-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VChub+ynAK6W8OJbjQ9yORu9GxSh24WHtaN+2viYvjzyVW0l767WDf2qfFgI6jCM ltc7tkoGljJEWjbLiOsjjw== 0000921446-97-000274.txt : 20040713 0000921446-97-000274.hdr.sgml : 20040713 19971217154700 ACCESSION NUMBER: 0000921446-97-000274 CONFORMED SUBMISSION TYPE: N-1A/A CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971217 DATE AS OF CHANGE: 19980211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPIRIT OF AMERICA INVESTMENT FUND INC CENTRAL INDEX KEY: 0001039667 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-27925 BUSINESS ADDRESS: STREET 1: 477 JERICHO TURNPIKE CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: 5163641637 MAIL ADDRESS: STREET 1: 477 JERICHO TURNPIKE CITY: SYOSSET STATE: NY ZIP: 11791 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPIRIT OF AMERICA INVESTMENT FUND INC CENTRAL INDEX KEY: 0001039667 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-08231 BUSINESS ADDRESS: STREET 1: 477 JERICHO TURNPIKE CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: 5163641637 MAIL ADDRESS: STREET 1: 477 JERICHO TURNPIKE CITY: SYOSSET STATE: NY ZIP: 11791 N-1A/A 1 PRE-EFFECTIVE AMENDMENT NO. 1 UNITED STATES File No. 333-27925 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 File No. 811-8231 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ] Pre-Effective Amendment No. 1 [ X ] Post- Effective Amendment No. [ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ] Amendment No. 1 [ X ] SPIRIT OF AMERICA INVESTMENT FUND, INC. (Exact name of Registrant as specified in charter) 477 Jericho Turnpike Syosset, New York 11791 (Address of principal executive offices) Registrant's Telephone Number, including Area Code: (516) 921-4200 Mr. David Lerner SSH Securities, Inc. 477 Jericho Turnpike Syosset, New York 11791 (Name and address of Agent for Service) Copies to: Ms. Sandra L. Adams FPS Services, Inc. 3200 Horizon Drive P.O. Box 61503 King of Prussia, PA 19406-0903 Approximate Date of Proposed Public offering: As soon as practicable after the effective date of this Registration Statement. __________________________________________________________________ Registrant will file a Notice pursuant to Rule 24f-2 within ninety days after its fiscal year end. Registrant hereby amends the Registration Statement under the Securities Act of 1933 on such date or dates as may be necessary to delay its effective date until Registrant shall file a further amendment which specifically states that such Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until such Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. As filed with the U.S. Securities and Exchange Commission on December 17, 1997. TABLE OF CONTENTS Registration Statement of Spirit of America Investment Fund, Inc. Page 1. Cross Reference Sheet 4 2. Spirit of America Investment Fund, Inc. Part A - Prospectus 6 3. Spirit of America Investment Fund, Inc. Part B - Statement of Additional Information 36 4. Spirit of America Investment Fund, Inc. Part C - Other Information 55 5. Signature Page 60 6. Index to Exhibits 61 SPIRIT OF AMERICA INVESTMENT FUND, INC. CROSS REFERENCE SHEET Pursuant to Rule 481(a) N-1A Item Information Required in Prospectus Caption in Prospectus Part A 1. Cover Page Cover Page 2. Synopsis Expense Information 3. Condensed Financial Information Not Applicable 4. General Description of Registrant Description of the Fund; General Information 5. Management of the Fund Management of the Fund; General Information; Risk Considerations 5A. Management's Discussion of Fund Per- Not Applicable formance 6. Capital Stock and Other Securities Dividends, Distributions and Taxes; General Information 7. Purchase of Securities Being Offered Purchase and Sale of Shares; General Information 8. Redemption or Repurchase Purchase and Sale of Shares; General Information 9. Legal Proceedings Not Applicable Location in Statement Of Additional Part B Information (Caption) 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and History Management of the Fund; General Information 13. Investment Objective and Policies Description of the Fund 14. Management of the Registrant Management of the Fund 15. Control Persons and Principal Not Applicable Holders of Securities 16. Investment Advisory and Other Services Management of the Fund; Expenses of the Fund; General Information 17. Brokerage Allocation and other Practices Portfolio Transaction 18. Capital Stock and Other Securities General Information 19. Purchase, Redemption, and Pricing Purchase of Shares; Redemption and Repurchase of Shares; Dividends, Distributions and Taxes; Shareholder Services 20. Tax Status Description of the Fund; Dividends, Distributions and Taxes 21. Underwriters General Information 22. Calculation of Performance Data Performance Information 23. Financial Statements Financial Statements; Report of Independent Auditors Part C Other Information Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this Registration Statement. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Subject to Completion Preliminary Prospectus dated ______________, 1997 SPIRIT OF AMERICA INVESTMENT FUND, INC. 477 Jericho Turnpike Syosset, New York 11791 (800) ___________ Prospectus January __, 1998 Spirit of America Investment Fund, Inc. (the "Fund") is an open-end diversified mutual fund which seeks growth of capital and current income. The Fund seeks to achieve its investment objective by investing in the equity securities of companies in the real estate industry. The Fund's investment adviser is Spirit of America Management Corp. ("Spirit Management"). This Prospectus sets forth the information you should know before investing in the Fund. Please read it carefully and keep it for future reference. Additional information about the Fund contained in a Statement of Additional Information dated January __, 1998 has been filed with the Securities and Exchange Commission (the "SEC"). It may be obtained free of charge by calling the Fund's distributor, SSH Securities, Inc. at (800) __________. Additionally, the SEC maintains a Web site (http://www.sec.gov) that contains the Statement of Additional Information, material incorporated by reference in this Prospectus and other information regarding the Fund. The Statement of Additional Information is incorporated by reference in this Prospectus. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE. Table of Contents Page A Brief Summary of the Fund. . . . . . . . . . . . . . . Expense Information. . . . . . . . . . . . . . . . . . . Description of the Fund. . . . . . . . . . . . . . . . . Investment Objective . . . . . . . . . . . . . . . . . . Investment Policies. . . . . . . . . . . . . . . . . . . Investment Practices . . . . . . . . . . . . . . . . . . Risk Considerations. . . . . . . . . . . . . . . . . . . Certain Fundamental Investment Limitations . . . . . . . How to Purchase Shares . . . . . . . . . . . . . . . . . How to Redeem Shares . . . . . . . . . . . . . . . . . . Special Services . . . . . . . . . . . . . . . . . . . . Net Asset Value. . . . . . . . . . . . . . . . . . . . . Management of the Fund . . . . . . . . . . . . . . . . . Dividends, Distributions and Taxes . . . . . . . . . . . Performance Information. . . . . . . . . . . . . . . . . General Information. . . . . . . . . . . . . . . . . . . Distributor Investment Adviser SSH Securities, Inc. Spirit of America Management Corp. 477 Jericho Turnpike 477 Jericho Turnpike Syosset, New York 11791 Syosset, New York 11791 (800)_______________ (800) _______________ A Brief Summary of the Fund What is the Fund's Investment Objective? The Fund seeks growth of capital and current income by investing in the equity securities of companies in the real estate industry. There can be no assurance that the Fund will be able to achieve its investment objective. See "Investment Objective" and "Investment Policies." Who is the Investment Adviser? The Fund's investment adviser is Spirit of America Management Corp., a recently organized investment manager. See "Management of the Fund" and "Risk Considerations." Who may want to Invest in the Fund? The Fund may be appropriate for investors who are willing to ride out stock market fluctuations in pursuit of potentially high long-term returns. The Fund is designed for those looking for income and growth through an investment that focuses on a wide range of equity securities in the real estate industry. What risks are associated with an investment in the Fund? The value of the Fund's investments will be affected by conditions in the real estate industry. Real estate is a cyclical industry that is sensitive to interest rates, economic conditions, property tax rates and other factors. The price of shares of the Fund will fluctuate as the daily price of the equity securities and debt instruments in which the Fund invests fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. An investment in the Fund may be suitable for long-term investors who may wish to consider investing a portion of their overall equity portfolio in a real estate mutual fund. By itself, the Fund does not constitute a balanced investment plan. See "Risk Considerations." Does the Fund pay dividends? The Fund intends to make distributions quarterly in March, June, September and December. These distributions may include ordinary income and capital gains (each of which is taxable) and a return of capital (which is generally non-taxable). All dividends and distributions are paid in additional shares (without sales charge) unless payment in cash is requested. See "Dividends, Distributions and Taxes." How do I make an investment in the Fund? Shares of the Fund may be purchased through broker-dealers or directly through SSH Securities, Inc., the Fund's principal distributor. Shares can be purchased for a minimum initial investment of $1,000 and subsequent investments can be made for as little as $50. Purchases of shares are subject to a maximum sales charge of 5.25%. For detailed information about purchasing shares, see "How to Purchase Shares." In addition, the Fund offers several time and money saving services to investors. Be sure to ask about the Automatic Investment Plan, Retirement Plans and the Systematic Withdrawal Plan. How do I sell my shares? Shares of the Fund may be redeemed at the current net asset value per share next determined after receipt by the transfer agent of a redemption request in proper form. Signature guarantees may be required for certain redemption requests. See "How to Redeem Shares." EXPENSE INFORMATION Shareholder Transaction Expenses are one of several factors to consider when you invest in the Fund. The following table summarizes your maximum transaction costs and estimated annual expenses for an investment in the Fund. Maximum sales charge imposed on purchases (as a percentage of offering price)(1) . . . . . . . . . . .5.25% Maximum sales charge imposed on reinvested dividends (as a percentage of offering price). . . . . . . . None Deferred sales charge (as a percentage of original purchase price)(2). . . . . . . . . . . . . . . . . None Redemption Fees (as a percentage of amount redeemed)(3). . . None (1) Reduced for purchases of $100,000 and over, decreasing to zero for purchases of $1 million and over. See "How to Purchase Shares - Sales Charge." (2) Investments of $1 million or more are not subject to any sales charge at the time of purchase, but a contingent deferred sales charge of 1.00% may be imposed on certain redemptions made within one year of the date of purchase. See "How to Purchase Shares - Sales Charge." (3) The Fund's transfer agent charges $15.00 per redemption for redemptions remitted by wire. Purchases and redemptions may also be made through broker-dealers and others who may charge a fee for their services. Annual Fund Operating Expenses: (as a percentage of average net assets) Management fees(4) . . . . . . . . . . . . . . . .0.97% 12b-1 fees(4) . . . . . . . . . . . . . . . . . . 0.30% Other Expenses (4). . . . . . . . . . . . . . . . 0.70% Total Fund operating expenses (after fee waivers)(4)1.97% (4) The above table reflects Spirit Management's voluntary undertaking to waive all or a portion of its fees and to reimburse certain expenses to limit the total operating expenses of the Fund for the first year of operations to 1.97% of the Fund's average daily net assets. Spirit Management reserves the right to terminate this waiver or any reimbursement at any time, in its sole discretion. Any reductions in Spirit Management's fee are subject to reimbursement by the Fund within the following three years, to the extent such reimbursement would not cause total operating expenses to exceed 1.97%. Absent such waiver, total operating expenses would be 2.22% of the Fund's average daily net assets on an annualized basis. In subsequent years, overall expenses for the Fund may not fall below the percentage limitation until the Adviser has been fully reimbursed for fees foregone or expenses it paid under the Advisory Agreement. "Other Expenses" are based on estimated amounts for the Fund's current fiscal year. Spirit Management has not previously provided investment advisory services to registered investment companies. Example Based on the level of expenses listed above, an investor would pay the following expenses on a $1,000 investment assuming (i) imposition of the maximum sales charge, (ii) 5% annual return and (iii) redemption at the end of each time period: 1 year 3 years $ 62 $102 THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The purpose of the foregoing table is to assist the investor in understanding the various costs and expenses that an investor in the Fund will bear directly or indirectly. Long-term shareholders may eventually pay more than the economic equivalent of the maximum front-end sales charge permitted by the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"). See "Management of the Fund - Distribution Services Agreement." DESCRIPTION OF THE FUND The Fund is a diversified investment company. The Fund's investment objective is fundamental and cannot be changed without a shareholder vote. Except as noted, the Fund's investment policies are not fundamental and can be changed without a shareholder vote. The Fund will not change these policies without notifying its shareholders. There is no guarantee that the Fund will achieve its investment objective. INVESTMENT OBJECTIVE The Fund's investment objective is to seek growth of capital and current income by investing in equity securities of companies in the real estate industry. To a lesser extent the Fund will invest in mortgage-backed securities and taxable debt obligations of municipalities or their affiliates. INVESTMENT POLICIES Under normal circumstances, at least 60% of the Fund's total assets will be invested in equity securities of real estate investment trusts ("REITs") and other real estate industry companies. For purposes of the Fund's investments, a "real estate industry company" is a company that derives at least 50% of its gross revenues or net profits from either (a) the ownership, development, construction, financing, management or sale of commercial, industrial or residential real estate or (b) products or services related to the real estate industry, like building supplies or mortgage servicing. The equity securities in which the Fund will invest for this purpose consist of common stock, shares of beneficial interest of REITs and securities with common stock characteristics, such as preferred stock and debt securities convertible into common stock ("Real Estate Equity Securities"). The Fund may invest up to 40% of its total assets in (a) securities that directly or indirectly represent participations in, or are collateralized by and payable from, mortgage loans secured by real property ("Mortgage-Backed Securities"), such as mortgage pass- through certificates, real estate mortgage investment conduit ("REMIC") certificates and collateralized mortgage obligations ("CMOs"), (b) taxable investment grade securities issued by or on behalf of states and municipal governments, other U.S. territories and possessions of the United States, and their authorities, agencies, instrumentalities and political subdivisions ("taxable municipal obligations"), and (c) short-term investments. These instruments are described below. See "Risk Considerations" for a description of the risks associated with the Fund's transactions in REMICs, CMOs, other types of mortgage-backed securities and taxable municipal obligations. The Fund may purchase or sell debt securities on a forward commitment basis or enter into standby commitment agreements and engage in portfolio management techniques such as selling short. See "Investment Practices." As to any investment in Real Estate Equity Securities, Spirit Management's analysis will focus on determining the degree to which the company involved can achieve sustainable growth in cash flow and dividend paying capability. Spirit Management believes that the primary determinant of this capability is the economic viability of property markets in which the company operates and that the secondary determinant of this capability is the ability of management to add value through strategic focus and operating expertise. The Fund will purchase Real Estate Equity Securities when, in the judgment of Spirit Management, their market price does not adequately reflect this potential. In making this determination, Spirit Management will take into account fundamental trends in underlying property markets as determined by site visits conducted by individuals knowledgeable in local real estate markets, price-earnings ratios (as defined for real estate companies), cash flow growth and stability, the relationship between asset value and market price of the securities, dividend payment history, and such other factors which Spirit Management may determine from time to time to be relevant. For temporary defensive purposes, the Fund may invest up to 100% of its total assets in short-term, liquid, high-grade debt securities, which may include U.S. Government securities, bank deposits, money market instruments, repurchase agreements and short-term debt securities, including notes and bonds (rated A-1, AA or better by Standard & Poors Ratings Group ("S&P") or rated Prime-1, Aa or better by Moody's Investors Service, Inc. ("Moody's"). The Fund will assume a temporary defensive posture only when economic and other factors affect the real estate industry market to such an extent that Spirit Management believes there are extraordinary risks in being invested primarily in Real Estate Securities. For a description of the types of securities in which the Fund may invest while in a temporary defensive position, please see the Statement of Additional Information. INVESTMENT PRACTICES REAL ESTATE INVESTMENT TRUSTS The Fund may invest without limitation in shares of REITs. REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Similar to investment companies such as the Fund, REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund will indirectly bear its proportionate share of expenses incurred by REITs in which the Fund invests in addition to the expenses incurred directly by the Fund. MORTGAGE-BACKED SECURITIES The Fund may invest in Mortgage-Backed Securities including mortgage pass-through certificates and multiple-class pass-through securities, such as REMIC pass-through certificates, CMOs and stripped mortgage-backed securities ("SMBs"), and other types of Mortgage-Backed Securities that may be available in the future. Mortgage-Backed Securities also include CMOs and REMIC pass-through or participation certificates, which may be issued by, among others, U.S. Government agencies and instrumentalities as well as private lenders. CMOs and REMIC certificates are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC certificates, often referred to as a "tranche," is issued at a specific adjustable or fixed interest rate and must by fully retired no later than its final distribution date. Generally, interest is paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis. Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgaged assets and any reinvestment income thereon. A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages primarily secured by interests in real property and other permitted investments. Investors may purchase Irregulars and "residual" interest shares of beneficial interest in REMIC trusts although the Fund does not intend to invest in residual interests. The Fund may invest in guaranteed mortgage pass-through securities which represent participation interests in pools of residential mortgage loans and are issued by U.S. governmental or private agencies or instrumentalities, including but not limited to the Government National Mortgage Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full faith and credit of the United States Government for timely payment of principal and interest on the certificates. Fannie Mae certificates are guaranteed by Fannie Mae, a federally chartered and privately-owned corporation for full and timely payment of principal and interest on the certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a corporate instrumentality of the United States Government, for timely payment of interest and the ultimate collection of all principal of the related mortgage loans. TAXABLE MUNICIPAL OBLIGATIONS The Fund will invest in taxable municipal securities. These instruments generally include debt obligations issued by municipalities and local agencies within the United States to obtain funds for various public purposes, including construction of a wide range of public facilities, refunding outstanding obligations, obtaining funds for community improvement projects and lending such funds to other public institutions and facilities. In addition, certain types of taxable industrial development bonds are issued by or on behalf of public authorities to provide for the construction, equipment, repair or improvement of certain privately operated or local facilities. These obligations, including those which are guaranteed by state, local and municipal agencies or instrumentalities, may or may not be backed by the full faith and credits or the taxing authority of the agency or instrumentality issuing the obligation. Unlike tax-tree municipal securities, the interest on taxable municipal securities generally will be included in gross income for federal income tax purposes and may be subject to income taxes imposed by any state or political subdivision. It is the Fund's current investment strategy, to limit its investments in taxable municipal securities to less than 25% of the Fund's net assets. The Fund will only invest in taxable municipal obligations which on the date of investment are within the four highest credit ratings of Moody's (Aaa, Aa, A, Baa for bonds; MIG-1, MIG-2, MIG-3, MIG-4 for notes; P-1, Aa or better for commercial paper) or S&P (AAA, AA, A, BBB for bonds; SP-1, SP-2 for notes; A-1, AA or better for commercial paper) or are comparably rated by another nationally recognized statistical rating organization or, if unrated, determined by Spirit Management to be of comparable quality. Although bonds and notes rated in the fourth credit rating category are commonly referred to as investment grade, they may have speculative characteristics. SHORT SALES The Fund may attempt to limit exposure to a possible decline in the market value of portfolio securities through short sales of securities which Spirit Management believes possess volatility characteristics similar to those being hedged. The Fund also may use short sales in an attempt to realize gain. To effect a short sale, the Fund borrows a security from a brokerage firm to make delivery to the buyer. The Fund is then obligated to replace the borrowed security by purchasing it at the market price at the time of replacement. No short sale will be effected which will, at the time of making such short sale transaction, cause the aggregate market value of all securities sold short to exceed 15% of the value of the Fund's net assets. SHORT-TERM INVESTMENTS The short-term investments in which the Fund may invest are: corporate commercial paper and other short-term commercial obligations, in each case rated or issued by companies with similar securities outstanding that are rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations (including certificates of deposit, time deposits, demand deposits and bankers' acceptances) of banks with securities outstanding that are rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; and obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities with remaining maturities not exceeding 18 months. RATINGS ON DEBT SECURITIES In addition to the permissible limits on short-term investments with reference to ratings noted above, the Fund may invest in investment grade debt securities (BBB or higher by S&P or Baa or higher by Moody's or, if not so rated, are of equivalent credit quality as determined by Spirit Management). Securities rated BBB by S&P or Baa by Moody's are considered to have speculative characteristics. Sustained periods of deteriorating economic conditions or rising interest rates are more likely to lead to a weakening in the issuer's capacity to pay interest and repay principal than in the case of higher-rated securities. The Fund expects that it will not retain a debt security which is downgraded below BBB or Baa or, if unrated, determined by Spirit Management to have undergone similar credit quality deterioration, subsequent to purchase by the Fund. OTHER INVESTMENTS AND LIMITATIONS While the Fund has no current intention of engaging in any of the following investment practices, it may in the future determine to do so to the extent indicated: (i) invest up to 15% of its net assets in rights or warrants; (ii) invest up to 15% of its net assets in the convertible securities of companies whose common stocks are eligible for purchase by the Fund; (iii) enter into repurchase agreements of up to seven days' duration; (iv) enter into forward commitment transactions as long as the Fund's aggregate commitments under such transactions are not more than 15% of the Fund's total assets; (v) enter into standby commitment agreements; and (vi) invest in illiquid securities unless, as a result, more than 15% of its net assets would be so invested. ILLIQUID SECURITIES The Fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities will generally include direct placements or other securities that are subject to legal or contractual restrictions on resale or for which there is not readily available market (e.g., when trading in the security is suspended or, in the case of unlisted securities, when market makers do not exist or will not entertain bids or offers) and repurchase agreements not terminable within seven days. Securities that may be resold without registration pursuant to Rule 144A may be treated as liquid for these purposes, subject to the supervision and oversight of the Board of Directors. These securities may include securities issued by certain REITs that are not publicly traded. REPURCHASE AGREEMENTS A repurchase agreement arises when a buyer purchases a security and simultaneously agrees to resell that security to the seller at an agreed upon price on an agreed upon date, normally not more than seven days from the date of purchase. The resale price is greater than the purchase price, reflecting an agreed-upon interest rate for the period the buyer's money is invested in the security. Such agreements permit the Fund to keep all of its assets at work while retaining overnight flexibility in pursuit of investments of a longer-term nature. If a vendor defaults on its repurchase obligation, the Fund would suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If a vendor goes bankrupt, the Fund might be delayed in, or prevented from, selling the collateral for its benefit. Spirit Management monitors the creditworthiness of the vendors with which the Fund enters into repurchase agreements. GENERAL The successful use of the foregoing investment practices draws upon Spirit Management's skills and experience with respect to such instruments and usually depends on its ability to forecast price movements correctly. Should prices move unexpectedly, the Fund may not achieve the anticipated benefits of the transactions or may realize losses and thus be in a worse position than if such strategies had not been used. FUTURE DEVELOPMENTS The Fund may, following written notice to its shareholders, take advantage of other investment practices that are not currently contemplated for use by the fund or are not available but may yet be developed, to the extent such investment practices are consistent with the Fund's investment objective and legally permissible for the Fund. Such investment practices, if they arise, may involve risks that exceed those involved in the activities described above. PORTFOLIO TURNOVER Spirit Management anticipates that the Fund's annual rate of turnover will not exceed 100%. A 100% annual turnover rate would occur if all of the securities in the Fund's portfolio are replaced once in a period of one year. A higher rate of portfolio turnover (100% or more) involves correspondingly greater brokerage and other expenses than a lower rate, which must be borne by the Fund and its shareholders. High portfolio turnover also may result in the realization of substantial net short-term capital gains. See "Dividends, Distributions and Taxes" in the Fund's Statement of Additional Information. RISK CONSIDERATIONS GENERAL Investments in common stocks and other equity securities of real estate investment trusts and other real estate industry companies and the use by the Fund of various investment techniques involve risks different from, and, in certain cases, greater than the risks presented by equity securities generally. An investment in the Fund is subject to certain risks associated with the direct ownership of real estate and with the real estate industry in general, including possible declines in the value of real estate, general and local economic conditions, environmental problems and changes in interest rates. To the extent the Fund invests in taxable municipal debt obligations, the credit quality of these instruments will depend upon the financial strength of the issuing municipality or other public body. These risks and certain others are discussed in this Prospectus. An investment in the Fund is suitable for moderately aggressive, long-term investors who may wish to consider investing a portion of their overall equity portfolio in a real estate mutual fund. REAL ESTATE INDUSTRY Although the Fund does not invest directly in real estate, it does invest primarily in Real Estate Equity Securities and does have a policy of concentration of its investments in the real estate industry. Therefore, an investment in the Fund is subject to certain risks associated with the direct ownership of real estate and with the real estate industry in general. These risks include, among others: possible declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates. To the extent that assets underlying the Fund's investments are concentrated geographically, by property type or in certain other respects, the Fund may be subject to certain of the foregoing risks to a greater extent. In addition, if the Fund receives rental income or income from the disposition of real property acquired as a result of a default on securities the Fund owns, the receipt of such income may adversely affect the Fund's ability to retain its tax status as a regulated investment company. See "Dividends, Distributions and Taxes" in the Statement of Additional Information. Investments by the Fund in securities of companies providing mortgage servicing will be subject to the risks associated with refinancings and their impact on servicing rights. REITs Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified, are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax free pass-through of income under the Internal Revenue Code (the "Code"). REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. In contrast, as interest rates on adjustable rate mortgage loans are reset periodically, yields on a REIT's investments in such loans will gradually align themselves to reflect changes in market interest rates, causing the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. Investing in REITs involves risks similar to those associated with investing in small capitalization companies. REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks included in the S&P Index of 500 Common Stocks. MORTGAGE-BACKED SECURITIES Investing in Mortgage-Backed Securities involves certain unique risks in addition to those risks associated with investment in the real estate industry in general. These risks include the failure of a counterparts to meet its commitments, adverse interest rate changes and the effects of prepayments on mortgage cash flows. When interest rates decline, the value of an investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of an investment in fixed rate obligations can be expected to decline. In contrast, as interest rates on adjustable rate mortgage loans are reset periodically, yields on investments in such loans will gradually align themselves to reflect changes in market interest rates, causing the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations. Further, the yield characteristics of Mortgage-Backed Securities, such as those in which the Fund may invest, differ from those of traditional fixed income securities. The major differences typically include more frequent interest and principal payments (usually monthly), the adjustability of interest rates, and the possibility that prepayments of principal may be made substantially earlier than their final distribution dates. Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors, and cannot be predicted with certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment and to a lesser rate of principal prepayments in an increasing interest rate environment. Early payment associated with Mortgage-Backed Securities causes these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed-income securities. Under certain interest rate and prepayment rate scenarios, the Fund may fail to recoup fully its investment in Mortgage-Backed Securities notwithstanding any direct or indirect governmental or agency guarantee. When the Fund reinvests amounts representing payments and unscheduled prepayments of principal, it may receive a rate of interest that is lower than the rate on existing adjustable rate mortgage pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass- through securities in particular, may be less effective than other types of U.S. Government securities as a means of locking in interest rates. SHORT SALE A short position may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged. The Fund will realize a gain on the security sold short if the security declines in price between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will incur a loss if the price of the security increases between those dates. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium or interest the Fund may be required to pay in connection with a short sale. TAXABLE MUNICIPAL OBLIGATIONS The principal risk factors associated with ownership by the Fund of taxable municipal obligations would be the risk of fluctuations in interest rates whereby an increase in interest rates causes a decline in the value of the debt obligation and the risk of default among one or more issuers of taxable municipal obligations which are held by the Fund. Another risk of the Fund investing in taxable municipal obligations would be the inability to readily find a buyer at or near the market price should the Fund need to quickly dispose of one or more of its positions in taxable municipal obligations. SECURITIES RATINGS The ratings of securities by S&P, Moody's, and other ratings services are a generally accepted barometer of credit risk. They are, however, subject to certain limitations from an investor's standpoint. The rating of an issuer is heavily weighted by past developments and does not necessarily reflect probable future conditions. There is frequently a lag between the time a rating is assigned and the time it is updated. In addition, there may be varying degrees of difference in credit risk of securities within each rating category. ABSENCE OF OPERATING HISTORY While principals of Spirit Management have experience in the purchase and sale of the type of investments permitted by the Fund, neither Spirit Management nor its principals have previously served as an adviser to a mutual fund and do not have other advisory clients. CERTAIN FUNDAMENTAL INVESTMENT LIMITATIONS In addition to its fundamental investment objective, the Fund has adopted the following fundamental investment limitations, which may not be changed without the approval of its shareholders. Additional investment policies and limitations are set forth in the Statement of Additional Information. The Fund may not: (i) with respect to 75% of its total assets, have such assets represented by other than: (a) cash and cash items, (b) U.S. Government securities, or (c) securities of any one issuer (other than the U.S. Government and its agencies or instrumentalities) not greater in value than 5% of the Fund's total assets, and not more than 10% of the outstanding voting securities of such issuer; (ii) purchase the securities of any one issuer, other than the U.S. Government and its agencies or instrumentalities, if as a result (a) the value of the holdings of the Fund in the securities of such issuer exceeds 15% of its total assets, or (b) the Fund owns more than 25% of the outstanding securities of any one class of securities of such issuer; (iii) invest 25% or more of its total assets in the securities of issuers conducting their principal business activities in any one industry, other than the real estate industry in which the Fund will invest at least 25% or more of its total assets, except that this restriction does not apply to U.S. Government securities; (iv) purchase or sell real estate, except that it may purchase and sell securities of companies which deal in real estate or interests therein, including Real Estate Equity Securities; or (v) borrow money except for temporary or emergency purposes or to meet redemption requests, in an amount not exceeding 5% of the value of its total assets at the time the borrowing is made. HOW TO PURCHASE SHARES General You can purchase shares of the Fund through broker-dealers or directly through SSH Securities, Inc. (the "Distributor"), the Fund's principal distributor. Shares are sold at the net asset value next determined after receipt by the Fund's transfer agent, FPS Services, Inc. (the "Transfer Agent"), plus an initial maximum sales charge of up to 5.25% of the offering price (5.54% of the net amount invested) reduced on investments of $100,000 or more. The minimum initial investment is $1,000. Shares of the Fund are offered only to residents of states in which the shares are registered or qualified. No share certificates will be issued in connection with the purchase of Fund shares. See "Sales Charge." Purchase orders for shares of the Fund that are received by the Transfer Agent in proper form by the close of the New York Stock Exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for trading, will be purchased at the Fund's next determined net asset value (plus any applicable sales charge). Orders for Fund shares received after 4:00 p.m. Eastern time will be purchased at the net asset value (plus any applicable sales charge) determined on the following business day. The Fund and the Transfer Agent each reserves the right to reject any purchase order in whole or in part. The Fund reserves the right to suspend the offering of shares of the Fund. The Fund also reserves the right to vary the initial and subsequent investment minimums, or to waive the minimum investment requirements for any investor. The Fund will not accept for purchase order a check which has been endorsed by a third party. When you sign your account application, you will be asked to certify that your Social Security or taxpayer identification number is correct and that you are not subject to 31% backup withholding for failing to report income to the IRS. If you violate IRS regulations, the IRS can require the Fund to withhold 31% of your taxable distributions and redemptions. Purchases by Mail Shares may be purchased initially by completing the application accompanying this Prospectus and mailing it to the Transfer Agent, together with a check payable to "Spirit of America Investment Fund, Inc." The check or money order and application should be mailed to FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. If this is an initial purchase, please send a minimum of $1,000 (including IRA and SEP accounts). Purchases by Wire Before making an initial investment by wire, an investor must first telephone the Transfer Agent at (800)452-4892 or (610) 239-4600 in order to be assigned an account number. The investor's name, account number, taxpayer identification number or social security number and address must be specified in the wire. In addition, an account application should be promptly forwarded to: FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. Shareholders having an account with a commercial bank that is a member firm of the Federal Reserve System may purchase shares of the Fund by requesting their bank to transmit funds by wire to: United Missouri Bank K.C. N.A., ABA #10-10-00695/Attention: FPS Services, Inc., A/C 98-7037-071-9/"Spirit of America Investment Fund, Inc.", along with the shareholder's name and account number as specified on the shareholder's account registration. Additional investments may be made at any time through the wire procedures described above, which must include a shareholder's name and account number. The shareholder's bank may impose a fee for investments by wire. The Fund will not be responsible for the consequences of delays, including delays in the banking or Federal Reserve wire systems. Shareholders may be subject to 31% withholding if original application is not received. Purchases through Broker-Dealers The Fund may accept telephone orders only from broker-dealers or service organizations that have been previously approved by the Fund. It is the responsibility of such broker-dealers or service organizations to promptly forward purchase orders and payments for the same to the Fund. Brokers, financial institutions, service organizations, banks and bank trust departments through which an investor purchases shares of the Fund, may charge the shareholder a transaction fee or other fee for their services at the time of purchase. Minimums of broker/dealers or accounts opened through a fund network may apply. For any order to be confirmed at the current day's offering price, it must be received by the Transfer Agent or the selling dealer by 4:00 p.m. Eastern time on the same day. For any dealer order to be confirmed at the current day's offering price, it not only must be received by the dealer prior to 4:00 p.m. Eastern time on that day, but it must be communicated to the Transfer Agent by 5:00 p.m. Eastern time on that day. It is the responsibility of that dealer to communicate the details of the order to the Transfer Agent. Orders received by dealers after 4:00 p.m. Eastern time are confirmed at the public offering price on the following business day. Purchases by Telephone The Fund only accepts telephone purchases from brokers, financial institutions or service organizations. Individuals are not able to make purchases by telephone. Subsequent Investments Once an account has been opened, subsequent purchases may be made by mail, bank wire, automatic investing or direct deposit. The minimum for subsequent investments is $50 for all accounts. When making subsequent investments by mail, please return the bottom portion of a previous confirmation with your investment in the envelope that is provided with each confirmation statement. Your check should be made payable to "Spirit of America Investment Fund, Inc." and mailed to FPS Services, Inc., c/o United Missouri Bank KC, N.A., P.O. Box 412797, Kansas City, Missouri 64141-2797. Orders to purchase shares are effective on the day the Transfer Agent receives your check or money order. All investments must be made in U.S. dollars and, to avoid fees and delays, checks must be drawn only on banks located in the United States. A charge (minimum of $20) will be imposed if any check used for the purchase of shares is returned. Investors who purchase Fund shares by check or money order may not receive redemption proceeds until there is reasonable belief that the check has cleared, which may take up to fifteen calendar days after the purchase date. Sales Charge The sales charge a shareholder pays depends on the dollar amount invested, as shown in the table below. Total Sales Charge Amount Paid to as a Percentage of Dealer as a Offering Net Amount Percentage of Price Invested Offering Price Under $100,000 5.25% 5.54% 5.00% $100,000 but less than $250,000 4.50% 4.71% 4.25% $250,000 but less than $500,000 3.75% 3.90% 3.50% $500,000 but less than $1,000,000 3.00% 3.09% 2.75% $1,000,000 or more* 0% 0% 0% * No sales charge is payable at the time of purchase on investments of $1 million or more, although for such investments the Fund imposes a contingent deferred sales charge of 1.00% in the event of certain redemptions within one year of the purchase. The contingent deferred sales charge incurred upon redemption is paid to the Distributor in reimbursement for distribution-related expenses. A commission will be paid to authorized dealers who initiate and are responsible for purchases of $1 million or more. The Distributor will pay the dealer concession to those selected dealers who have entered into an agreement with the Distributor. The dealer's concession may be changed from time to time. The Distributor may from time to time offer incentive compensation to dealers which sell shares of the Fund subject to sales charges, allowing such dealers to retain an additional portion of the sales load. On some occasions, such cash or incentives will be conditioned upon the sale of a specified minimum dollar amount of the shares of the Fund during a specified period of time. A dealer who receives all or substantially all of the sales load may be considered an "underwriter" under the Securities Act of 1933, as amended. All such sales charges are paid to the securities dealer involved in the trade, if any. No sales charge will be assessed on the reinvestment of dividends or distributions. Reduced Sales Charges The sales charge may be reduced through Rights of Accumulation or Letter of Intent. To qualify for a reduced sales charge, an investor must so notify his or her distributor at the time of each purchase of shares which qualifies for the reduction. Rights of Accumulation For investors who already have an account with the Fund, reduced sales charges based upon the sales charge schedule are applicable to subsequent purchases. The sales charge on each additional purchase is determined by adding the current market value of the shares the investor currently owns to the amount being invested. The reduced sales charge is applicable only to current purchases. It is the investor's responsibility to notify the Transfer Agent at the time of subsequent purchases that the account is eligible for the Right of Accumulation. The investor must also give the account numbers of his accounts, and those accounts held in the name of his spouse or for minor children, the age of such children and the specific relationship of each such person to the investor. Letter of Intent An investor may qualify for a reduced sales charge immediately by signing a non-binding Letter of Intent stating the investor's intention to invest during the next 13 months a specified amount which, if made at one time, would qualify for a reduced sales charge. The first investment cannot be made more than 90 days prior to the date of the Letter of Intent. Any redemptions made during the 13-month period will be subtracted from the amount of purchases in determining whether the Letter of Intent has been completed. During the term of the Letter of Intent, the Transfer Agent will hold shares representing 5% of the indicated amount in escrow for payment of a higher sales load if the full amount indicated in the Letter of Intent is not purchased. The escrowed shares will be released when the full amount indicated has been purchased. If the full amount indicated is not purchased within the 13-month period, a shareholder's escrowed shares will be redeemed in an amount equal to the difference in the dollar amount of sales charge actually paid and the amount of sales charge the shareholder would have had to pay on his or her aggregate purchases if the total of such purchases had been made at a single time. It is the shareholder's responsibility to notify the Transfer Agent at the time the Letter of Intent is submitted that there are prior purchases that may apply. The term "single purchaser" refers to (i) an individual, (ii) an individual and spouse purchasing shares of the Fund for their own account or for trust or custodial accounts of their minor children, or (iii) a fiduciary purchasing for any one trust, estate or fiduciary account, including employee benefit plans created under Sections 401 and 457 of the Code including related plans of the same employer. Sales at Net Asset Value The Fund may sell shares at net asset value (i.e., without any initial sales charge) to certain categories of investors, including: (i) investment advisory clients of the Adviser or its affiliates; (ii) officers and present or former Directors of the Fund; directors and present and full-time employees of selected dealers or agents; or the spouse, sibling, direct ancestor or direct descendant (collectively "relatives") of any such person; or any trust, individual retirement account or retirement plan account for the benefit of any such person or relative; or the estate of any such person or relative, if such shares are purchased for investment purposes (such shares may not be resold except to the Fund); (iii) the Adviser, the Distributor, and their affiliates; and certain employee benefit plans for employees of the Adviser and the Distributor; (iv) persons who establish to the Distributor's satisfaction that they are investing, within such time period as may be designated by the Distributor, proceeds of redemption of shares of such other registered investment companies as may be designated from time to time by the Distributor; and (v) employer-sponsored qualified pension or profit-sharing plans (including Section 401(k) plans), custodial accounts maintained pursuant to Section 403(b)(7) retirement plans and individual retirement accounts (including individual retirement accounts to which simplified employee pension ("SEP") contributions are made), if such plans or accounts are established or administered under programs sponsored by administrators or other persons that have been approved by the Distributor. How to Redeem Shares Shareholders may redeem their shares of the Fund on any business day that the NYSE is open for business. Redemptions will be effective at the net asset value next determined after receipt by the Transfer Agent of a redemption request meeting the requirements described below. Redemption by Mail Shareholders may redeem their shares by submitting a written request for redemption to FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. A written redemption request to the Transfer Agent must be in good order, which means that it must: (i) identify the shareholder's account name and account number; (ii) state the number of shares or dollar amount to be redeemed, and (iii) be signed by each registered owner exactly as the shares are registered. To prevent fraudulent redemptions, a signature guarantee for the signature of each person in whose name an account is registered is required for all written redemption requests exceeding $10,000 or where proceeds are to be mailed to an address other than the address of record. A guarantee may be obtained from any commercial bank, credit union, member firm of a national securities exchange, registered securities association, clearing agency or savings and loan association. A credit union must be authorized to issue signature guarantees. Signature guarantees will be accepted from any eligible guarantor institution that participates in a signature guarantee program. Notary public endorsements will not be accepted. The Transfer Agent may require additional supporting documents for redemptions made by corporations, executors, administrators, trustees or guardians and retirement plans. A redemption request will not be deemed to be properly received until the Transfer Agent receives all required documents in proper form. Questions with respect to the proper form for redemption requests should be directed to the Transfer Agent at (800) 452-4892. Redemption by Telephone Shareholders who have so indicated on the application, or have subsequently arranged in writing to do so, may redeem shares by calling the Transfer Agent at (800) 452-4892 or (610) 239-4600 during normal business hours. In order to arrange for redemption by wire or telephone after an account has been opened, or to change the bank or account designated to receive redemption proceeds, a written request with a signature guarantee must be sent to the Transfer Agent. The Fund reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by wire or telephone may be modified or terminated at any time. During periods of unusual economic or market changes, telephone redemptions may be difficult to implement. In such event, shareholders should follow the procedures for redemption by mail. Neither the Fund nor any of its service contractors will be liable for any loss or expense in acting upon telephone instructions that are reasonably believed to be genuine. In this regard, the Fund and the Transfer Agent require personal identification information before accepting a telephone redemption. To the extent that the Fund or the Transfer Agent fails to use reasonable procedures to verify the genuineness of telephone instructions, the Fund may be liable for losses due to fraudulent or unauthorized instructions. The Fund reserves the right to refuse a telephone redemption if it is believed advisable to do so. Written confirmation will be provided for all redemption transactions initiated by telephone. Proceeds from a telephone redemption shall only be sent to the shareholder's address of record or wired to the shareholder's bank account on file with the Transfer Agent. General Redemption Information When a request for redemption is made shortly after the purchase of shares, you will not receive the redemption proceeds until the check(s) received for the shares purchased has cleared. Although the redemption proceeds may be delayed, the redemption request will be processed at the net asset value next determined after receipt of the redemption request in good order. The Fund will mail the redemption proceeds as soon as the purchase check clears, which may take up to 15 calendar days or more. You may avoid such delays by purchasing shares by federal funds wire. Redemption proceeds may be wired directly to any bank previously designated by an investor on his or her new account application. There is a $15.00 charge for redemptions made by wire to domestic banks. Wires to foreign or overseas banks may be charged at higher rates. It should also be noted that banks may impose a fee for wire services. In addition, there may be fees for redemptions made through brokers, financial institutions and service organizations. The Fund will satisfy redemption requests for cash to the fullest extent feasible, as long as such payments would not, in the opinion of the Board of Directors, result in the need for the Fund to sell assets under disadvantageous conditions or to the detriment of the remaining shareholders of the Fund. Pursuant to the Fund's Articles of Incorporation, however, payment for shares redeemed may also be made in-kind, or partly in cash and partly in-kind. The Fund has elected, pursuant to Rule 18f-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund, during any 90 day period for any one shareholder. Any portfolio securities paid or distributed in-kind would be in readily marketable securities and valued in the manner described below. See "Net Asset Value." In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as brokerage commissions, on the sale or other disposition of the securities received from the Fund. In-kind payments need not constitute a cross-section of the Fund's portfolio. The Fund may suspend the right of redemption or postpone the date of payment for more than seven days during any period when (1) trading on the NYSE is restricted or the NYSE is closed for other than customary weekends and holidays, (2) the SEC has by order permitted such suspension for the protection of the Fund's shareholders, or (3) an emergency exists making disposal of portfolio securities or valuation of net assets of the Fund not reasonably practicable. Minimum Balances Due to the relatively high cost of maintaining smaller accounts, the Fund reserves the right to involuntarily redeem shares in any account at its then current net asset value if at any time the total investment does not have a value of at least $500 as a result of shareholder redemptions, but not market fluctuations. A shareholder will be notified that the value of his or her account is less than the required minimum and will be allowed at least 60 days to bring the value of the account up to the minimum before the redemption is processed. SPECIAL SERVICES Automatic Investment Plan Once an account has been opened, a shareholder can make additional purchases of shares of the Fund through an automatic investment plan. The automatic investment plan provides a convenient method by which investors may have monies deducted directly from their bank account for investment in the Fund. An investor may authorize the automatic withdrawal of funds from his or her bank account by opening an account with a minimum of $1,000 and completing the automatic investment plan form enclosed with this Prospectus. Subsequent monthly investments are subject to a minimum required amount of $50. The Fund may alter, modify or terminate this plan at any time. 