Notes to Financial Statements
December 31, 1996 (continued)
1. Summary of Significant Accounting Policies (continued)
Investment transactions are accounted for on the day following trade-date, except same day settlements which
are accounted for on the trade date. Interest income is recorded on an accrual basis. Discounts and premiums on
securities purchased are amortized, using an effective yield method, over the life of the respective security.
Dividend income and stock splits are recorded on the ex-dividend date. Realized gains and losses from
investment transactions are determined on an identified cost basis.
2. Investment Advisory and Administrative Services Fees
For the period January 1 through July 31, 1996, the Fund paid the Company (its investment adviser) an
investment advisory fee at an annual rate of one-quarter of one percent (0.25%) of its average daily net assets.
On June 17, 1996, shareholders of the Fund approved a new Investment Advisory Agreement, effective August
1, 1996, which provides for an increase in the annual advisory fee to 0.40% of average daily net assets of the
The Fund has entered into an administrative services agreement (the Agreement) with the Company whereby the
Company is reimbursed for a share of its overhead related to managing the Fund. In addition, the Company has
been paying, and the Fund had been reimbursing the Company for, the Fund's ordinary, recurring expenses such
as legal fees, trustees' fees, custodial fees and insurance premiums. Effective May 1, 1996, the Agreement was
modified to enable the Fund to fix the amount of its costs and expenses. Under the terms of the new Agreement,
the Company will receive a fixed fee in exchange for providing the services described above, including
reimbursement of its overhead related to managing the Fund. The new Agreement provides for the Company to
receive a fixed fee at an annual rate of 0.08% of average daily net assets of the Fund.
During June, the shareholders of the Fund voted t