NII-CURRENT> 431,001
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,904,428
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,732,641
<NET-ASSETS> 42,880,040
<DIVIDEND-INCOME> 1,167,077
<INTEREST-INCOME> 121,275
<OTHER-INCOME> 0
<EXPENSES-NET> 434,019
<NET-INVESTMENT-INCOME> 854,333
<REALIZED-GAINS-CURRENT> 2,277,319
<APPREC-INCREASE-CURRENT> 6,391,511
<NET-CHANGE-FROM-OPS> 9,523,163
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 788,687
<DISTRIBUTIONS-OF-GAINS> 1,357,531
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 234,168
<NUMBER-OF-SHARES-REDEEMED> 156,417
<SHARES-REINVESTED> 80,419
<NET-CHANGE-IN-ASSETS> 11,160,859
<ACCUMULATED-NII-PRIOR> 365,355
<ACCUMULATED-GAINS-PRIOR> 984,640
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 266,741
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 434,019
<AVERAGE-NET-ASSETS> 37,493,769
<PER-SHARE-NAV-BEGIN> 22.35
<PER-SHARE-NII> .556
<PER-SHARE-GAIN-APPREC> 5.759
<PER-SHARE-DIVIDEND> .540
<PER-SHARE-DISTRIBUTIONS> .945
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.18
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