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. For information about starting a systematic cash withdrawal plan, call the Transfer Agent at (800) 452-4892. Retirement Plans The Fund is available for investment by pension and profit sharing plans including Individual Retirement Accounts, SEP, Keogh, 401(k) and 403(b)(7) plans through which an investor may purchase Fund shares. For details concerning any of these retirement plans, please call the Transfer Agent at (800) 452-4892 or (610) 239-4700. Net Asset Value The offering price and net asset value per share is calculated as of the close of regular trading on the NYSE, currently 4:00 p.m., Eastern Time. Currently, the NYSE is closed on the following holidays or days on which the following holidays are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset value per share is computed by adding the value of all securities and other assets in the portfolio, deducting any liabilities, and dividing by the total number of outstanding shares. Expenses are accrued daily and applied when determining the net asset value. The Fund's equity securities are valued based on market quotations or, when no market quotations are available, at fair value as determined in good faith by, or under direction of, the Board of Directors. Market quotations are generally the last reported sales price on the principal exchange on which the security trades, or if no sale price is reported, the mean of the latest bid and asked prices is used. Securities traded over-the-counter are priced at the mean of the latest bid and asked prices. When market quotations are not readily available, securities and other assets are valued at fair value as determined in good faith by the Board of Directors. Securities are valued through valuations obtained from a commercial pricing service or at the most recent mean of the bid and asked prices provided by investment dealers in accordance with procedures established by the Board of Directors. Short-term investments having a maturity of 60 days or less are valued at amortized cost, which the Board of Directors believes represents fair value. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact on fluctuating interest rates on the market value of the instrument. All other securities and other assets are valued at their fair value as determined in good faith under procedures established by and under the supervision of the Board of Directors. MANAGEMENT OF THE FUND Board of Directors The Fund is managed by its Board of Directors and all powers and authorities are exercised by or under the direction of the Board of Directors. Investment Adviser Subject to the policies of, review by, and overall control of the Board of Directors of the Fund, Spirit of America Management Corp. ("Spirit Management"), 477 Jericho Turnpike, Syosset, New York 11791, has been retained to act as the Fund's manager and investment adviser pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). Spirit Management was incorporated in 1997 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended. Spirit Management is engaged in the business of managing the investments of the Fund. Mr. David Lerner is the sole shareholder, director and controlling person of Spirit Management. Spirit Management supervises the management of the Fund including, among other things, reporting to the Directors regarding economic and statistical information as requested by the Directors. Spirit Management invests the Fund's assets, manages the Fund's business affairs and supervises the Fund's day-to-day operations. Spirit Management provides the Fund with advice on buying and selling securities in accordance with the Fund's investment policies and limitations. Spirit Management also furnishes office space and certain administrative and clerical services, and employs the personnel needed with respect to Spirit Management's responsibilities under the Advisory Agreement. Under the Advisory Agreement, the Fund pays Spirit Management a fee at the annual rate of 0.97% of the Fund's average daily net assets. The fee is higher than the management fees paid by most U.S. registered investment companies, although Spirit Management believes that the fee is generally comparable to the management fees paid by other open-end registered investment companies that invest in securities similar to the Fund. The fee is accrued daily and paid monthly. From time to time, Spirit Management may voluntarily waive all or a portion of its management fee and/or reimburse the Fund for certain expenses without further notification of the commencement or termination of such waiver or reimbursement. Any such waiver or absorption will have the effect of lowering the overall expense ratio of the Fund and increasing the Fund's overall return to investors at the time any such amounts are waiver and/or absorbed. Spirit Management has voluntarily agreed to waive all or a portion of its fee, and/or to reimburse expenses of the Fund to the extent necessary in order to limit net operating expenses for the first year of operations to an annual rate of not more than 1.97% of the Fund's average daily net assets. Any amounts waived or reimbursed by Spirit Management are subject to reimbursement by the Fund within the following three years, provided that the Fund is able to effect such reimbursement and remain in compliance with the stated expense limitation. The person primarily responsible for the day-to-day management of the Fund's portfolio since inception is Ronald W. Weiss. Mr. Weiss has been associated with Spirit Management since its inception for the purpose of advising the Fund with respect to its investments. Mr. Weiss has spent over twenty years in the real estate finance and investment banking industry, which includes debt and equity financing, real estate investment trusts, asset management, new investment product development and venture capital transactions for financial services firms. Most recently, Mr. Weiss was Senior Vice President of Gilford Securities, Inc., New York, NY from April, 1996 to May, 1997. Mr. Weiss was Senior Real Estate Investment Trust Analyst and Vice President of First Albany Corporation, New York, NY from 1994 through April of 1996. Prior to that, Mr. Weiss was Managing Director and Real Estate General Counsel for Primerica Corporation, New York, NY from 1991 to 1994. From 1972 through 1990 he served as founder, Chairman and CEO of Shearson Lehman Real Estate Corporation, Executive Vice President of Shearson Lehman Brothers, Inc., and an officer and director of thirty-five Shearson subsidiary companies. EXPENSES OF THE FUND In addition to the payments to Spirit Management under the Advisory Agreement described above, the Fund pays certain other costs, including, but not limited to: (i) custody, transfer agent and administrator expenses, (ii) fees of the Directors who are not affiliated with Spirit Management, (iii) legal and auditing expenses, (iv) clerical, accounting and other office costs, (v) costs of printing the Fund's prospectuses and shareholder reports, (vi) costs of maintaining the Fund's existence, (vii) interest charges, taxes, brokerage fees and commissions, (viii) costs of stationery and supplies, (ix) expenses and fees related to registration and filing with the SEC and with state regulatory authorities, and (x) such promotional, shareholder servicing and other expenses as may be contemplated by the Distribution Services Agreement, described below. DISTRIBUTION SERVICES AGREEMENT Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment company to pay expenses associated with the distribution of its shares in accordance with a duly adopted plan. The Fund has adopted a Rule 12b-1 plan (the "Plan") and has entered into a Distribution Services Agreement (the "Agreement") with SSH Securities, Inc. ("SSH" or the "Distributor"). The Plan permits the Fund to pay the Distributor from the assets of the Fund, a monthly fee which may not exceed an annual rate of 0.30% of the Fund's aggregate average daily net assets. The Plan provides that SSH will use the distribution services fee received from the Fund in its entirety for payments (i) to compensate broker-dealers or other persons for providing distribution assistance, (ii) to otherwise promote the sale of shares of the Fund, and (iii) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to the Fund's shareholders. Distribution services fees received from the Fund will not be used to pay any interest expenses, carrying charges or other financing costs or allocation of overhead of SSH. The Plan also provides that SSH may use its own resources to finance the distribution of the Fund's shares. The Fund is not obligated under the Plan to pay any distribution services fee in excess of the amounts set forth above. Distribution expenses accrued by SSH in one fiscal year may not be paid from distribution services fees received from the Fund in subsequent fiscal years. The Fund intends to operate the Plan in accordance with its terms and within the rules of the NASD concerning sales charges. The fees paid to the Distributor under the Plan are subject to review and approval by the Fund's independent Directors who have the authority to reduce the fees or terminate the Plan at any time. All payments to the Plan shall be made for the purpose of selling shares issued by the Fund or servicing shareholder accounts. DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS The Fund intends to distribute substantially all of its net investment income and capital gains to shareholders each year. Normally, dividends are declared in March, June, September and December. Capital gains, if any, will normally be distributed in December but may be made more frequently as deemed advisable by the Board of Directors. All such dividends and distributions are taxable to the shareholder whether or not reinvested in shares. The Fund will distribute the return of capital it receives from the REITs in which the Fund invests. The REITs pay distributions based on cash flow, without regard to depreciation and amortization. As a result, a portion of the distributions paid to the Fund and subsequently distributed to shareholders is a return of capital. The final determination of the amount of the Fund's return of capital distributions for the period will be made after the end of each calendar year. Each income dividend and capital gains distribution, if any, declared by the Fund on its outstanding shares will be paid in additional shares of the Fund having an aggregate net asset value as of the payment date of such dividend or distribution equal to the cash amount of such income dividend or distribution unless payment in cash is specified by the shareholder by written request to the Fund. Election to receive income dividends and distributions in cash may be made at the time shares are initially purchased or may be changed at any time prior to the record date for a particular dividend or distribution. There is no sales or other charge in connection with the reinvestment of dividends and capital gains distributions. If you buy shares just before the Fund deducts a distribution from its net asset value, you will pay the full price for the shares and then receive a portion of the price back as a taxable distribution. Any check tendered in payment of dividends or other distributions which cannot be delivered by the post office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value, and the dividend option may be changed from cash to reinvest. U.S. FEDERAL INCOME TAXES The Fund intends to qualify each year as a "regulated investment company" under the Code so it will not pay federal taxes on either income or capital gains distributed to shareholders, although there can be no assurance that they will so qualify. Dividends representing net investment income and distributions of net short-term capital gains are taxable as ordinary income. The excess of net capital gains over the net capital losses realized and distributed by the Fund to its shareholders as capital gains distributions is expected to be taxable to the shareholders as mid-term or long-term capital gains, irrespective of the length of time a shareholder may have held his or her stock. Capital gains distributions are not eligible for the dividends-received deduction referred to above. Distributions received by a shareholder may include nontaxable returns of capital, which will reduce a shareholder's basis in shares of the Fund. If that basis is reduced to zero (which could happen if the shareholder does not reinvest distributions and returns of capital are significant), any further returns of capital will be taxable as capital gain. Under the current federal tax law, the amount of an income dividend or capital gains distribution declared by the Fund during October, November and December of a year to shareholders of record as of a specified date in such a month that is paid during January of the following year is includable in the prior year's taxable income of shareholders that are calendar year taxpayers. Any dividend or distribution received by a shareholder on shares of the Fund will have the effect of reducing the net asset value of such shares by the amount of such dividend or distribution. Furthermore, a dividend or distribution made shortly after the purchase of such shares by a shareholder, although in effect a return of capital to that particular shareholder, would be taxable to him or her as described above. If a shareholder held shares six months or less and during that period received a distribution taxable to such shareholder as long-term capital gain, any loss realized on the sale of such shares during such six-month period would be a long-term capital loss to the extent of such distribution. A dividend or capital gains distribution with respect to shares of the Fund held by a tax-deferred or qualified plan, such as an individual retirement account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not be taxable to the plan. Distributions from such plans will be taxable to individual participants under applicable tax rules without regard to the character of the income earned by the qualified plan. The Fund will be required to withhold 31% of any payments made to a shareholder if the shareholder has not provided a certified taxpayer identification number to the Fund, or if they are otherwise subject to backup withholding. Shareholders will be advised annually as to the federal tax status of income dividends and capital gain and return of capital distributions made by the Fund for the preceding year. Distributions by the Fund may be subject to state and local taxes. Shareholders are urged to consult their tax advisers regarding their own tax situation. PERFORMANCE INFORMATION Performance information such as total return for the Fund may be quoted in advertisements or in communications to shareholders. Such performance information may be useful in reviewing the performance of the Fund and for providing a basis for comparison with other investment alternatives. However, because the net investment return of the Fund changes in response to fluctuations in market conditions, interest rates and Fund expenses, any given performance quotation should not be considered representative of the Fund's performance for any future period. The value of an investment in the Fund will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's total return is the change in value of an investment in the Fund over a particular period, assuming that all distributions have been reinvested. Thus, total return reflects not only income earned, but also variations in share prices at the beginning and end of the period. Average annual return reflects the average percentage change per year in the value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. Please refer to the Statement of Additional Information for more information on performance. From time to time, the Fund advertises its total return. Such advertisements disclose the Fund's average annual compounded total return for the periods prescribed by the SEC. The Fund's total return for each such period is computed by finding, through the use of a formula prescribed by the SEC, the average annual compounded rate of return over the period that would equate an assumed initial amount invested to the value of the investment at the end of the period. For purposes of computing total return, income, dividends and capital gains distributions paid on shares of the Fund are assumed to have been reinvested when paid and the maximum sales charges applicable to purchases and redemptions of the Fund's shares are assumed to have been paid. The Fund's advertisements may quote performance rankings or ratings of the Fund by financial publications or independent organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare the Fund's performance to various indices. GENERAL INFORMATION PORTFOLIO TRANSACTIONS Consistent with the Conduct Rules of the NASD and subject to seeking best price and execution, the Fund may consider sales of its shares as a factor in the selection of dealers to enter into portfolio transactions with the Fund. ORGANIZATION Spirit of America Investment Fund, Inc. is a Maryland corporation organized on May 15, 1997. The authorized capital stock of the Fund is one billion (1,000,000,000) shares, par value of $0.001 per share. Under Maryland Law, the Fund's Board of Directors may increase the number of authorized shares without approval of the shareholders. All of the shares of the Fund currently outstanding and offered by this Prospectus are of a single class. Each share of common stock carries one vote on matters submitted to a vote of stockholders. A shareholder in the Fund will be entitled to his or her share pro rata with other holders of the same class of shares of all dividends and distributions arising from the Fund's assets and, upon redeeming shares, will receive the then current net asset value of the Fund represented by the redeemed shares. The Fund is empowered to establish, without shareholder approval, additional portfolios, which may have different investment objectives, and additional classes of shares. If an additional portfolio or class were established in the Fund, each share of the portfolio or class would normally be entitled to one vote for all purposes. Shares are freely transferable, are entitled to dividends as determined by the Directors and, in liquidation of the Fund, are entitled to receive the net assets of the Fund. Certain additional matters relating to the Fund's organization are discussed in its Statement of Additional Information. SHAREHOLDER MEETINGS Under Maryland law, the Fund is not required and does not intend to hold annual meetings of shareholders unless, under certain circumstances, it is required to do so under the 1940 Act. Shareholders of 10% or more of the Fund's outstanding shares may request that a special meeting be called to consider the removal of any directors. The Fund will assist in the communication with other shareholders. THE ADMINISTRATOR The Fund has retained FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, to provide administrative services to the Fund. Such services relate to administration, operations and compliance. For such services, the Fund has agreed to pay FPS a fee, subject to a minimum annual fee of $55,000, as compared to an asset based fee computed at the annual rate of 0.15% of the first $50 million of total average net assets, 0.10% of the next $50 million of total average net assets and 0.05% of total average net assets in excess of $100 million. TRANSFER AGENT AND FUND ACCOUNTANT FPS also acts as transfer agent and maintains the records of each shareholder's account, answers shareholder inquiries, processes purchases and redemptions and acts as dividend disbursing agent. FPS also performs certain accounting and pricing services for the Fund, including the daily calculation of the Fund's net asset value per share. The Fund intends to be fully year 2000 compliant by December, 1999. CUSTODIAN The Bank of New York serves as custodian for the safekeeping of securities, cash and other assets of the Fund. PRINCIPAL DISTRIBUTOR SSH Securities, Inc., located at 477 Jericho Turnpike, Syosset, New York 11791, is the principal distributor of shares of the Fund. SHAREHOLDER REPORTS AND INQUIRIES The Fund issues unaudited financial information semiannually and audited financial statements annually. Shareholder inquiries should be addressed to the Fund c/o FPS Services, Inc., 3200 Horizon Drive, P. O. Box 61503, King of Prussia, PA 19406-0903. Purchase and redemption transactions should be made through FPS Services, Inc. by calling (800) 452-4892. [OUTSIDE BACK COVER] INVESTMENT ADVISER Spirit of America Management Corp. 477 Jericho Turnpike Syosset, NY 11791 (800) _________________ DISTRIBUTOR SSH Securities, Inc. 477 Jericho Turnpike Syosset, NY 11791 (800) _________________ SHAREHOLDER SERVICES/TRANSFER AGENT FPS Services, Inc. 3200 Horizon Drive, P. O. Box 61503 King of Prussia, PA 19406-0903 (800) 452-4892 (610) 239-4600 CUSTODIAN The Bank of New York 48 Wall Street New York, New York 10286 LEGAL COUNSEL Ruthann G. Niosi, Esq., P.C. 91 East End Avenue New York, New York 10028 AUDITORS Tait Weller & Baker Two Penn Center, Suite 700 Philadelphia, PA 19102-1707 Subject to Completion -- December __, 1997 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Statement of Additional Information shall not constitute a prospectus. SPIRIT OF AMERICA INVESTMENT FUND, INC. 477 Jericho Turnpike Syosset, New York 11791 Toll Free (800)___________ STATEMENT OF ADDITIONAL INFORMATION _________________, 1998 This Statement of Additional Information is not a prospectus but supplements and should be read in conjunction with the current Prospectus for the Spirit of America Investment Fund, Inc. (the "Fund") dated ______________, 1998. No investment in shares should be made without first reading the Prospectus. This Statement of Additional Information is intended to provide additional information regarding activities and operations of the Fund, and should be read in conjunction with the Prospectus. A copy of the Prospectus may be obtained without charge by contacting SSH Securities, Inc. at the address or telephone number shown above. TABLE OF CONTENTS Page Investment Policies and Techniques . . . . . . . . . . Investment Restrictions. . . . . . . . . . . . . . . . . Management of the Fund . . . . . . . . . . . . . . . . . Expenses of the Fund . . . . . . . . . . . . . . . . . . Shareholder Services . . . . . . . . . . . . . . . . . . Retirement Plans . . . . . . . . . . . . . . . . . . . . Net Asset Value. . . . . . . . . . . . . . . . . . . . . Dividends, Distributions and Taxes . . . . . . . . . . . Brokerage and Portfolio Transactions . . . . . . . . . . Performance Information. . . . . . . . . . . . . . . . . General Information. . . . . . . . . . . . . . . . . . . Financial Statements INVESTMENT POLICIES AND TECHNIQUES The following supplements the information contained in the Prospectus concerning a description of securities and investment practices of the Fund. You should read it together with the sections in the Prospectus entitled "Investment Objective", "Investment Policies" and "Investment Practices." The investment practices described below are not fundamental and may be changed by the Board of Directors without the approval of the shareholders of the Fund. Shareholders will, however, be given contemporaneous written notification of any changes in the investment policies. Convertible Securities Although the Fund has no current intention of purchasing convertible securities, the Fund may invest up to 15% of its total assets in convertible securities of issuers whose common stocks are eligible for purchase by the Fund. Convertible securities include bonds, debentures, corporate notes and preferred stocks. Convertible securities are instruments that are convertible at a stated exchange rate into common stock. Prior to their conversion, convertible securities have the same general characteristics as nonconvertible securities which provide a stable stream of income with generally higher yields than those of equity securities of the same or similar issuers. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest yields than non-convertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. When the market price of the common stock underlying a convertible security increases, the price of the convertible security increasingly reflects the value of the underlying common stock and may rise accordingly. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis, and thus may not depreciate to the same extent as the underlying common stock. Convertible securities rank senior to common stocks in an issuer's capital structure. They are consequently of higher quality and entail less risk than the issuer's common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. Forward Commitments, When-Issued Securities and Delayed Delivery Transactions Although the Fund may purchase securities on a when-issued basis, or purchase or sell securities on a forward commitment basis or purchase securities on a delayed delivery basis, the Fund does not have the current intention of doing so in the foreseeable future. The Fund will normally realize a capital gain or loss in connection with these transactions. No forward commitments will be made by the Fund if, as a result, the Fund's aggregate commitments under such transactions would be more than 15% of the then current value of the Fund's total assets. The Fund's right to receive or deliver a security under a forward commitment may be sold prior to the settlement date, but the Fund will enter into forward commitments only with the intention of actually receiving or delivering the securities, as the case may be. To facilitate such transactions, the Fund's custodian will maintain, in a segregated account of the Fund, liquid assets having value equal to, or greater than, any commitments to purchase securities on a forward commitment basis and, with respect to forward commitments to sell portfolio securities of the Fund, the portfolio securities themselves. If the Fund, however, chooses to dispose of the right to receive or deliver a security subject to a forward commitment prior to the settlement date of the transaction, it may incur a gain or loss. In the event the other party to a forward commitment transaction were to default, the Fund might lose the opportunity to invest money at favorable rates or to dispose of securities at favorable prices. Standby Commitment Agreements Although the Fund has no current intention of entering into standby commitments, the Fund may purchase a security subject to a standby commitment agreement. The related commitment fee will be recorded on the date on which the security can reasonably be expected to be issued and the value of the security will thereafter be reflected in the calculation of the Fund's net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment. The Fund will at all times maintain a segregated account with its custodian of liquid assets in an aggregate amount equal to the purchase price of the securities underlying the commitment. There can be no assurance that the securities subject to a standby commitment will be issued and the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, the Fund will bear the risk of capital loss in the event the value of the security declines and may not benefit from an appreciation in the value of the security during the commitment period if the issuer decides not to issue and sell the security to the Fund. Short Sales To secure the Fund's obligation to replace any borrowed security, it will place in a segregated account, an amount of cash or U.S. Government securities equal to the difference between the market value of the securities sold short at the time of the short sale, and any cash or U.S. Government securities originally deposited with the broker in connection with the short sale (excluding the proceeds of the short sale). The Fund will thereafter maintain daily the segregated amount at such a level that the amount deposited in it plus the amount originally deposited with the broker as collateral will equal the greater of the current market value of the securities sold short, or the market value of the securities at the time they were sold short. Repurchase Agreements The Fund may enter into repurchase agreements pertaining to U.S. Government Securities with member banks of the Federal Reserve System or Primary dealers (as designated by the Federal Reserve Bank of New York) in such securities. There is no percentage restriction on the Fund's ability to enter into repurchase agreements. Currently, the Fund intends to enter into repurchase agreements only with its custodian and such primary dealers. A repurchase agreement arises when a buyer purchases a security and simultaneously agrees to resell it to the vendor at an agreed-upon future date, normally one day or a few days later. The resale price is greater than the purchase price, reflecting an agreed-upon interest rate which is effective for the period of time the buyer's money is invested in the security and which is related to the current market rate rather than the coupon rate on the purchased security. This results in a fixed rate of return insulated from market fluctuations during such period. Such agreements permit the Fund to keep all of its assets at work while retaining "overnight" flexibility in pursuit of investments of a longer-term nature. The Fund requires continual maintenance by its Custodian for its account in the Federal Reserve/Treasury Book Entry System of collateral in an amount equal to, or in excess of, the resale price. In the event a vendor defaulted on its repurchase obligation, the Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. In the event of a vendor's bankruptcy, the Fund might be delayed in, or prevented from, selling the collateral for its benefit. The Fund's Board of Directors has established procedures, which are periodically reviewed by the Board, pursuant to which the Adviser monitors the creditworthiness of the dealers with which the Fund enters into repurchase agreement transactions. Illiquid Securities Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities. In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments. The Fund may invest in restricted securities issued under Section 4(2) of the Securities Act, which exempts from registration transactions by an issuer not involving any public offering. Section 4(2) instruments are restricted in the sense that they can only be resold through the issuing dealer to institutional investors and in private transactions; they cannot be resold to the general public without registration. Rule 144A under the Securities Act allows a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a safe harbor. from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. An insufficient number of qualified institutional buyers interested in purchasing certain restricted securities held by the Fund, however, could affect adversely the marketability of such portfolio securities and the Fund might be unable to dispose of such securities promptly or at reasonable prices. The Adviser, under the supervision of the Board of Directors, will monitor the liquidity of restricted securities in the Fund's portfolio. In reaching liquidity decisions, the Adviser will consider, among other factors, the following: (1) the frequency of trades and quotes for the security; (2) the number of dealers making quotations to purchase or sell the security; (3) the number of other potential purchasers of the security; (4) the number of dealers undertaking to make a market in the security; (5) the nature of the security (including its unregistered nature) and the nature of the marketplace for the security (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer); and (6) any applicable Securities and Exchange Commission (the "Commission") interpretation or position with respect to such type of security. Rights and Warrants The Fund has no current intention to invest in rights and warrants, although the Fund may invest up to 15% of its net assets in rights or warrants only if the underlying equity securities are themselves deemed appropriate by Spirit of America Management Corp. (the "Adviser") for inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy equity securities at a specific price for a specific period of time. Rights are similar to warrants except that they have a substantially shorter duration. Rights and warrants may be considered more speculative than certain other types of investments in that they do not entitle a holder to dividends or voting rights with respect to the underlying securities nor do they represent any rights in the assets of the issuing company. The value of right or warrant does not necessarily change with the value of the underlying security, although the value of a right or warrant may decline because of a decrease in the value of the underlying security, the passage of time or a change in perception as to the potential of the underlying security, or any combination thereof. If the market price of the underlying security is below the exercise price set forth in the warrant on the expiration date, the warrant will expire worthless. Moreover, a right or warrant ceases to have value if it is not exercised prior to the expiration date. Portfolio Turnover It is the Fund's policy to sell any security whenever, in the judgment of the Adviser, its appreciation possibilities have been substantially realized or the business or market prospects for such security have deteriorated, irrespective of the length of time that such security has been held. The Adviser anticipates that the Fund's annual rate of portfolio turnover will not exceed 100%. A 100% annual turnover rate would occur if all securities in the Fund's portfolio were replaced once within a period of one year. INVESTMENT RESTRICTIONS The following restrictions, which supplement those set forth in the Fund's Prospectus, may not be changed without approval by the vote of a majority of the Fund's outstanding voting securities, which means the affirmative vote of the holders of (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are represented, or (ii) more than 50% of the outstanding shares, whichever is less. To reduce investment risk, as a matter of fundamental policy the Fund may not: (i) pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings; (ii) make loans except through (a) the purchase of debt obligations in accordance with its investment objectives and policies; or (b) the use of repurchase agreements; (iii) participate on a joint or joint and several basis in any securities trading account; (iv) invest in companies for the purpose of exercising control; (v) issue any senior security within the meaning of the Investment Company Act of 1940 (the "1940 Act"); (vi) (a) purchase or sell commodities or commodity contracts including futures contracts; (b) invest in interests in oil, gas, or other mineral exploration or development programs; (c) purchase securities on margin, except for such short-term credits as may be necessary for the clearance of transactions; and (d) act as an underwriter of securities, except that the Fund may acquire restricted securities under circumstances in which, if such securities were sold, the Fund might be deemed to be an underwriter for purposes of the Securities Act. MANAGEMENT OF THE FUND Directors and Officers The Directors and principal officers of the Fund, their ages and their principal occupations during the past five years are set forth below. Each Director who is an "interested person" of the Fund, as that term is defined in the 1940 Act, is indicated by an asterisk. Directors DAVID LERNER*, 61, 477 Jericho Turnpike, Syosset, New York 11791; Chairman of the Board of Directors, President and Treasurer of the Fund; President and a Director of newly formed Spirit of America Management Corp., the Fund's investment adviser, and Director, Chief Executive Officer and President of SSH Securities, Inc., the Fund's principal distributor. Mr. Lerner has been associated with David Lerner Associates, Inc., a registered broker-dealer, for over twenty-one years as President and founder. Mr. Lerner received his B.A. and M.B.A degrees from the City University of New York, New York, NY. STANLEY THUNE, 60, 31 Brearly Road, Princeton, New Jersey 08540; Director; President and Chief Executive Officer, Freight Management Systems, Inc., from April 1993 to present. Mr. Thune is also President and CEO of Energy Conservation Management, Inc. (July 1995 to present). Mr. Thune is involved in property development and construction, including the purchase and development of raw land leading to either sale to individual builders or home construction by the development company. Previously, Mr. Thune was President and CEO of Residuals Management Group from September 1989 to April 1993 and of Air & Water Technologies Corporation, Branchburg, New Jersey, from 1986 to April 1993. Mr. Thune received his B.S. in Chemical Engineering from The City College of New York and his M.B.A. from Baruch School of Business, The City University of New York. HERBERT GRANT, 73, 409 Old Courthouse Road, New Hyde Park, New York 11040; Director; For the past 42 years, Mr. Grant has been owned and/or operated various Automobile Dealerships. He is presently the owner of Central Avenue Chrysler, Plymouth, Jeep, Eagle in Yonkers, New York, which is the fifth largest dealership in New York. Mr. Grant also owns Nanuet Chrysler-Jeep, Mazda, Subaru, located in Nanuet, New York. Mr. Grant received a B.S. degree from New York University and his J.D. degree from University of Miami Law School. ALLEN KAUFMAN, 60, Director; 223 Hamlet Drive, Jericho, New York 11797; President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency located in Woodbury, New York, since 1963; Graduate of C.C.N.Y. Baruch School of Business Administration (B.B.A. degree). Mr. Kaufman majored in real estate and insurance. DANIEL LERNER*, 36, 477 Jericho Turnpike, Syosset, New York 11791; Director; Vice President of SSH Securities, the Fund's principal distributor; Senior Vice President - Investment Counselor and Assistant Director of Training for David Lerner Associates, Inc., a registered broker-dealer, Syosset, New York from 1984 to present. Mr. Lerner received his B.A. from the State University of New York at Binghamton. Daniel Lerner is the son of David Lerner. Officers DAVID LERNER, 61, 477 Jericho Turnpike, Syosset, New York 11791; President and Treasurer (see biography above). CONSTANCE FERREIRA, 46, 477 Jericho Turnpike, Syosset, New York 11791; Vice President and Secretary; Chief Operating Officer of Spirit of America Management Corp., the Fund's investment adviser, and Chief Operating Officer and Chief Financial Officer of SSH Securities, Inc., the Fund's principal distributor; Chief Operating Officer with David Lerner Associates, Inc., a registered broker-dealer located in New York. Ms. Ferreira has been associated with David Lerner Associates, Inc. for over twenty-one years. The Fund pays each of its Directors who is not an affiliated person of the Adviser or Distributor an annual retainer of $1,000 and $250 per Board meeting and committee meeting attended, as well as reimbursement for out-of-pocket expenses relating to attendance at such meetings. COMPENSATION TABLE Directors and Officers Estimated total Compensation from Fund complex paid Estimated Aggregate to Directors Compensation from for Fiscal year Fund for fiscal Ended 10/31/98 Name of Director/ Year ended 10/31/98 Officer David Lerner* $ 0 $ 0 Stanley Thune $ 5,000 $ 5,000 Herbert Grant $ 5,000 $ 5,000 Allen Kaufman $ 5,000 $ 5,000 Daniel Lerner* $ 0 $ 0 Connie Ferreira $ 0 $ 0 The Adviser Spirit of America Management Corp. (the "Spirit Management" or "Adviser"), 477 Jericho Turnpike, Syosset, New York, New York 11791, of which Mr. David Lerner is the sole shareholder and director, manages the Fund and provides it with investment advice pursuant to an Advisory Agreement. Under the agreement, Spirit Management manages the Fund's investments, including the provision of investment advisory services and order placement facilities for the Fund (subject to overall control and direction of the Fund's Board of Directors) and pays all compensation of Directors and officers of the Fund who are affiliated persons of Spirit Management. Spirit Management or its affiliates also furnishes the Fund, without charge, with management supervision and assistance and office facilities and provides persons satisfactory to the Fund's Board of Directors to serve as the Fund's officers. The Advisory Agreement is terminable without penalty by a vote of a majority of the Fund's outstanding voting securities or by a vote of majority of the Fund's Directors on 60 days' written notice, or by the Adviser on 60 days' written notice, and will automatically terminate in the event of its assignment. The Advisory Agreement provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser, or of reckless disregard of its obligations thereunder, the Adviser shall not be liable for any action or failure to act in accordance with its duties thereunder. The Advisory Agreement provides that the Adviser will reimburse the Fund for its expenses (exclusive of interest, taxes, brokerage, expenditures pursuant to the Distribution Services Agreement described below, and extraordinary expenses as to the extent permitted by applicable state securities laws and regulations) which in any year exceed the limits prescribed by any state in which the Fund's shares are qualified for sale. The Fund may not qualify its shares for sale in every state. Expense reimbursements, if any, are accrued daily and paid monthly. The Advisory Agreement became effective on ___________, 1998. The Advisory Agreement will continue in effect until _______, 2000 and thereafter for successive twelve-month periods provided, however, that such continuance is specifically approved at least annually by a vote of a majority of the Fund's outstanding voting securities or by the Fund's Board of Directors, including in either case approval by a majority of the Directors who are not parties to the Advisory Agreement or interested persons of any such party as defined by the 1940 Act. Service Provider to the Fund FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903 has been engaged by the Fund to provide the back office services on the Fund's behalf. Pursuant to an agreement entitled "Investment Company Services Agreement" (the "Agreement"), FPS provides the services commonly and separately referred to as: Fund Administration, Fund Accounting, Transfer Agency and Custody Administration. The Agreement was approved by the Board of Directors at the organizational meeting of the Fund which was held on July 9, 1997. The management of the Fund oversees FPS in the fulfillment of its obligations under the Agreement and FPS reports to the Board on a quarterly basis with regard to those obligations. Included among the many tasks which FPS performs on behalf of the Fund are: (1) coordination and monitoring, through the Fund Administration function, the activities of any other third party service provider providing services to the Fund (e.g. the Fund's independent auditors, printers, etc.); (2) providing the Fund with necessary office space, telephones and other communications facilities and personnel competent to perform the responsibilities under the Agreement; (3) maintenance of such books and records of the Fund as may be required by applicable federal or state law; (4) prepares and, after approval by the Fund, files and arranges for the distribution of proxy materials and periodic reports to shareholders of the Fund as required by applicable law; (5) prepares and, after approval by the Fund, arranges for the filing of such registration statements and other documents with the U.S. Securities and Exchange Commission and any other federal or state regulatory authorities as may be required by applicable law; (6) reviews and submits to the officers of the Fund for their approval, invoices or other requests for payment of the Fund's expenses and instructs the custodian to issue checks in payment thereof; and (7) takes such other action with respect to the Fund as may be deemed by FPS to appropriately perform its duties under the Agreement. Pursuant to the Agreement, FPS receives a fee for performing Administrative Services at the greater of a flat fee of $55,000 as compared to an asset based fee computed at the annual rate of 0.15% of the first $50 million of total average net assets, 0.10% of the next $50 million of total average net assets and 0.05% of total net assets in excess of $100 million. FPS also receives fees under the Agreement for providing the other services mentioned. EXPENSES OF THE FUND Distribution Plan Pursuant to Rule 12b-1 The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Distribution services fees are accrued daily and paid monthly and are charged as expenses of the Fund as accrued. The initial sales charge and distribution services fees provide the financing of the distribution of the Fund's shares. Under the Plan, the principal financial officer of the Fund reports the amounts expended under the Rule 12b-1 Plan and the purposes for which such expenditures were made to the Directors of the Fund for their review on a quarterly basis. Also, the Plan provides that the selection and nomination of Directors who are not interested persons of the Fund, as defined in the 1940 Act, are committed to the discretion of such disinterested Directors then in office. The Adviser may from time to time and from its own funds or such other resources as may be permitted by rules of the Commission make payments for distribution services to the Distributor; the latter may in turn pay part or all of such compensation to brokers or other persons for their distribution assistance. In the event that the Plan is terminated or not continued (i) no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Fund to the Distributor, and (ii) the Fund would not be obligated to pay the Distributor for any amounts expended under the Plan not previously recovered by the Distributor from distribution services fees in respect of shares or through deferred sales charges. The Plan provides that it will continue in full force and effect from year to year so long as such continuance is specifically approved by a vote of the Directors, including a vote of the disinterested Directors, cast in person at a meeting called for the purpose of voting on the plan. All material amendments to the Plan must be approved by a vote of the Directors or the holders of the Fund's outstanding voting securities, and in either case, by a majority of the disinterested Directors, cast in person at a meeting called for the purpose of voting on such approval; and the Plan may not be amended in order to increase materially the costs that shareholders may bear pursuant to the Plan without the approval of a majority of the holders of the outstanding voting shares of the Fund. The Plan may be terminated (a) by the Fund without penalty at any time by a majority vote of the holders of the outstanding voting securities of the Fund, or by a majority vote of the Directors who are not "interested persons" as defined in the 1940 Act, or (b) by the Distributor. To terminate the Plan, any party must give the other parties 60 days' written notice; to terminate the Plan only, the Fund need give no notice to the Distributor. The Plan will terminate automatically in the event of its assignment. SHAREHOLDER SERVICES The following information supplements that set forth in the Fund's Prospectus under the heading "How to Purchase Shares." Automatic Investment Plan Investors may purchase shares of the Fund through an automatic investment program utilizing electronic funds transfers drawn on the investor's own bank account. Under such a program, pre-authorized monthly drafts for a fixed amount (at least $50) are used to purchase shares through the selected dealer or selected agent designated by the investor at the public offering price next determined after the Distributor receives the proceeds from the investor's bank. In electronic form, drafts can be made on or about a date each month selected by the shareholder. Investors wishing to establish an automatic investment program in connection with their initial investment should complete the appropriate portion of the Application Form found in the Prospectus. Current shareholders should contact SSH Securities, Inc. at the address or telephone numbers shown on the cover of this Statement of Additional Information to establish an automatic investment program. RETIREMENT PLANS The Fund may be a suitable investment vehicle for part or all of the assets held in various types of retirement plans, such as those listed below. The Fund has available forms of such plans pursuant to which investments can be made in the Fund. Persons desiring information concerning these plans should contact SSH Securities, Inc. at the telephone number on the cover of this Statement of Additional Information, or write to: SSH Securities, Inc. 477 Jericho Turnpike Syosset, New York 11791 Traditional Individual Retirement Account ("IRA"). Individuals who receive compensation, including earnings from self-employment, may be entitled to establish and make contributions to an IRA. Taxation of the income and gains paid to an IRA by the Fund is deferred until distribution from the IRA. Roth IRAs. The Taxpayers Relief Act has created the new Roth IRA. While contributions to a Roth IRA are not currently deductible, the amounts within the accounts accumulate tax-free and qualified distributions will not be included in a shareholder's taxable income. The contribution limit is $2,000 annually ($4,000 for joint returns) in aggregate with contributions to Traditional IRAs. Certain income phaseouts apply. Education IRAs. The Taxpayers Relief Act has also created the new Education IRA. Like the Roth IRA, contributions are non-deductible, but the investment earnings accumulate tax-free, and distributions used for higher education expenses are not taxable. Contributions limits are $500 per account and certain income phaseouts apply. Employer-Sponsored Qualified Retirement Plans. Sole proprietors, partnerships and corporations may sponsor qualified money purchase pension and profit-sharing plans, including Section 401(k) plans ("qualified plans"), under which annual tax-deductible contributions are made within prescribed limits based on compensation paid to participating individuals. Simplified Employee Pension Plan ("SEP"). Sole proprietors, partnerships and corporations may sponsor a SEP under which they make annual tax-deductible contributions to an IRA established by each eligible employee within prescribed limits based on employee compensation. 403(b)(7) Retirement Plan. Certain tax-exempt organizations and public educational institutions may sponsor retirements plans under which an employee may agree that monies deducted from his or her compensation (minimum $25 per pay period) may be contributed by the employer to a custodial account established for the employee under the plan. Distributions from retirement plans are subject to certain Code requirements in addition to normal redemption procedures. For additional information please contact SSH Securities, Inc. Systematic Withdrawal Plan Any shareholder who owns or purchases shares of the Fund having a current net asset value of at least $10,000 may establish a systematic withdrawal plan under which the shareholder will receive payments from his or her account on a regular basis. Systematic withdrawal plan participants must elect to have their dividends and distributions from the Fund automatically reinvested in additional shares of the Fund. Shares of the Fund owned by a participant in the Fund's systematic withdrawal plan will be redeemed as necessary to meet withdrawal payments and such withdrawal payments will be subject to any taxes applicable to redemptions. Shares acquired with reinvested dividends and distributions will be liquidated first to provide such withdrawal payments and thereafter other shares will be liquidated to the extent necessary, and depending upon the amount withdrawn, the investor's principal may be depleted. A systematic withdrawal plan may be terminated at any time by the shareholder or the Fund. Withdrawal payments will not automatically end when a shareholder's account reaches a certain minimum level. Therefore, redemptions of shares under the plan may reduce or even liquidate a shareholder's account and may subject the shareholder to the Fund's involuntary redemption provisions. Statements and Reports Each shareholder of the Fund receives semi-annual and annual reports which include a portfolio of investments, financial statements and, in the case of the annual report, the report of the Fund's independent auditors, as well as a monthly cumulative dividend statement and a confirmation of each purchase and redemption. By contacting his or her broker, a shareholder can arrange for copies of his or her account statements to be sent to another person. NET ASSET VALUE A more complete discussion of the Fund's determination of net asset value is contained in the Prospectus. The net asset value per share is computed by dividing the value of the assets of the Fund, less its liabilities, by the number of shares outstanding. The net asset value of all outstanding shares will be computed on a pro-rata basis for each outstanding share based on the proportionate participation in the Fund represented by the value of shares. All income earned and expenses incurred by the Fund will be borne on a pro-rata basis by each outstanding share. Portfolio securities are valued and net asset value per share is determined as of the close of regular trading on the New York Stock Exchange ("NYSE") which currently is 4:00 p.m. (Eastern Time), on each day the NYSE is open for trading. DIVIDENDS, DISTRIBUTIONS AND TAXES Federal Income Taxes The Fund intends to qualify and elect to be treated as a "regulated investment company" under sections 851 through 855 of the Code. To so qualify, the Fund must, among other things, (i) derive at least 90% of its gross income in each taxable year from dividends, interest, payments with respect to securities loans, gains from sale or other disposition of stock or securities or foreign currency, or certain other income (including, but not limited to, gains from options, futures and forward contracts) derived with respect to its business of investing in stock, securities or currency; and (ii) diversify its holdings so that, at the end of each quarter of its taxable year, the following two conditions are met: (a) at least 50% of the value of the Fund's assets is represented by cash, U.S. government securities, securities of other regulated investment companies and other securities with respect to which the Fund's investment is limited, in respect of any one issuer, to an amount not greater than 5% of the Fund's assets and 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Fund's assets is invested in securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies). If the Fund qualifies as a regulated investment company for any taxable year and makes timely distributions to its shareholders of 90% or more of its net investment income for that year, it will not be subject to federal income tax on the portion of its taxable income for the year (including any net capital gain) that it distributes to shareholders. The Fund intends to also avoid the 4% federal excise tax that would otherwise apply to certain undistributed income for a given calendar year if it makes timely distributions to the shareholders equal to the sum of (i) 98% of its ordinary income for that year; (ii) 98% of its capital gain net income and foreign currency gains for the twelve month period ending on October 31 of that year; and (iii) any ordinary income or capital gain net income from the preceding calendar year that was not distributed during that year. For this purpose, income and gain retained by the Fund that is subject to corporate income tax will be considered to have been distributed by the Fund by year-end. For federal income and excise tax purposes, dividends declared and payable to shareholders of record as of a date in October, November or December of a given year but actually paid during the immediately following January will be treated as if paid by the fund on December 31 of that calendar year, and will be taxable to these shareholders for the year declared, and not for the year in which the shareholders actually receive the dividend. The Fund intends to make timely distributions of the Fund's taxable income (including any net capital gain) so that the Fund will not be subject to federal income or excise taxes. However, exchange control or other regulations on the repatriation of investment income, capital or the proceeds of securities sales, if any exist or are enacted in the future, may limit the Fund's ability to make distributions sufficient in amount to avoid being subject to one or both of such federal taxes. Dividends and Distributions The Fund intends to make timely distributions of the Fund's taxable income (including any net capital gain) so that the Fund will not be subject to federal income and excise taxes. The excess of net capital gains over the net capital losses realized and distributed by the Fund to its shareholders is expected to be taxable to the shareholders as mid-term or long-term capital gains, irrespective of the length of time a shareholder may have held his Fund shares. Dividends of the Fund's net ordinary income and distributions of any net realized short-term capital gain are taxable to shareholders as ordinary income. Due to distributions of amounts representing a return of capital the Fund will receive from REITs in which the Fund is invested, distributions made by the Fund may also include nontaxable returns of capital, which will reduce a shareholder's basis in shares of the Fund. If a shareholder's basis is reduced to zero (which could happen if shareholder does not reinvest distributions and returns of capital are significant), any further returns of capital will be taxable as capital gain. After the end of the taxable year, the Fund will notify shareholders of the federal income tax status of any distributions made by the Fund to shareholders during such year. It is the present policy of the Fund to distribute to shareholders all net investment income quarterly and to distribute realized capital gains, if any, annually. There is no fixed dividend rate and there can be no assurance that the Fund will pay any dividends. The amount of any dividend or distribution paid on shares of the Fund must necessarily depend upon the realization of income and capital gains from the Fund's investments. Sales and Redemptions Any gain or loss arising from a sale or redemption of Fund shares generally will be capital gain or loss except in the case of a dealer or a financial institution, and will be long-term capital gain or loss if such shareholder has held such shares for more than one year at the time of the sale or redemption; otherwise it will be short-term capital gain or loss. However, if a shareholder has held shares in the Fund for six months or less and during that period has received a distribution taxable to the shareholder as a long-term capital gain, any loss recognized by the shareholder on the sale of those shares during the six-month period will be treated as a long-term capital loss to the extent of the dividend. In determining the holding period of such shares for this purpose, any period during which a shareholders risk of loss is offset by means of options, short sales or similar transactions is not counted. Backup Withholding The Fund may be required to withhold United States federal income tax at the rate of 31% of all taxable distributions payable to shareholders who fail to provide the Fund with their correct taxpayer identification numbers or to make required certifications, or who have been notified by the Internal Revenue Service that they are subject to backup withholding. Corporate shareholders and certain other shareholders specified in the Code are exempt from such backup withholding. Backup withholding is not an additional tax; any amounts so withheld may be credited against a United States shareholder's United States federal income tax liability or refunded. BROKERAGE AND PORTFOLIO TRANSACTION The management of the Fund has the responsibility for allocating its brokerage orders and may direct orders to any broker. It is the Fund's general policy to seek favorable net prices and prompt reliable execution in connection with the purchase or sale of all portfolio securities. In the purchase and sale of over-the-counter securities, it is the Fund's policy to use the primary market makers except when a better price can be obtained by using a broker. The Board of Directors has approved, as in the best interests of the Fund and the shareholders, a policy of considering, among other factors, sales of the Fund's shares as a factor in selection of broker-dealers to execute portfolio transactions, subject to best execution. The Adviser is authorized under the Advisory Agreement to place brokerage business with such brokers and dealers. The use of brokers who supply supplemental research and analysis and other services may result in the payment of higher commissions than those available from other brokers and dealers who provide only the execution of portfolio transactions. In addition, the supplemental research and analysis and other services that may be obtained from brokers and dealers through which brokerage transactions are affected may be useful to the Adviser in connection with advisory clients other than the Fund. Investment decisions for the Fund are expected to be made independently from those for other advisory accounts managed by the Adviser. It may happen, on occasion, that the same security is held in the portfolio of the Fund and one or more of such accounts. Simultaneous transactions are likely when several accounts are managed by the same Adviser, particularly when a security is suitable for the investment objectives of more than one of such accounts. If two or more accounts managed by the Adviser are simultaneously engaged in the purchase or sale of the same security, the transactions will be allocated to the respective accounts both as to amount and price, in accordance with a method deemed equitable to each account. In some cases this system may adversely affect the price paid or received by the Fund or the size of the position obtainable for the Fund. Allocations are made by the officers of the Fund or of the Adviser. Purchases and sales of portfolio securities are determined by the Adviser and are placed with broker dealers by the Adviser. The extent to which commissions that will be charged by broker-dealers selected by the Fund may reflect an element of value for research cannot presently be determined. To the extent that research services of value are provided by broker-dealers with or through whom the Fund places portfolio transactions, the Adviser may be relieved of expenses which it might otherwise bear. Research services furnished by broker-dealers could be useful and of value to the Adviser in servicing its other clients as well as the Fund. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc. and subject to seeking best execution, the Fund may consider sales of shares of the Fund as a factor in the selection of brokers to execute portfolio transactions for the Fund. PERFORMANCE INFORMATION General From time to time, advertisements quoting performance rankings of the Fund as measured by financial publications or by independent organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc., and advertisements presenting the historical record of payments of income dividends by the Fund may also from time to time be sent to investors or placed in newspapers and/or magazines such as The Wall Street Journal, The New York Times, Barrons, Investor's Daily, Money Magazine, Changing Times, Business Week and Forbes or other media on behalf of the Fund. Total return may be used to compare the performance of the Fund against certain widely acknowledged standards or indices for stock and bond market performance such as the Standard & Poor's 500 Composite Index and the Dow Jones Industrial Average. The Fund may compare its total return to that of the National Association of Real Estate Investment Trusts (NAREIT) Equity REIT Index. Average Annual Total Return From time to time the Fund may advertise its total return for prior periods. The Fund's total return is its average annual compounded total return for its most recently completed one, five, and ten-year periods (or the period since the Fund's inception). The Fund's total return for such a period is computed by finding, through the use of a formula prescribed by the Commission below, the average annual compounded rate of return over the period that would equate an assumed initial amount invested to the value of such investment at the end of the period. For purposes of computing total return, income dividends and capital gains distributions paid on shares of the Fund are assumed to have been reinvested when paid and the maximum sales charge applicable to purchase of Fund shares is assumed to have been paid. This calculation can be expressed as follows: P(1 + T)n = ERV Where: ERV = ending redeemable value at the end of the period covered by the computation of a hypothetical $1,000 payment made at the beginning of the period P = hypothetical investment payment of $1,000 n = period covered by the computation, expressed in terms of years. T = average annual total return Cumulative Total Return The Fund may also quote the cumulative total return in addition to the average annual total return. These quotations are computed the same way, except the cumulative total return will be based on the actual return for a specified period rather than on the average return over one-,five- and ten year periods, or fractional portion thereof. GENERAL INFORMATION Capitalization The authorized capital stock of the Fund currently consists of 1,000,000,000 shares of Common Stock each having a par value of $.001 per share. All shares of the Fund, when issued, are fully paid and non-assessable. The Directors are authorized to reclassify and issue any unissued shares to any number of additional series and classes without shareholder approval. Accordingly, the Directors in the future, for reasons such as the desire to establish one or more additional portfolios with different investment objectives, policies or restrictions, may create additional classes or series of shares. Any issuance of shares of another class or series would be governed by the 1940 Act and the law of the State of Maryland. If shares of another series were issued in connection with the creation of a second portfolio, each share of either portfolio would normally be entitled to one vote for all purposes. Generally, shares of both portfolios would vote as a single series on matters, such as the election of Directors, that affected both portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Advisory Agreement and changes in investment policy, shares of each portfolio would vote as a separate series. Procedures for calling a shareholders' meeting for the removal of Directors of the Fund, similar to those set forth in Section 16(c) of the 1940 Act, will be available to shareholders of the Fund. Custodian The Bank of New York, New York, NY will act as the Fund's custodian. The Fund's securities and cash are held under a custodian agreement by rules adopted under the 1940 Act which permit the Fund to maintain its securities and cash in the custody of certain eligible banks and securities depositories. Principal Distributor SSH Securities, Inc., 477 Jericho Turnpike, Syosset, New York 11791, serves as the Fund's principal Distributor, and as such may solicit orders from the public to purchase shares of the Fund. Under the Underwriting Agreement, the Fund has agreed to indemnify the Distributor, in the absence of its willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. [LEGAL PROCEEDINGS DELETED] Independent Auditors Tait Weller & Baker, have been appointed as independent auditors for the Fund. Additional Information Any shareholder inquiries may be directed to the shareholder's broker or to SSH Securities, Inc. at the address or telephone number shown on the front cover of this Statement of Additional Information. This Statement of Additional Information does not contain all the information set forth in the Registration Statement filed by the Fund with the Securities and Exchange Commission under the Securities Act of 1933. Copies of the Registration Statement may be obtained at a reasonable charge from the Securities and Exchange Commission or may be examined, without charge, at the offices of the Securities and Exchange Commission in Washington, D.C. SPIRIT OF AMERICA INVESTMENT FUND, INC. Form N-1A Part C -- Other Information Part C. Other Information Item 24. Financial Statements and Exhibits. (a) Financial Statements. (To be filed by amendment.) (b) Exhibits: Exhibits filed pursuant to Form N-1A: (1) Articles of Incorporation are incorporated by reference to Registrant's initial Registration Statement on Form N-1A, File number 333-27925 filed May 28, 1997. (2) By-Laws are incorporated by reference to Registrant's initial Registration Statement on Form N-1A, File number 333-27925 filed May 28, 1997. (3) Voting Trust Agreement -- None (4) All Instruments Defining the Rights of Holders -- None (5) Investment Advisory Contracts -- Investment Advisory Agreement between Spirit of America Management Corp. and the Registrant is filed herewith. (6) (a) Underwriting Agreement --Underwriting Agreement between SSH Securities, Inc. and the Registrant is filed herewith. (b) Distribution Services Agreement -- Distribution Services Agreement between SSH Securities, Inc. and the Registrant is filed herewith. (c) Selected Dealer Agreement -- to be filed by amendment. (7) Bonus, Profit Sharing, Pension or Other Similar Contracts -- None (8) Custodian Agreements -- Custodian Agreement between The Bank of New York and Registrant is filed herewith. (9) Investment Company Services Agreement -- Investment Company Services Agreement is filed herewith. (10) Opinion and Consent of Ruthann G. Niosi, Esq., P.C. regarding the legality of the securities being issued -- To be filed by amendment (11) Consent of Independent Auditors -- (To be filed by Amendment.) (12) Financial Statements Omitted from Item 23. -- None (13) Agreements or Understandings Made in Consideration for Providing the Initial Capital -- (To be filed by Amendment.) (14) Model Plan -- None (15) Plan of Distribution pursuant to Rule 12b-1 - filed herewith. (16) Schedule for Computation of Performance Quotations -- (To be filed in a Post-Effective Amendment.) (17) Financial Data Schedule -- None. (18) Plan of Distribution pursuant to Rule 18f-3 with respect to Multiple Class Shares -- not applicable (19) Director's Powers of Attorney -- a. David Lerner Filed herewith b. Herbert Grant Filed herewith c. Allen Kaufman Filed herewith d. Daniel Lerner Filed herewith Item 25. Persons Controlled by or Under Common Control with Registrant. The Registrant is a recently organized corporation and David Lerner owns 100% of its issued and outstanding stock. Item 26. Number of Holders of Securities. None. Item 27. Indemnification. It is the Registrant's policy to indemnify its directors and officers, employees and other agents to the maximum extent permitted by Section 2-418 of the General Corporation Law of the State of Maryland, which is incorporated by reference herein, and as set forth in Article EIGHT of Registrant's Articles of Incorporation, filed as Exhibit 1 hereto, Article VII and Article VIII of Registrant's By-Laws, filed as Exhibit 2 hereto, and Section 10 of the proposed Distribution Services Agreement, to be filed by amendment. The Adviser's liability for any loss suffered by the Registrant or its shareholders is set forth in Section 4 of the proposed Advisory Agreement, filed as Exhibit 5 hereto. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than 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 of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. In accordance with Release No. IC-11330 (September 2, 1980), the Registrant will indemnify its directors, officers, investment manager and principal underwriters only if (1) a final decision on the merits was issued by the court or other body before whom the proceeding was brought that the person to be indemnified (the "indemnitee") was not liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office ("disabling conduct") or (2) a reasonable determination is made, based upon a review of the facts, that the indemnitee was not liable by reason of disabling conduct, by (a) the vote of a majority of a quorum of the directors who are neither "interested persons" of the Registrant as defined in section 2(a)(19) of the Investment Company Act of 1940, as amended, nor parties to the proceeding ("disinterested, non-party directors"), or (b) an independent legal counsel in a written opinion. The Registrant will advance attorneys fees or other expenses incurred by its directors, officers, investment adviser or principal underwriters in defending a proceeding, upon the undertaking by or on behalf of the indemnitee to repay the advance unless it is ultimately determined that he is entitled to indemnification and, as a condition to the advance, (1) the indemnitee shall provide a security for his undertaking, (2) the Registrant shall be insured against losses arising by reason of any lawful advances, or (3) a majority of a quorum of disinterested, non-party directors of the Registrant, or an independent legal counsel in a written opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found entitled to indemnification. Item 28. Business and Other Connections of Investment Adviser. Since the date of its incorporation on April 24, 1997, Spirit of America Management Corp. has not been engaged in any other business other than acting as adviser to Registrant. During the past twenty-one years, David Lerner, a director and officer of the Adviser, has served as the Chief Executive Officer and Director of David Lerner Associates, Inc. (and David Lerner Government Securities Associates, Inc., a government securities dealer). The business address of such companies is 477 Jericho Turnpike, Syosset, New York 11791. 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 adviser has been engaged for his own account or in the capacity of Director, officer, employee, partner or director, reference is made to Form ADV (File #801-54782) filed by it under the Investment Advisers Act of 1940. Item 29. Principal Underwriter. (a) SSH Securities, Inc., the Registrant's distributor, does not act as principal underwriter, depositor or investment adviser for any other investment company. (b) The table below sets forth certain information with respect to each director, officer and control person of SSH Securities, Inc. Position Position and Name and Principal and Offices Offices with Business Address with Underwriter Registrant David Lerner Director, Chairman of the Chief Executive Board, Director, 477 Jericho Turnpike Officer and President and Syosset, NY 11791 President Treasurer Constance Ferreira Vice President, Vice President and 477 Jericho Turnpike Chief Operating Secretary Syosset, NY 11791 Officer and Chief Financial Officer Daniel E. Chafetz Chief Compliance None 477 Jericho Turnpike Officer Syosset, NY 11791 Daniel Lerner Vice President Director 477 Jericho Turnpike Syosset, NY 11791 (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-3 promulgated thereunder, are maintained by the Fund's Investment Adviser, Spirit of America Management, Inc., 477 Jericho Turnpike, Syosset, New York 11791, except for those maintained by the Fund's Custodian, The Bank of New York, 48 Wall Street, New York, New York 10172 and the Fund's Administrator, Transfer Agent and Fund Accounting Services Agent, FPS Services Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903. Item 31. Management Services. There are no management-related service contracts not discussed in Part A or Part B. Item 32. Undertakings. (a) Registrant hereby undertakes to file an amendment to this Registration Statement with certified financial statements showing the initial capital received before accepting subscriptions from any person in excess of 25 if Registrant proposes to raise its initial capital pursuant to Section 14(a)(3) of the 1940 Act. (b) Registrant hereby undertakes to file a post-effective amendment within four to six months from the effective date of this Registration Statement under the Securities Act of 1933. Registrant understands that such post-effective amendment will contain reasonably current financial statements which need not be certified by independent public accountants. (c) Registrant hereby undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest Annual Report to Shareholders upon request and without charge. (d) The Registrant hereby undertakes to promptly call a meeting of shareholders for the purpose of voting upon the question of removal of any director or directors when requested in writing to do so by the record holders of not less than 10 percent of the Registrant's outstanding shares and to assist its shareholders in accordance with the requirements of Section 16(c) of the Investment Company Act of 1940 relating to shareholder communications. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Syosset, and State of New York on the 17th day of December, 1997. Spirit of America Investment Fund, Inc. Registrant By /s/ David Lerner* David Lerner, President Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. Signature Capacity Date /s/ David Lerner* Chairman of the Board 12/17/97 David Lerner President & Director /s/ Herbert Grant* Director 12/17/97 Herbert Grant /s/ Allen Kaufman* Director 12/17/97 Allen Kaufman /s/ Daniel Lerner* Director 12/17/97 Daniel Lerner /s/ Constance Ferreira* Principal Financial and 12/17/97 Constance Ferreira Accounting Officer /s/ Stanley S. Thune Director 12/17/97 Stanley S. Thune /s/ Sandra L. Adams * By Sandra L. Adams, as Attorney-in-Fact and Agent pursuant to Power of Attorney The Spirit of America Investment Fund, Inc. Index to Exhibits to Form N-1A Exhibit No. EX-99.B5 Investment Advisory Agreement EX-99.B6 Underwriting Agreement EX-99.B8 Custodian Agreement EX-99.B9 Investment Company Services Agreement EX-99.B15 Distribution and Services Plan Pursuant to Rule 12b-1 EX-99.B19 Powers of Attorney (a) David Lerner (b) Herbert Grant (c) Allen Kaufman (d) Daniel Lerner (e) Constance Ferreira EX-5 2 INVESTMENT ADVISORY AGREEMENT Investment Advisory Agreement AGREEMENT made this 16th day of December, 1997 by and between Spirit of America Investment Fund, Inc. (the "Fund"), a Maryland corporation and Spirit of America Management Corp. (the "Adviser"), a corporation operating as a registered investment adviser and duly organized and existing under the laws of the State of New York. 1. Duties of Adviser. The Fund hereby appoints the Adviser to act as investment adviser to the Fund for the period and on such terms set forth in this Agreement. The Fund employs the Adviser to manage the investment and reinvestment of the assets of the Fund, to determine in its discretion the assets to be held uninvested, to provide the Fund with records concerning the Adviser's activities which the Fund is required to maintain, and to render regular reports to the Fund's officers and Board of Directors concerning the Adviser's discharge of the foregoing responsibilities. The Adviser shall discharge the foregoing responsibilities subject to the control of the Board of Directors of the Fund, and in compliance with the objectives, policies and limitations set forth in the Fund's Prospectus and Statement of Additional Information. The Adviser accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. The Adviser may employ or contract with other persons to assist it in the performance of this Agreement (herein, a "Sub-Adviser"); provided that the retention of any Sub-Adviser shall be approved as may be required by the 1940 Act. A Sub-Adviser may perform under the supervision of the Adviser any or all services described herein. Sub-Advisers may include other investment advisory or management firms and officers or employees who are employed by the Adviser and the Fund. The fees or other compensation of any Sub-Adviser shall be paid by the Adviser and no obligation may be incurred on the Fund's behalf to any such person. 2. Portfolio Transactions. The Adviser shall provide the Fund with a trading department. The Adviser shall select the brokers or dealers that will execute the purchases and sales of securities for the Fund, and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Fund are obtained. The Fund will bear all expenses, not specifically assumed by the Adviser, incurred in its operations and offering of its shares, including, without limitation, brokerage commissions and custody expenses. Subject to policies established by the Board of Directors of the Fund and communicated to the Adviser, it is understood that the Adviser will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Fund or in respect of the Fund, or be in breach of any obligation owing to the Fund or in respect of the Fund under this Agreement, or otherwise, solely by reason of its having caused the Fund to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Fund in excess of the amount of commission that another member of an exchange, broker or dealer would have charged, if the Adviser determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Adviser's overall responsibilities with respect to the accounts, including the Fund, as to which it exercises investment discretion. The Adviser will promptly communicate to the officers and Directors of the Fund such information relating to Fund transactions as they may reasonably request. 3. Compensation of the Adviser. For the services to be rendered by the Adviser as provided in Section 1 and 2 of this Agreement, the Fund shall pay to the Adviser within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.97% of the average daily net assets of the Fund. The net asset value shall be calculated in the manner provided in the Fund's Prospectus and Statement of Additional Information then in effect. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. Any amounts waived or reimbursed by the Adviser are subject to reimbursement by the Fund within the following three years, provided the Fund is able to effect such reimbursement and remain in compliance with the expense limitations stated in the Prospectus. 4. Reports. The Fund and the Adviser agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. Status of Adviser. The services of the Adviser to the Fund are not to be deemed exclusive, and the Adviser shall be free to render similar services to others so long as its services to the Fund are not impaired thereby. 6. Liability of Adviser. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Adviser of its obligations and duties hereunder, the Adviser shall not be subject to any liability whatsoever to the Fund, or to any shareholder of the Fund, for any error of judgement, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Fund. 7. Duration and Termination. This Agreement shall become effective on the date that the Fund's registration statement is declared effective by the U.S. Securities and Exchange Commission, provided that first it is approved by the Board of Directors of the Fund, including a majority of those Directors who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in Section 15(c) of the 1940 Act, and by the holders of a majority of the outstanding voting securities of the Fund; and shall continue in effect for two years. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Fund's Board of Directors or, (ii) by the vote of a majority of the outstanding voting securities of the Fund; and in either event by a vote of a majority of those Directors of the Fund who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the 1940 Act. This Agreement may be terminated by the Fund, at any time, without the payment of any penalty, by the Board of Directors of the Fund or by vote of the holders of a majority of the outstanding voting securities of the Fund on 60 days' written notice to the Adviser. This Agreement may be terminated by the Adviser at any time, without the payment of any penalty, upon not more than 60 days' written notice to the Fund. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postage prepaid, to the other party at the principal office of such party. As used in this Section 7, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. Name of Fund. The parties agree that the Adviser has a proprietary interest in the name "Spirit of America Investment Fund, Inc." and the Fund agrees to promptly take such action as may be necessary to delete from its name and/or the name of the Fund any reference to such name promptly after receipt from the Adviser of a written request therefore. 9. Severability. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 10. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without giving effect to the conflicts of law principles thereof, and in accordance with the 1940 Act. To the extent that the applicable laws of the State of New York conflict with the applicable provisions of the 1940 Act, the latter shall control. 11. Records. All records held by the Adviser which are required to be maintained and preserved by the Fund in order to comply with Rules 31 a-1 and 31 a-2 of the 1940 Act remain the property of the Fund and will be surrendered promptly by the Adviser upon the request of the Fund. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 16th day of December, 1997. Spirit of america investment fund, inc. Spirit of America Management Corp. /s/ David Lerner /s/ David Lerner David Lerner, President David Lerner, President EX-6 3 UNDERWRITING AGREEMENT UNDERWRITING AGREEMENT This Agreement, dated as of the 16th day of December, 1997, made by and between Spirit of America Investment Fund, Inc. (the "Fund"), a corporation duly organized under the laws of the state of Maryland and operating as a registered investment company under the Investment Company Act of 1940, as amended (the "Act"); and SSH Securities, Inc. ("SSH"), a registered broker-dealer existing as a corporation duly organized and existing under the laws of New York (together, the "Parties"). WITNESSETH THAT: WHEREAS, the Fund is authorized by its Articles of Incorporation to issue separate series of shares representing interests in separate investment portfolios (the "Series"), which Series are identified on Schedule "A" attached hereto, and which Schedule "A"may be amended from time to time by mutual agreement among the Parties; and WHEREAS, SSH is a broker-dealer registered with the U.S. Securities and Exchange Commission and a member in good standing of the National Association of Securities Dealers, Inc.(the "NASD"); and WHEREAS, the Parties are desirous of entering into an agreement providing for the distribution by SSH of the shares of the Fund (the "Shares"); NOW, THEREFORE, in consideration of the promises and agreementsof the Parties contained herein and in exchange of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: 1. Appointment. The Fund hereby appoints SSH as its exclusive agent for the distribution of the Shares in such of the fifty United States of America, the District of Columbia and Puerto Rico, as SSH deems appropriate and SSH hereby accepts such appointment under the terms of this Agreement. The Fund agrees that it will not sell any shares to any person except to fill orders for the shares received through SSH; provided, however, that the foregoing exclusive right shall not apply: (a) to shares issued or sold in connection with the merger or consolidation of any other investment company with the Fund or the acquisition by purchase or otherwise of all or substantially all of the assets of any investment company or substantially all of the outstanding shares of any such company by the Fund; (b) to shares which may be offered by the Fund to its stockholders for reinvestment of cash distributed from capital gains or net investment income of the Fund; or (c) shares that may be purchased from the Fund's transfer agent in the manner set forth in the Registration Statement; (d) to shares which may be issued to shareholders of other funds who exercise any exchangeprivilege set forth in the Fund's Prospectus. Notwithstanding any other provision hereof, the Fund may terminate, suspend, or withdraw the offering of the Shares whenever in its sole discretion, it deems such action to be desirable. 2. Sale and Repurchase of Shares. (a) SSH is hereby granted 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.(c) below). (b) SSH will also have the right to take, as agent for the Fund, all actions which, in SSH's judgment, are necessary to carry into effect the distribution of the Shares. (c) The public offering price shall be the net asset value of the Shares then in effect plus any applicable sales charge. (d) 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 and when determined shall be applicable to all transactions as provided in the prospectus. The netasset value of the Shares shall be calculated by the Fund or by another entity on behalf of the Fund. SSH shall have no duty to inquire into or liability for the accuracy of the net asset value per Share as calculated. (e) On every sale, the Fund shall receive the applicable net asset value of the Shares promptly. (f) Upon receipt of purchase instructions, SSH will transmit such instructions to the Fund or its transfer agent for registration of the Shares purchased. (g) Nothing in this Agreement shall prevent SSH or any affiliated person (as defined in the Act) of SSH from acting as underwriter or distributor for any other person, firm or corporation (including other investment companies) or in any way limit or restrict SSH 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 SSH 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 not undertake in any activities which, in its judgment, will adversely affect the performance of its obligations to the Fund under this Agreement. (h) SSH may, but is not required to, repurchase Shares at such prices and upon such terms and conditions as shall be specified in the Prospectus. 3. Rules of Sale of Shares. SSH does not agree to sell any specific number of Shares. SSH, as Underwriter for the Fund,undertakes to sell Shares on a best efforts basis and only against orders received therefor. The Fund reserves the right to terminate, suspend or withdraw the sale of its Shares for any reason deemed adequate by it and the Fund reserves the right to refuse at any time or times to sell any of its Shares to any person for any reason deemed adequate by it. 4. Rules of NASD. (a) SSH will conform to the Conduct Rules of the NASD and the securities laws of any jurisdiction in which it directly or indirectly sells any Shares. (b) SSH will require each dealer with whom SSH has a selling agreement to conform to the applicable provisions of the Prospectus, with respect to the public offering price of the Shares, and SSH shall not cause the Fund to withhold the placing of purchase orders so as to make a profit thereby. (c) The Fund agrees to furnish to SSH sufficient copies of any and all: agreements, plans, communications with the public or other materials which the Fund or SSH intends to use in connection with any sales of Shares in adequate time for SSH to file and clear such materials with the proper authorities before they are put in use. SSH and the Fund may agree that any such material does not need to be filed subsequent to distribution. In addition, the Fund agrees not to use any such materials until so filed and cleared for use by appropriate authorities as well as by SSH. (d) SSH, 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 such states as may be mutually agreed upon by the Parties. (e) SSH shall remain registered with the U.S. Securities and Exchange Commission and a member of the National Association of Securities Dealers for the term of this Agreement. (f) SSH shall not, in connection with any sale or solicitation of a sale of the Shares, make or authorize any representative, Service Organization, broker or dealer to make, any representations concerning the Shares except those contained in the Prospectus covering the Shares and in communications with the public or sales materials approved by SSH as information supplemental to such Prospectus. Copies of the Prospectus will be supplied by the Fund to SSH in reasonable quantities upon request. 5. Records to be Supplied by the Fund. The Fund shall furnish to SSH copies of all information, financial statements and other papers which SSH may reasonably request for use in connection with the distribution of the Shares including, but not limited to, one certified copy of all financial statements prepared for the Fund by its 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 prospectuses and statements of additional information for distribution to shareholders, and the distribution of same to the shareholders; (ii) preparation, printing and distribution of reports and other communications to shareholders; (iii) registration of the Shares under the federal securities laws; (iv) fees and disbursements of its counsel and independent public accountants (v) qualification of the Shares for sale in the jurisdictions as directed by the Fund; (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. (b) SSH will pay all other expenses incident to the sale and distribution of the Shares sold hereunder. 7. Term. (a) The term of this Agreement shall commence on the date on which the Fund's registration statement is declared effective by the U.S. Securities and Exchange Commission ("Effective Date") provided that this Agreement shall not take effect unless such action has first been approved by vote of a majority of the Board of Directors and by vote of a majority of those Directors of the Fund who are not interested persons of the Fund, and have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("Independent Directors"), cast in person at a meeting called for the purpose of voting on such action. (b) This Agreement shall remain in effect for two (2) years from the Effective Date. This Agreement shall continue thereafter for periods not exceeding one (1) year if approved at least annually (i) by a vote of a majority of the outstanding voting securities of the Fund or by a vote of the Board of Directors of the Fund, and (ii) by a vote of a majority of the Independent Directors cast in person at a meeting called for the purpose of voting on such approval. (c) This Agreement (i) may at any time be terminated without the payment of any penalty, either by a vote of the Directors of the Fund or by a vote of a majority of the outstanding voting securities of the Fund, on sixty (60) days' written notice to SSH; and (ii) may be terminated by SSH on sixty (60) days' written notice to the Fund. (d) This Agreement shall automatically terminate in the event of its assignment. 8. Liability of Underwriter. (a) SSH, its directors, officers, employees, shareholders and agents shall not be liable for any error of judgment 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 SSH's obligation pursuant to Section 4 of this Agreement, 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 SSH in the performance of its obligations and duties or by reason of its reckless disregard of its obligations and duties under this Agreement. (b) The Fund agrees to indemnify and hold harmless SSH against any and all liability, loss, damages, costs or expenses (including reasonable counsel fees) which SSH may incur or be required to pay hereafter, in connection with any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which SSH may be involved as a party or otherwise or with which SSH may be threatened, by reason of the offer or sale of the Fund shares by persons other than SSH or its representatives, prior to the execution of this Agreement. (c) Any person, even though also a director, officer, employee, shareholder or agent of SSH, 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 SSH'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 SSH even though receiving a salary from SSH. (d) The Fund agrees to indemnify and hold harmless SSH, and each person, who controls SSH within the meaning of Section 15 of the Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the Securities Exchange Act of 1934, as amended (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 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 the Fund to SSH for SSH'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 SSH (or any person controlling SSH) 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 SSH (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 SSH 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 found in any prospectus, statement of additional information,supplement, sales or other literature, subsequently corrected, but, negligently distributed by SSH and a copy of the corrected prospectus was not delivered to such person at or before the confirmation of the sale to such person. 9. Amendments. No provision of this Agreement may be amended or modified, in any manner whatsoever except by a written agreement properly authorized and executed by the Parties. 10. Section Headings. Section and Paragraph headings are for convenience only and shall not be construed as part of this Agreement. 11. Reports. SSH 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. 12. Severability. If any part, term or provision of this Agreement is held by any court to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid provided that the basic agreement is not thereby substantially impaired. 13. Governing Law. This Agreement shall be governed by the laws of New York, without giving effect to the conflicts of law principles thereof, and in accordance with the 1940 Act. To the extent that the applicable laws of the State of New York conflict with the applicable provisions of the 1940 Act, the latter shall control. 14. Authority to Execute The Parties represent and warrant that the execution and delivery of this Agreement by the undersigned officers of the Parties has been duly and validly authorized by resolution of the respective Boards of Directors of each of the Parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement consisting of nine type written pages, together with Schedule "A" to be signed by their duly authorized officers, as of the day and year first above written. Spirit of America Investment Fund, Inc. /s/ David Lerner David Lerner, President SSH Securities, Inc. /s/ David Lerner David Lerner, President Schedule "A" Identification of Series Below are listed the "Series" to which services under this Agreement are to be performed as of the execution date of the Agreement: "Spirit of America Investment Fund, Inc." This Schedule "A" may be amended from time to time by agreement of the Parties. EX-8 4 CUSTODIAN AGREEMENT CUSTODY AGREEMENT Agreement made as of this day of , 1997, between SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation organized and existing under the laws of the State of Maryland, having its principal office and place of business at 477 Jericho Turnpike, Syosset, New York 11791 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a banking business, hav- ing its principal office and place of business at 48 Wall Street, New York, New York 10286 (hereinafter called the "Cus- todian"). W I T N E S S E T H : WHEREAS, the Fund represents that pursuant to the Administration Agreement (as hereinafter defined) between FPS Services, Inc. ("FPS") and the Fund, FPS (a) has agreed to perform certain administrative functions which may include the functions of administrator, transfer agent and accounting ser- vices agent and (b) has been appointed by the Fund to act as its agent in respect of certain transactions contemplated in this Agreement; and WHEREAS, the Fund represents that (a) FPS has agreed to act as Fund's agent in respect of certain transactions contemplated in this Agreement and (b) the Custodian is au- thorized and directed to rely upon and follow Certificates and Instructions given by FPS, the Fund's agent, in respect of transactions contemplated in this Agreement. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the Fund and the Custodian agree as follows: ARTICLE I DEFINITIONS Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 1. "Administrator" shall mean FPS and such successors or permitted assigns as may succeed and perform its duties under the Administration Agreement. 2. "Administration Agreement" shall mean that certain separate agreement entitled "Custody Administration and Agency Agreement" dated as of _______________, 199 between the Fund and the FPS. 3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system for United States and fed- eral agency securities, its successor or successors and its nominee or nominees. 4. "Call Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities. 5. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Custodian which is actually re- ceived by the Custodian and signed on behalf of the Fund by any two Officers, and the term Certificate shall also include Instructions communicated to the Custodian by the Administrator. 6. "Clearing Member" shall mean a registered broker-dealer which is a clearing member under the rules of O.C.C. and a member of a national securities exchange quali- fied to act as a custodian for an investment company, or any broker-dealer reasonably believed by the Custodian to be such a clearing member. 7. "Collateral Account" shall mean a segregated account so denominated which is specifically allocated to a Series and pledged to the Custodian as security for, and in consideration of, the Custodian's issuance of (a) any Put Option guarantee letter or similar document described in paragraph 8 of Article V herein, or (b) any receipt described in Article V or VIII herein. 8. "Composite Currency Unit" shall mean the European Currency Unit or any other composite unit consisting of the aggregate of specified amounts of specified Currencies as such unit may be constituted from time to time. 9. "Covered Call Option" shall mean an exchange traded option entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities (ex- cluding Futures Contracts) which are owned by the writer thereof and subject to appropriate restrictions. 10. "Currency" shall mean money denominated in a lawful currency of any country or the European Currency Unit. 11. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing agency registered with the Securities and Exchange Commission, its successor or successors and its nomi- nee or nominees. The term "Depository" shall further mean and include any other person authorized to act as a depository under the Investment Company Act of 1940, its successor or successors and its nominee or nominees, specifically identi- fied in a certified copy of a resolution of the Fund's Board of Trustees specifically approving deposits therein by the Custodian. 12. "Financial Futures Contract" shall mean the firm commitment to buy or sell fixed income securities including, without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and Eurodollar certificates of deposit, during a specified month at an agreed upon price. 13. "Futures Contract" shall mean a Financial Futures Contract and/or Stock Index Futures Contracts. 14. "Futures Contract Option" shall mean an option with respect to a Futures Contract. 15. "FX Transaction" shall mean any transaction for the purchase by one party of an agreed amount in one Currency against the sale by it to the other party of an agreed amount in another Currency. 16. "Instructions" shall mean instructions communications transmitted by electronic or telecommunications media including S.W.I.F.T., computer-to-computer interface, dedicated transmission line, facsimile transmission (which may be signed by an Officer or unsigned) and tested telex. 17. "Margin Account" shall mean a segregated account in the name of a broker, dealer, futures commission merchant, or a Clearing Member, or in the name of the Fund for the benefit of a broker, dealer, futures commission merchant, or Clearing Member, or otherwise, in accordance with an agreement between the Fund, the Custodian and a broker, dealer, futures commis- sion merchant or a Clearing Member (a "Margin Account Agree- ment"), separate and distinct from the custody account, in which certain Securities and/or money of the Fund shall be deposited and withdrawn from time to time in connection with such transactions as the Fund may from time to time deter- mine. Securities held in the Book-Entry System or the Deposi- tory shall be deemed to have been deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting an ap- propriate entry in its books and records. 18. "Money Market Security" shall be deemed to include, without limitation, certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as to interest and prin- cipal by the government of the United States or agencies or instrumentalities thereof, any tax, bond or revenue anticipa- tion note issued by any state or municipal government or pub- lic authority, commercial paper, certificates of deposit and bankers' acceptances, repurchase agreements with respect to the same and bank time deposits, where the purchase and sale of such securities normally requires settlement in federal funds on the same day as such purchase or sale. 19. "O.C.C." shall mean the Options Clearing Corpora- tion, a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, its successor or successors, and its nominee or nominees. 20. "Officers" shall be deemed to include the President, any Vice President, the Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary, any Assistant Clerk, any Assistant Treasurer, and any other person or persons, in- cluding officers or employees of the Administrator, whether or not any such other person is an officer of the Fund, duly au- thorized by the Board of Trustees of the Fund to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or such other Certificate as may be received by the Custodian from time to time. 21. "Option" shall mean a Call Option, Covered Call Op- tion, Stock Index Option and/or a Put Option. 22. "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an Officer or from a person reasonably believed by the Custodian to be an Officer. 23. "Put Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and tender of the specified un- derlying Securities, to sell such Securities to the writer thereof for the exercise price. 24. "Reverse Repurchase Agreement" shall mean an agree- ment pursuant to which the Fund sells Securities and agrees to repurchase such Securities at a described or specified date and price. 25. "Security" shall be deemed to include, without limi- tation, Money Market Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures Contracts, Stock In- dex Futures Contract Options, Financial Futures Contracts, Financial Futures Contract Options, Reverse Repurchase Agree- ments, common stocks and other securities having characteris- tics similar to common stocks, preferred stocks, debt obliga- tions issued by state or municipal governments and by public authorities, (including, without limitation, general obliga- tion bonds, revenue bonds, industrial bonds and industrial development bonds), bonds, debentures, notes, mortgages or other obligations, and any certificates, receipts, warrants or other instruments representing rights to receive, purchase, sell or subscribe for the same, or evidencing or representing any other rights or interest therein, or any property or as- sets. 26. "Senior Security Account" shall mean an account maintained and specifically allocated to a Series under the terms of this Agreement as a segregated account, by recorda- tion or otherwise, within the custody account in which certain Securities and/or other assets of the Fund specifically al- located to such Series shall be deposited and withdrawn from time to time in accordance with Certificates received by the Custodian in connection with such transactions as the Fund may from time to time determine. 27. "Series" shall mean the various portfolios, if any, of the Fund as described from time to time in the current and effective prospectus for the Fund and listed on Appendix B hereto as amended from time to time. 28. "Shares" shall mean the shares of beneficial inter- est of the Fund, each of which is, in the case of a Fund hav- ing Series, allocated to a particular Series. 29. "Stock Index Futures Contract" shall mean a bilat- eral agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the value of a particular stock index at the close of the last business day of the con- tract and the price at which the futures contract is origi- nally struck. 30. "Stock Index Option" shall mean an exchange traded option entitling the holder, upon timely exercise, to receive an amount of cash determined by reference to the difference between the exercise price and the value of the index on the date of exercise. ARTICLE II APPOINTMENT OF CUSTODIAN 1. The Fund hereby constitutes and appoints the Custo- dian as custodian of the Securities and money at any time owned by the Fund during the period of this Agreement. 2. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as herein- after set forth. ARTICLE III CUSTODY OF CASH AND SECURITIES 1. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, the Fund will deliver or cause to be delivered to the Custodian all Securities and all money owned by it, at any time during the period of this Agreement, and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. The Custodian shall segregate, keep and maintain the assets of the Series separate and apart. The Custodian will not be respon- sible for any Securities and money not actually received by it. The Custodian will be entitled to reverse any credits made on the Fund's behalf where such credits have been previ- ously made and money is not finally collected. The Fund shall deliver to the Custodian a certified resolution of the Board of Trustees of the Fund, substantially in the form of Exhibit A hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis to deposit in the Book-Entry System all Securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated and to utilize the Book-Entry System to the extent possible in connection with its performance hereunder, includ- ing, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities and deliveries and returns of Securities collateral. Prior to a deposit of Securities specifically allocated to a Series in the Depository, the Fund shall deliver to the Custodian a cer- tified resolution of the Board of Trustees of the Fund, sub- stantially in the form of Exhibit B hereto, approving, autho- rizing and instructing the Custodian on a continuous and ongo- ing basis until instructed to the contrary by a Certificate actually received by the Custodian to deposit in the Deposi- tory all Securities specifically allocated to such Series eli- gible for deposit therein, and to utilize the Depository to the extent possible with respect to such Securities in connec- tion with its performance hereunder, including, without limi- tation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of Securities collateral. Securities and money deposited in either the Book-Entry System or the Depository will be repre- sented in accounts which include only assets held by the Cus- todian for customers, including, but not limited to, accounts in which the Custodian acts in a fiduciary or representative capacity and will be specifically allocated on the Custodian's books to the separate account for the applicable Series. Prior to the Custodian's accepting, utilizing and acting with respect to Clearing Member confirmations for Options and transactions in Options for a Series as provided in this Agreement, the Custodian shall have received a certified reso- lution of the Fund's Board of Trustees, substantially in the form of Exhibit C hereto, approving, authorizing and instruct- ing the Custodian on a continuous and on-going basis, until instructed to the contrary by a Certificate actually received by the Custodian, to accept, utilize and act in accordance with such confirmations as provided in this Agreement with respect to such Series. 2. The Custodian shall establish and maintain separate accounts, in the name of each Series, and shall credit to the separate account for each Series all money received by it for the account of the Fund with respect to such Series. Money credited to a separate account for a Series shall be disbursed by the Custodian only: (a) as hereinafter provided; (b) pursuant to Certificates setting forth the name and address of the person to whom the payment is to be made, the Series account from which payment is to be made and the purpose for which payment is to be made; or (c) in payment of the fees and in reimbursement of the expenses and liabilities of the Custodian attributable to such Series. 3. Promptly after the close of business on each day, the Custodian shall furnish the Administrator with confirma- tions and a summary, on a per Series basis, of all transfers to or from the account of the Fund for a Series, either here- under or with any co-custodian or sub-custodian appointed in accordance with this Agreement during said day. Where Securi- ties are transferred to the account of the Fund for a Series, the Custodian shall also by book-entry or otherwise identify as belonging to such Series a quantity of Securities in a fun- gible bulk of Securities registered in the name of the Custo- dian (or its nominee) or shown on the Custodian's account on the books of the Book-Entry System or the Depository. At least monthly and from time to time, the Custodian shall fur- nish the Administrator with a detailed statement, on a per Series basis, of the Securities and money held by the Custo- dian for the Fund. 4. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, all Securities held by the Custo- dian hereunder, which are issued or issuable only in bearer form, except such Securities as are held in the Book-Entry System, shall be held by the Custodian in that form; all other Securities held hereunder may be registered in the name of the Fund, in the name of any duly appointed registered nominee of the Custodian as the Custodian may from time to time deter- mine, or in the name of the Book-Entry System or the Deposi- tory or their successor or successors, or their nominee or nominees. The Fund agrees to furnish or cause to be furnished to the Custodian appropriate instruments to enable the Custo- dian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee or in the name of the Book-Entry System or the Depository any Securities which it may hold hereunder and which may from time to time be registered in the name of the Fund. The Custodian shall hold all such Securities specifically allocated to a Series which are not held in the Book-Entry System or in the Depository in a separate account in the name of such Series physically seg- regated at all times from those of any other person or per- sons. 5. Except as otherwise provided in this Agreement and unless otherwise instructed to the contrary by a Certificate, the Custodian by itself, or through the use of the Book-Entry System or the Depository with respect to Securities held here- under and therein deposited, shall with respect to all Securi- ties held for the Fund hereunder in accordance with preceding paragraph 4: (a) collect all income due or payable; (b) present for payment and collect the amount pay- able upon such Securities which are called, but only if either (i) the Custodian receives a written notice of such call, or (ii) notice of such call appears in one or more of the publi- cations listed in Appendix C annexed hereto, which may be amended at any time by the Custodian without the prior notifi- cation or consent of the Fund; (c) present for payment and collect the amount pay- able upon all Securities which mature; (d) surrender Securities in temporary form for de- finitive Securities; (e) execute, as custodian, any necessary declara- tions or certificates of ownership under the Federal Income Tax Laws or the laws or regulations of any other taxing au- thority now or hereafter in effect; and (f) hold directly, or through the Book-Entry System or the Depository with respect to Securities therein depos- ited, for the account of a Series, all rights and similar se- curities issued with respect to any Securities held by the Custodian for such Series hereunder. 6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or through the use of the Book-Entry Sys- tem or the Depository, shall: (a) execute and deliver to such persons as may be designated in such Certificate proxies, consents, authoriza- tions, and any other instruments whereby the authority of the Fund as owner of any Securities held by the Custodian hereun- der for the Series specified in such Certificate may be exer- cised; (b) deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate in ex- change for other Securities or cash issued or paid in con- nection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege and receive and hold hereunder specifically allocated to such Series any cash or other Securities received in exchange; (c) deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any cor- poration, and receive and hold hereunder specifically al- located to such Series such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (d) make such transfers or exchanges of the assets of the Series specified in such Certificate, and take such other steps as shall be stated in such Certificate to be for the purpose of effectuating any duly authorized plan of liqui- dation, reorganization, merger, consolidation or recapitaliza- tion of the Fund; and (e) present for payment and collect the amount pay- able upon Securities not described in preceding paragraph 5(b) of this Article which may be called as specified in the Cer- tificate. 7. Notwithstanding any provision elsewhere contained herein, the Custodian shall not be required to obtain posses- sion of any instrument or certificate representing any Futures Contract, any Option, or any Futures Contract Option until after it shall have determined, or shall have received a Cer- tificate from the Fund stating, that any such instruments or certificates are available. The Fund shall deliver to the Custodian such a Certificate no later than the business day preceding the availability of any such instrument or certifi- cate. Prior to such availability, the Custodian shall comply with Section 17(f) of the Investment Company Act of 1940, as amended, in connection with the purchase, sale, settlement, closing out or writing of Futures Contracts, Options, or Fu- tures Contract Options by making payments or deliveries speci- fied in Certificates received by the Custodian in connection with any such purchase, sale, writing, settlement or closing out upon its receipt from a broker, dealer, or futures commis- sion merchant of a statement or confirmation reasonably be- lieved by the Custodian to be in the form customarily used by brokers, dealers, or future commission merchants with respect to such Futures Contracts, Options, or Futures Contract Op- tions, as the case may be, confirming that such Security is held by such broker, dealer or futures commission merchant, in book-entry form or otherwise, in the name of the Custodian (or any nominee of the Custodian) as custodian for the Fund, pro- vided, however, that notwithstanding the foregoing, payments to or deliveries from the Margin Account and payments with respect to Securities to which a Margin Account relates, shall be made in accordance with the terms and conditions of the Margin Account Agreement. Whenever any such instruments or certificates are available, the Custodian shall, notwithstand- ing any provision in this Agreement to the contrary, make pay- ment for any Futures Contract, Option, or Futures Contract Option for which such instruments or such certificates are available only against the delivery to the Custodian of such instrument or such certificate, and deliver any Futures Con- tract, Option or Futures Contract Option for which such in- struments or such certificates are available only against re- ceipt by the Custodian of payment therefor. Any such instru- ment or certificate delivered to the Custodian shall be held by the Custodian hereunder in accordance with, and subject to, the provisions of this Agreement. ARTICLE IV PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS, FUTURES CONTRACTS AND FUTURES CONTRACT OPTIONS 1. Promptly after each purchase of Securities by the Fund, other than a purchase of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Se- curities, a Certificate, and (ii) with respect to each pur- chase of Money Market Securities, a Certificate or Oral In- structions, specifying with respect to each such purchase: (a) the Series to which such Securities are to be specifically allocated; (b) the name of the issuer and the title of the Securities; (c) the number of shares or the principal amount purchased and accrued interest, if any; (d) the date of pur- chase and settlement; (e) the purchase price per unit; (f) the total amount payable upon such purchase; (g) the name of the person from whom or the broker through whom the purchase was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom payment is to be made. The Custo- dian shall, upon receipt of Securities purchased by or for the Fund, pay to the broker specified in the Certificate out of the money held for the account of such Series the total amount payable upon such purchase, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions. 2. Promptly after each sale of Securities by the Fund, other than a sale of any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase Agreement, the Fund shall deliver or cause the Administrator to deliver to the Custodian (i) with respect to each sale of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each sale of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such sale: (a) the Series to which such Securities were specifi- cally allocated; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per unit; (f) the total amount payable to the Fund upon such sale; (g) the name of the broker through whom or the person to whom the sale was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom the Securities are to be delivered. The Custodian shall deliver the Securities specifically allocated to such Series to the broker specified in the Certificate against payment upon receipt of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount pay- able as set forth in such Certificate or Oral Instructions. ARTICLE V OPTIONS 1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each Option purchased: (a) the Series to which such Option is specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the total amount payable by the Fund in con- nection with such purchase; (h) the name of the Clearing Mem- ber through whom such Option was purchased; and (i) the name of the broker to whom payment is to be made. The Custodian shall pay, upon receipt of a Clearing Member's statement con- firming the purchase of such Option held by such Clearing Mem- ber for the account of the Custodian (or any duly appointed and registered nominee of the Custodian) as custodian for the Fund, out of money held for the account of the Series to which such Option is to be specifically allocated, the total amount payable upon such purchase to the Clearing Member through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Certificate. 2. Promptly after the sale of any Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall de- liver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such sale: (a) the Series to which such Option was specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g) the total amount payable to the Fund upon such sale; and (h) the name of the Clearing Member through whom the sale was made. The Custodian shall consent to the delivery of the Option sold by the Clearing Member which previously supplied the confirmation described in preceding paragraph 1 of this Article with respect to such Option against payment to the Custodian of the total amount payable to the Fund, provided that the same conforms to the total amount payable as set forth in such Certificate. 3. Promptly after the exercise by the Fund of any Call Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Call Option: (a) the Series to which such Call Option was specifically allocated; (b) the name of the issuer and the title and number of shares subject to the Call Option; (c) the expiration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid by the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Call Option was exercised. The Custodian shall, upon receipt of the Securities underlying the Call Option which was exercised, pay out of the money held for the account of the Series to which such Call Option was specifically allocated the total amount payable to the Clear- ing Member through whom the Call Option was exercised, pro- vided that the same conforms to the total amount payable as set forth in such Certificate. 4. Promptly after the exercise by the Fund of any Put Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series to which such Put Option was spe- cifically allocated; (b) the name of the issuer and the title and number of shares subject to the Put Option; (c) the expi- ration date; (d) the date of exercise and settlement; (e) the exercise price per share; (f) the total amount to be paid to the Fund upon such exercise; and (g) the name of the Clearing Member through whom such Put Option was exercised. The Custo- dian shall, upon receipt of the amount payable upon the exer- cise of the Put Option, deliver or direct the Depository to deliver the Securities specifically allocated to such Series, provided the same conforms to the amount payable to the Fund as set forth in such Certificate. 5. Promptly after the exercise by the Fund of any Stock Index Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series to which such Stock Index Option was specifically allocated; (b) the type of Stock Index Option (put or call); (c) the number of Options being exercised; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the total amount to be received by the Fund in connection with such exercise; and (h) the Clearing Member from whom such payment is to be received. 6. Whenever the Fund writes a Covered Call Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Covered Call Option: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares for which the Covered Call Option was written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Covered Call Option was writ- ten; and (g) the name of the Clearing Member through whom the premium is to be received. The Custodian shall deliver or cause to be delivered, in exchange for receipt of the premium specified in the Certificate with respect to such Covered Call Option, such receipts as are required in accordance with the customs prevailing among Clearing Members dealing in Covered Call Options and shall impose, or direct the Depository to impose, upon the underlying Securities specified in the Cer- tificate specifically allocated to such Series such restric- tions as may be required by such receipts. Notwithstanding the foregoing, the Custodian has the right, upon prior written notification to the Fund, at any time to refuse to issue any receipts for Securities in the possession of the Custodian and not deposited with the Depository underlying a Covered Call Option. 7. Whenever a Covered Call Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate instructing the Cus- todian to deliver, or to direct the Depository to deliver, the Securities subject to such Covered Call Option and specifying: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares subject to the Covered Call Option; (c) the Clearing Member to whom the underlying Securities are to be delivered; and (d) the total amount payable to the Fund upon such delivery. Upon the return and/or cancellation of any receipts delivered pur- suant to paragraph 6 of this Article, the Custodian shall de- liver, or direct the Depository to deliver, the underlying Securities as specified in the Certificate against payment of the amount to be received as set forth in such Certificate. 8. Whenever the Fund writes a Put Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series for which such Put Option was written; (b) the name of the issuer and the title and number of shares for which the Put Option is written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Put Op- tion is written; (g) the name of the Clearing Member through whom the premium is to be received and to whom a Put Option guarantee letter is to be delivered; (h) the amount of cash, and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Secu- rity Account for such Series; and (i) the amount of cash and/or the amount and kind of Securities specifically al- located to such Series to be deposited into the Collateral Account for such Series. The Custodian shall, after making the deposits into the Collateral Account specified in the Cer- tificate, issue a Put Option guarantee letter substantially in the form utilized by the Custodian on the date hereof, and deliver the same to the Clearing Member specified in the Cer- tificate against receipt of the premium specified in said Cer- tificate. Notwithstanding the foregoing, the Custodian shall be under no obligation to issue any Put Option guarantee let- ter or similar document if it is unable to make any of the representations contained therein. 9. Whenever a Put Option written by the Fund and de- scribed in the preceding paragraph is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Put Option was written; (b) the name of the issuer and title and number of shares subject to the Put Option; (c) the Clearing Member from whom the underlying Securities are to be received; (d) the total amount payable by the Fund upon such delivery; (e) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be with- drawn from the Collateral Account for such Series and (f) the amount of cash and/or the amount and kind of Securities, spe- cifically allocated to such Series, if any, to be withdrawn from the Senior Security Account. Upon the return and/or cancellation of any Put Option guarantee letter or similar document issued by the Custodian in connection with such Put Option, the Custodian shall pay out of the money held for the account of the Series to which such Put Option was specifi- cally allocated the total amount payable to the Clearing Mem- ber specified in the Certificate as set forth in such Certifi- cate against delivery of such Securities, and shall make the withdrawals specified in such Certificate. 10. Whenever the Fund writes a Stock Index Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) whether such Stock Index Option is a put or a call; (c) the number of options written; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the Clearing Member through whom such Option was written; (h) the premium to be received by the Fund; (i) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Se- ries; (j) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Collateral Account for such Series; and (k) the amount of cash and/or the amount and kind of Securi- ties, if any, specifically allocated to such Series to be de- posited in a Margin Account, and the name in which such ac- count is to be or has been established. The Custodian shall, upon receipt of the premium specified in the Certificate, make the deposits, if any, into the Senior Security Account speci- fied in the Certificate, and either (1) deliver such receipts, if any, which the Custodian has specifically agreed to issue, which are in accordance with the customs prevailing among Clearing Members in Stock Index Options and make the deposits into the Collateral Account specified in the Certificate, or (2) make the deposits into the Margin Account specified in the Certificate. 11. Whenever a Stock Index Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with re- spect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) such information as may be necessary to identify the Stock Index Option being ex- ercised; (c) the Clearing Member through whom such Stock Index Option is being exercised; (d) the total amount payable upon such exercise, and whether such amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the amount of cash and/or amount and kind of Securi- ties, if any, to be withdrawn from the Senior Security Account for such Series; and the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Col- lateral Account for such Series. Upon the return and/or can- cellation of the receipt, if any, delivered pursuant to the preceding paragraph of this Article, the Custodian shall pay out of the money held for the account of the Series to which such Stock Index Option was specifically allocated to the Clearing Member specified in the Certificate the total amount payable, if any, as specified therein. 12. Whenever the Fund purchases any Option identical to a previously written Option described in paragraphs, 6, 8 or 10 of this Article in a transaction expressly designated as a "Closing Purchase Transaction" in order to liquidate its posi- tion as a writer of an Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to the Option being purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the Series for which the Option was written; (c) the name of the issuer and the title and number of shares subject to the Option, or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Options held; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the type of Option (put or call); (h) the date of such purchase; (i) the name of the Clearing Member to whom the premium is to be paid; and (j) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account, a specified Margin Account, or the Senior Security Account for such Se- ries. Upon the Custodian's payment of the premium and the return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the Op- tion being liquidated through the Closing Purchase Transac- tion, the Custodian shall remove, or direct the Depository to remove, the previously imposed restrictions on the Securities underlying the Call Option. 13. Upon the expiration, exercise or consummation of a Closing Purchase Transaction with respect to any Option pur- chased or written by the Fund and described in this Article, the Custodian shall delete such Option from the statements delivered to the Fund pursuant to paragraph 3 Article III herein, and upon the return and/or cancellation of any re- ceipts issued by the Custodian, shall make such withdrawals from the Collateral Account, and the Margin Account and/or the Senior Security Account as may be specified in a Certificate received in connection with such expiration, exercise, or con- summation. ARTICLE VI FUTURES CONTRACTS 1. Whenever the Fund shall enter into a Futures Con- tract, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract, (or with respect to any number of identical Futures Contract(s)): (a) the Series for which the Futures Contract is being entered; (b) the category of Futures Contract (the name of the underlying stock index or financial instrument); (c) the number of identical Futures Contracts entered into; (d) the delivery or settlement date of the Fu- tures Contract(s); (e) the date the Futures Contract(s) was (were) entered into and the maturity date; (f) whether the Fund is buying (going long) or selling (going short) on such Futures Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series; (h) the name of the broker, dealer, or futures commission merchant through whom the Fu- tures Contract was entered into; and (i) the amount of fee or commission, if any, to be paid and the name of the broker, dealer, or futures commission merchant to whom such amount is to be paid. The Custodian shall make the deposits, if any, to the Margin Account in accordance with the terms and conditions of the Margin Account Agreement. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and deposit in the Senior Security Account for such Series the amount of cash and/or the amount and kind of Securities specified in said Certificate. 2. (a) Any variation margin payment or similar payment required to be made by the Fund to a broker, dealer, or fu- tures commission merchant with respect to an outstanding Fu- tures Contract, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. (b) Any variation margin payment or similar payment from a broker, dealer, or futures commission merchant to the Fund with respect to an outstanding Futures Contract, shall be received and dealt with by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 3. Whenever a Futures Contract held by the Custodian hereunder is retained by the Fund until delivery or settlement is made on such Futures Contract, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certifi- cate specifying: (a) the Futures Contract and the Series to which the same relates; (b) with respect to a Stock Index Fu- tures Contract, the total cash settlement amount to be paid or received, and with respect to a Financial Futures Contract, the Securities and/or amount of cash to be delivered or re- ceived; (c) the broker, dealer, or futures commission merchant to or from whom payment or delivery is to be made or received; and (d) the amount of cash and/or Securities to be withdrawn from the Senior Security Account for such Series. The Custo- dian shall make the payment or delivery specified in the Cer- tificate, and delete such Futures Contract from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein. 4. Whenever the Fund shall enter into a Futures Con- tract to offset a Futures Contract held by the Custodian here- under, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the items of information required in a Certificate described in paragraph 1 of this Article, and (b) the Futures Contract be- ing offset. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commis- sion, if any, specified in the Certificate and delete the Fu- tures Contract being offset from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals from the Senior Security Account for such Series as may be specified in such Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and con- ditions of the Margin Account Agreement. 5. Notwithstanding any other provision in this Agreement to the contrary, the Custodian shall deliver cash and Securities to a future commission merchant upon receipt of a Certificate from the Fund or the Administrator specifying: (a) the name of the future commission merchant; (b) the specific cash and Securities to be delivered; (c) the date of such delivery; and (d) the date of the agreement between the Fund and such future commission merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a Certificate by the Fund shall constitute (x) a representation and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized, executed and delivered by the Fund and the future commission merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable for the acts or omissions of any such future commission merchant. ARTICLE VII FUTURES CONTRACT OPTIONS 1. Promptly after the purchase of any Futures Contract Option by the Fund, the Fund shall deliver or cause the Admin- istrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series to which such Option is specifically allocated; (b) the type of Futures Contract Option (put or call); (c) the type of Fu- tures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Con- tract Option purchased; (d) the expiration date; (e) the exer- cise price; (f) the dates of purchase and settlement; (g) the amount of premium to be paid by the Fund upon such purchase; (h) the name of the broker or futures commission merchant through whom such option was purchased; and (i) the name of the broker, or futures commission merchant, to whom payment is to be made. The Custodian shall pay out of the money spe- cifically allocated to such Series, the total amount to be paid upon such purchase to the broker or futures commissions merchant through whom the purchase was made, provided that the same conforms to the amount set forth in such Certificate. 2. Promptly after the sale of any Futures Contract Op- tion purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such sale: (a) Series to which such Futures Contract Option was specifically allocated; (b) the type of Future Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date of settle- ment; (g) the total amount payable to the Fund upon such sale; and (h) the name of the broker of futures commission merchant through whom the sale was made. The Custodian shall consent to the cancellation of the Futures Contract Option being closed against payment to the Custodian of the total amount payable to the Fund, provided the same conforms to the total amount payable as set forth in such Certificate. 3. Whenever a Futures Contract Option purchased by the Fund pursuant to paragraph 1 is exercised by the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option (put or call) being exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the date of exercise; (e) the name of the broker or futures commission merchant through whom the Futures Contract Option is exercised; (f) the net total amount, if any, payable by the Fund; (g) the amount, if any, to be received by the Fund; and (h) the amount of cash and/or the amount and kind of Securities to be deposited in the Se- nior Security Account for such Series. The Custodian shall make, out of the money and Securities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Cer- tificate. The deposits, if any, to be made to the Margin Ac- count shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 4. Whenever the Fund writes a Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series for which such Futures Contract Option was written; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the expiration date; (e) the exercise price; (f) the premium to be received by the Fund; (g) the name of the broker or futures commission merchant through whom the premium is to be received; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series. The Custodian shall, upon receipt of the premium specified in the Certificate, make out of the money and Securities specifically allocated to such Series the deposits into the Senior Security Account, if any, as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 5. Whenever a Futures Contract Option written by the Fund which is a call is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certifi- cate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option was exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in such Certificate make the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 6. Whenever a Futures Contract Option which is written by the Fund and which is a put is exercised, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series to which such Option was specifically allocated; (b) the particular Futures Con- tract Option exercised; (c) the type of Futures Contract un- derlying such Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Fu- tures Contract Option is exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn from or deposited in, the Senior Security Account for such Series, if any. The Custodian shall, upon its re- ceipt of the net total amount payable to the Fund, if any, specified in the Certificate, make out of the money and Secu- rities specifically allocated to such Series, the payments, if any, and the deposits, if any, into the Senior Security Ac- count as specified in the Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 7. Whenever the Fund purchases any Futures Contract Option identical to a previously written Futures Contract Op- tion described in this Article in order to liquidate its posi- tion as a writer of such Futures Contract Option, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to the Futures Contract Option being purchased: (a) the Series to which such Option is specifically allocated; (b) that the transaction is a closing transaction; (c) the type of Future Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Option Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of the broker or futures commission merchant to whom the premium is to be paid; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series. The Custodian shall effect the withdrawals from the Senior Security Account specified in the Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and con- ditions of the Margin Account Agreement. 8. Upon the expiration, exercise, or consummation of a closing transaction with respect to, any Futures Contract Op- tion written or purchased by the Fund and described in this Article, the Custodian shall (a) delete such Futures Contract Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein and, (b) make such withdraw- als from and/or in the case of an exercise such deposits into the Senior Security Account as may be specified in a Certifi- cate. The deposits to and/or withdrawals from the Margin Ac- count, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement. 9. Futures Contracts acquired by the Fund through the exercise of a Futures Contract Option described in this Ar- ticle shall be subject to Article VI hereof. 10. Notwithstanding any other provision in this Agreement to the contrary, the Custodian shall deliver cash and Securities to a future commission merchant upon receipt of a Certificate from the Fund or the Administrator specifying: (a) the name of the future commission merchant; (b) the specific cash and Securities to be delivered; (c) the date of such delivery; and (d) the date of the agreement between the Fund and such future commission merchant entered pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a Certificate by the Fund shall constitute (x) a representation and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized, executed and delivered by the Fund and the future commission merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable for the acts or omissions of any such future commission merchant. ARTICLE VIII SHORT SALES 1. Promptly after any short sales by any Series of the Fund, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) the Series for which such short sale was made; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest or dividends, if any; (d) the dates of the sale and settlement; (e) the sale price per unit; (f) the total amount credited to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind of Securities, if any, which are to be deposited in a Margin Account and the name in which such Margin Account has been or is to be established; (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in a Senior Security Account, and (i) the name of the broker through whom such short sale was made. The Custodian shall upon its receipt of a statement from such broker confirming such sale and that the total amount credited to the Fund upon such sale, if any, as specified in the Certificate is held by such broker for the account of the Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a receipt or make the deposits into the Margin Account and the Senior Secu- rity Account specified in the Certificate. 2. In connection with the closing-out of any short sale, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such closing out: (a) the Series for which such transaction is being made; (b) the name of the issuer and the title of the Security; (c) the number of shares or the princi- pal amount, and accrued interest or dividends, if any, re- quired to effect such closing-out to be delivered to the bro- ker; (d) the dates of closing-out and settlement; (e) the pur- chase price per unit; (f) the net total amount payable to the Fund upon such closing-out; (g) the net total amount payable to the broker upon such closing-out; (h) the amount of cash and the amount and kind of Securities to be withdrawn, if any, from the Margin Account; (i) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account; and (j) the name of the broker through whom the Fund is effecting such closing-out. The Cus- todian shall, upon receipt of the net total amount payable to the Fund upon such closing-out, and the return and/or cancel- lation of the receipts, if any, issued by the Custodian with respect to the short sale being closed-out, pay out of the money held for the account of the Fund to the broker the net total amount payable to the broker, and make the withdrawals from the Margin Account and the Senior Security Account, as the same are specified in the Certificate. ARTICLE IX REVERSE REPURCHASE AGREEMENTS 1. Promptly after the Fund enters a Reverse Repurchase Agreement with respect to Securities and money held by the Custodian hereunder, the Fund shall deliver or cause the Ad- ministrator to deliver to the Custodian a Certificate, or in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions specifying: (a) the Series for which the Reverse Repurchase Agreement is en- tered; (b) the total amount payable to the Fund in connection with such Reverse Repurchase Agreement and specifically al- located to such Series; (c) the broker or dealer through or with whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities to be delivered by the Fund to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Senior Security Account for such Series in connection with such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total amount payable to the Fund specified in the Certificate or Oral Instructions make the delivery to the broker or dealer, and the deposits, if any, to the Senior Security Account, specified in such Cer- tificate or Oral Instructions. 2. Upon the termination of a Reverse Repurchase Agree- ment described in preceding paragraph 1 of this Article, the Fund shall deliver or cause the Administrator to deliver a Certificate or, in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions to the Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and the Series for which same was entered; (b) the total amount payable by the Fund in connection with such termination; (c) the amount and kind of Securities to be received by the Fund and specifically allocated to such Series in connection with such termination; (d) the date of termination; (e) the name of the broker or dealer with or through whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of cash and/or the amount and kind of Securities to be withdrawn from the Senior Securities Account for such Series. The Custodian shall, upon receipt of the amount and kind of Securities to be received by the Fund specified in the Certificate or Oral Instructions, make the payment to the broker or dealer, and the withdrawals, if any, from the Senior Security Account, specified in such Certificate or Oral Instructions. ARTICLE X LOAN OF PORTFOLIO SECURITIES OF THE FUND 1. Promptly after each loan of portfolio Securities specifically allocated to a Series held by the Custodian here- under, the Fund shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying with respect to each such loan: (a) the Series to which the loaned Securi- ties are specifically allocated; (b) the name of the issuer and the title of the Securities, (c) the number of shares or the principal amount loaned, (d) the date of loan and deliv- ery, (e) the total amount to be delivered to the Custodian against the loan of the Securities, including the amount of cash collateral and the premium, if any, separately identi- fied, and (f) the name of the broker, dealer, or financial institution to which the loan was made. The Custodian shall deliver the Securities thus designated to the broker, dealer or financial institution to which the loan was made upon re- ceipt of the total amount designated as to be delivered against the loan of Securities. The Custodian may accept pay- ment in connection with a delivery otherwise than through the Book-Entry System or Depository only in the form of a certi- fied or bank cashier's check payable to the order of the Fund or the Custodian drawn on New York Clearing House funds and may deliver Securities in accordance with the customs prevail- ing among dealers in securities. 2. Promptly after each termination of the loan of Secu- rities by the Fund, the Fund shall deliver or cause the Admin- istrator to deliver to the Custodian a Certificate specifying with respect to each such loan termination and return of Secu- rities: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities to be returned, (c) the number of shares or the principal amount to be returned, (d) the date of termination, (e) the total amount to be delivered by the Cus- todian (including the cash collateral for such Securities mi- nus any offsetting credits as described in said Certificate), and (f) the name of the broker, dealer, or financial institu- tion from which the Securities will be returned. The Custo- dian shall receive all Securities returned from the broker, dealer, or financial institution to which such Securities were loaned and upon receipt thereof shall pay, out of the money held for the account of the Fund, the total amount payable upon such return of Securities as set forth in the Certifi- cate. ARTICLE XI CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS, AND COLLATERAL ACCOUNTS 1. The Custodian shall, from time to time, make such deposits to, or withdrawals from, a Senior Security Account as specified in a Certificate received by the Custodian. Such Certificate shall specify the Series for which such deposit or withdrawal is to be made and the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited in, or withdrawn from, such Senior Se- curity Account for such Series. In the event the Certificate fails to specify the Series, the name of the issuer, the title and the number of shares or the principal amount of any par- ticular Securities to be deposited by the Custodian into, or withdrawn from, a Senior Securities Account, the Custodian shall be under no obligation to make any such deposit or with- drawal and shall so notify the Administrator. 2. The Custodian shall make deliveries or payments from a Margin Account to the broker, dealer, futures commission merchant or Clearing Member in whose name, or for whose ben- efit, the account was established as specified in the Margin Account Agreement. 3. Amounts received by the Custodian as payments or distributions with respect to Securities deposited in any Mar- gin Account shall be dealt with in accordance with the terms and conditions of the Margin Account Agreement. 4. The Custodian shall have a continuing lien and secu- rity interest in and to any property at any time held by the Custodian in any Collateral Account described herein. In ac- cordance with applicable law the Custodian may enforce its lien and realize on any such property whenever the Custodian has made payment or delivery pursuant to any Put Option guar- antee letter or similar document or any receipt issued hereun- der by the Custodian. In the event the Custodian should real- ize on any such property net proceeds which are less than the Custodian's obligations under any Put Option guarantee letter or similar document or any receipt, such deficiency shall be a debt owed the Custodian by the Fund within the scope of Ar- ticle XIV herein. 5. On each business day the Custodian shall furnish the Fund with a statement with respect to each Margin Account in which money or Securities are held specifying as of the close of business on the previous business day: (a) the name of the Margin Account; (b) the amount and kind of Securities held therein; and (c) the amount of money held therein. The Custo- dian shall make available upon request to any broker, dealer, or futures commission merchant specified in the name of a Mar- gin Account a copy of the statement furnished the Fund with respect to such Margin Account. 6. Promptly after the close of business on each busi- ness day in which cash and/or Securities are maintained in a Collateral Account for any Series, the Custodian shall furnish the Administrator with a statement with respect to such Col- lateral Account specifying the amount of cash and/or the amount and kind of Securities held therein. No later than the close of business next succeeding the delivery to the Fund of such statement, the Fund shall deliver or cause the Adminis- trator to deliver to the Custodian a Certificate specifying the then market value of the Securities described in such statement. In the event such then market value is indicated to be less than the Custodian's obligation with respect to any outstanding Put Option guarantee letter or similar document, the Fund shall promptly specify or cause the Administrator to promptly specify in a Certificate the additional cash and/or Securities to be deposited in such Collateral Account to eliminate such deficiency. ARTICLE XII PAYMENT OF DIVIDENDS OR DISTRIBUTIONS 1. The Fund shall deliver or cause the Administrator to deliver to the Custodian a copy of the resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, either (i) setting forth with respect to the Series specified therein the date of the declaration of a dividend or distribution, the date of payment thereof, the record date as of which share- holders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on the payment date, or (ii) authorizing with respect to the Series specified therein the declaration of dividends and distributions on a daily basis and authorizing the Custodian to rely on Oral Instructions or a Certificate setting forth the date of the declaration of such dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent on the payment date. 2. Upon the payment date specified in such resolution, Oral Instructions or Certificate, as the case may be, the Cus- todian shall pay out of the money held for the account of each Series the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with respect to such Series. ARTICLE XIII SALE AND REDEMPTION OF SHARES 1. Whenever the Fund shall sell any Shares, it shall deliver or cause the Administrator to deliver to the Custodian a Certificate duly specifying: (a) The Series, the number of Shares sold, trade date, and price; and (b) The amount of money to be received by the Cus- todian for the sale of such Shares and specifically allocated to the separate account in the name of such Series. 2. Upon receipt of such money from the Transfer Agent, the Custodian shall credit such money to the separate account in the name of the Series for which such money was received. 3. Upon issuance of any Shares of any Series described in the foregoing provisions of this Article, the Custodian shall pay, out of the money held for the account of such Se- ries, all original issue or other taxes required to be paid by the Fund in connection with such issuance upon the receipt of a Certificate specifying the amount to be paid. 4. Except as provided hereinafter, whenever the Fund desires the Custodian to make payment out of the money held by the Custodian hereunder in connection with a redemption of any Shares, it shall deliver or cause the Administrator to deliver to the Custodian a Certificate specifying: (a) The number and Series of Shares redeemed; and (b) The amount to be paid for such Shares. 5. Upon receipt from the Transfer Agent of an advice setting forth the Series and number of Shares received by the Transfer Agent for redemption and that such Shares are in good form for redemption, the Custodian shall make payment to the Transfer Agent out of the money held in the separate account in the name of the Series the total amount specified in the Certificate delivered pursuant to the foregoing paragraph 4 of this Article. 6. Notwithstanding the above provisions regarding the redemption of any Shares, whenever any Shares are redeemed pursuant to any check redemption privilege which may from time to time be offered by the Fund, the Custodian, unless other- wise instructed by a Certificate, shall, upon receipt of an advice from the Fund or its agent setting forth that the re- demption is in good form for redemption in accordance with the check redemption procedure, honor the check presented as part of such check redemption privilege out of the money held in the separate account of the Series of the Shares being re- deemed. ARTICLE XIV OVERDRAFTS OR INDEBTEDNESS 1. If the Custodian, should in its sole discretion ad- vance funds on behalf of any Series which results in an over- draft because the money held by the Custodian in the separate account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically al- located to such Series, as set forth in a Certificate or Oral Instructions, or which results in an overdraft in the separate account of such Series for some other reason, or if the Fund is for any other reason indebted to the Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement, (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of para- graph 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by the Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360-day year for the actual number of days involved) equal to 1/2% over Custodian's prime commercial lending rate in effect from time to time, such rate to be adjusted on the effective date of any change in such prime commercial lending rate but in no event to be less than 6% per annum, or at such other rate per annum, if any, as the Fund and the Custodian may agree upon in writing from time to time. In addition, the Fund hereby agrees that the Custodian shall have a continuing lien and security interest in and to any property specifically al- located to such Series at any time held by it for the benefit of such Series or in which the Fund may have an interest which is then in the Custodian's possession or control or in posses- sion or control of any third party acting in the Custodian's behalf. The Fund authorizes the Custodian, in its sole dis- cretion, at any time to charge any such overdraft or indebted- ness together with interest due thereon against any balance of account standing to such Series' credit on the Custodian's books. In addition, the Fund hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a third party, or which next succeeds a Business Day on which at the close of business the Fund had outstanding a Reverse Repur- chase Agreement or such a borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian, in writing, of each such borrowing, shall specify the Series to which the same relates, and shall not incur any indebtedness not so specified other than from the Custodian. 2. The Fund will cause to be delivered to the Custodian by any bank (including, if the borrowing is pursuant to a separate agreement, the Custodian) from which it borrows money for investment or for temporary or emergency purposes using Securities held by the Custodian hereunder as collateral for such borrowings, a notice or undertaking in the form currently employed by any such bank setting forth the amount which such bank will loan to the Fund against delivery of a stated amount of collateral. The Fund shall promptly deliver to the Custo- dian a Certificate specifying with respect to each such bor- rowing: (a) the Series to which such borrowing relates; (b) the name of the bank, (c) the amount and terms of the borrow- ing, which may be set forth by incorporating by reference an attached promissory note, duly endorsed by the Fund, or other loan agreement, (d) the time and date, if known, on which the loan is to be entered into, (e) the date on which the loan becomes due and payable, (f) the total amount payable to the Fund on the borrowing date, (g) the market value of Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular Securities, and (h) a statement specifying whether such loan is for investment pur- poses or for temporary or emergency purposes and that such loan is in conformance with the Investment Company Act of 1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing date specified in a Certificate the specified col- lateral and the executed promissory note, if any, against de- livery by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the Certificate. The Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. The Custodian shall deliver such Se- curities as additional collateral as may be specified in a Certificate to collateralize further any transaction described in this paragraph. The Fund shall cause all Securities re- leased from collateral status to be returned directly to the Custodian, and the Custodian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Fund fails to specify in a Certificate the Se- ries, the name of the issuer, the title and number of shares or the principal amount of any particular Securities to be delivered as collateral by the Custodian, the Custodian shall not be under any obligation to deliver any Securities. ARTICLE XV INSTRUCTIONS 1. With respect to any software provided by the Custodian to the Administrator in order for the Administrator to transmit Instructions to the Custodian (the "Software"), the Custodian grants to the Administrator a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Instructions on behalf of the Fund to, and receiving communications from, the Custodian in connection with its account(s). The Administrator agrees not to sell, reproduce, lease or otherwise provide, directly or indirectly, the Software or any portion thereof to any third party without the prior written consent of the Custodian. 2. The Administrator shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and transmit Instructions to the Custodian. The Custodian shall not be responsible for the reliability, compatibility with the Software or availability of any such equipment or services or the performance or nonperformance by any nonparty to this Custody Agreement. 3. The Administrator acknowledges for itself and the Fund that the Software, all data bases made available to the Administrator by utilizing the Software (other than data bases relating solely to the assets of the Fund and transactions with respect thereto), and any proprietary data, processes, information and documentation (other than which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of the Custodian. The Administrator shall keep the Information confidential by using the same care and discretion that the Administrator uses with respect to its own confidential property and trade secrets and shall neither make nor permit any disclosure without the prior written consent of the Custodian. Upon termination of this Agreement or the Software license granted hereunder for any reason, the Fund shall return to the Custodian all copies of the Information which are in its possession or under its control or which the Fund distributed to third parties. 4. The Custodian reserves the right to modify the Software from time to time upon reasonable prior notice and the Administrator shall install new releases of the Software as the Custodian may direct. The Administrator agrees not to modify or attempt to modify the Software without the Custodian's prior written consent. The Administrator acknowledges that any modifications to the Software, whether by the Administrator or the Custodian and whether with or without the Custodian's consent, shall become the property of the Custodian. 5. The Custodian makes no warranties or representations of any kind with regard to the Software or the method(s) by which the Administrator may transmit Instructions to the Custodian, express or implied, including but not limited to any implied warranties or merchantability or fitness for a particular purpose. 6. Where the method for transmitting Instructions by the Administrator on behalf of the Fund involves an automatic systems acknowledgment by the Custodian of its receipt of such Instructions, then in the absence of such acknowledgment the Custodian shall not be liable for any failure to act pursuant to such Instructions, neither the Administrator nor the Fund may claim that such Instructions were received by the Custodian, and the Administrator or the Fund shall deliver a Certificate by some other means. 7. (a) The Administrator and the Fund agree that where the Administrator delivers to the Custodian Instructions hereunder, it shall be the Administrator's sole responsibility to ensure that only persons duly authorized by the Administrator transmit such Instructions to the Custodian. The Administrator will cause all persons transmitting Instructions to the Custodian to treat applicable user and authorization codes, passwords and authentication keys with extreme care, and irrevocably authorizes the Custodian to act in accordance with and rely upon Instructions received by it pursuant hereto. (b) The Administrator hereby represents, acknowledges and agrees that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Custodian and that there may be more secure methods of transmitting instructions to the Custodian than the method(s) selected by the Administrator on behalf of the Fund. The Fund hereby agree that the security procedures (if any) to be followed in connection with the Fund's transmission of Instructions provide a commercially reasonable degree of protection in light of its particular needs and circumstances. 8. The Administrator and the Fund hereby represent, warrant and covenant to the Custodian that this Agreement has been duly approved by a resolution of the Fund's Board of Directors Trustees, and that its transmission of Instructions pursuant hereto shall at all times comply with the Investment Company Act of 1940, as amended. 9. The Fund shall notify the Custodian of any errors, omissions or interruptions in, or delay or unavailability of, its ability to send Instructions as promptly as practicable, and in any event within 24 hours after the earliest of (i) discovery thereof, (ii) the Business Day on which discovery should have occurred through the exercise of reasonable care and (iii) in the case of any error, the date of actual receipt of the earliest notice which reflects such error, it being agreed that discovery and receipt of notice may only occur on a business day. The Custodian shall promptly advise the Administrator whenever the Custodian learns of any errors, omissions or interruption in, or delay or unavailability of, the Fund's ability to send Instructions. ARTICLE XVI DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES 1. The Custodian is authorized and instructed to employ, as sub-custodian for each Series' Foreign Securities (as such term is defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to carry out their respective responsibilities in accordance with the terms of the sub-custodian agreement between each such Foreign Sub- Custodian and the Custodian, copies of which have been previously delivered to the Fund and receipt of which is hereby acknowledged (each such agreement, a "Foreign Sub- Custodian Agreement"). Upon receipt of a Certificate, together with a certified resolution substantially in the form attached as Exhibit E of the Fund's Board of Trustees, the Fund may designate any additional foreign sub-custodian with which the Custodian has an agreement for such entity to act as the Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the employment of any one or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I. 2. Each Foreign Sub-Custodian Agreement shall be substantially in the form previously delivered to the Fund and will not be amended in a way that materially adversely affects the Fund without the Fund's prior written consent. 3. The Custodian shall identify on its books as belonging to each Series of the Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims by the Fund or any Series against a Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Fund or any Series if and to the extent that the Fund or such Series has not been made whole for any such loss, damage, cost, expense, liability or claim. 4. Upon request of the Fund, the Custodian will, consistent with the terms of the applicable Foreign Sub- Custodian Agreement, use reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub-Custodian under its agreement with the Custodian on behalf of the Fund. 5. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Series held by Foreign Sub-Custodians, including but not limited to, an identification of entities having possession of each Series' Foreign Securities and other assets, and advices or notifications of any transfers of Foreign Securities to or from each custodial account maintained by a Foreign Sub- Custodian for the Custodian on behalf of the Series. 6. The Custodian shall furnish annually to the Fund, as mutually agreed upon, information concerning the Foreign Sub- Custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the Fund's initial approval of such Foreign Sub-Custodians and, in any event, shall include information pertaining to (i) the Foreign Custodians' financial strength, general reputation and standing in the countries in which they are located and their ability to provide the custodial services required, and (ii) whether the Foreign Sub-Custodians would provide a level of safeguards for safekeeping and custody of securities not materially different form those prevailing in the United States. The Custodian shall monitor the general operating performance of each Foreign Sub- Custodian. The Custodian agrees that it will use reasonable care in monitoring compliance by each Foreign Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of such Foreign Sub- Custodian Agreement believed by the Custodian to have a material adverse effect on the Fund or any Series it will promptly notify the Fund of such breach. The Custodian also agrees to use reasonable and diligent efforts to enforce its rights under the relevant Foreign Sub-Custodian Agreement. 7. The Custodian shall transmit promptly to the Fund all notices, reports or other written information received pertaining to the Fund's Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials. 8. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of any Series and delivery of securities maintained for the account of such Series may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. 9. Notwithstanding any other provision in this Agreement to the contrary, with respect to any losses or damages arising out of or relating to any actions or omissions of any Foreign Sub-Custodian the sole responsibility and liability of the Custodian shall be to take appropriate action at the Fund's expense to recover such loss or damage from the Foreign Sub-Custodian. It is expressly understood and agreed that the Custodian's sole responsibility and liability shall be limited to amounts so recovered from the Foreign Sub- Custodian. ARTICLE XVII FX TRANSACTIONS 1. Whenever the Fund shall enter into an FX Transaction, the Fund shall promptly deliver or cause the Administrator to deliver to the Custodian a Certificate or Oral Instructions specifying with respect to such FX Transaction: (c) the Series to which such FX Transaction is specifically allocated; (b) the type and amount of Currency to be purchased by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the date on which the Currency to be purchased is to be delivered; (e) the date on which the Currency to be sold is to be delivered; and (f) the name of the person from whom or through whom such currencies are to be purchased and sold. Unless otherwise instructed by a Certificate or Oral Instructions, the Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on the date on which such delivery is to be made, as set forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive, the Currency to be purchased on the date as set forth in the Certificate. 2. Where the Currency to be sold is to be delivered on the same day as the Currency to be purchased, as specified in the Certificate or Oral Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and receipts to be made in accordance with the customs prevailing from time to time among brokers or dealers in Currencies, and such receipt and delivery may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with such receipts and deliveries, which responsibility and liability shall continue until the Currency to be received by the Fund has been received in full. 3. Any FX Transaction effected by the Custodian in connection with this Agreement may be entered with the Custodian, any office, branch or subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as principal or otherwise through customary banking channels. The Fund may issue a standing Certificate with respect to FX Transaction but the Custodian may establish rules or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in Securities or holding Currency. Without limiting the foregoing, the Fund shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes or other laws, rules, regulations or orders shall prohibit or impose burdens or costs on the transfer to, by or for the account of the Fund of Securities or any cash held outside the Fund's jurisdiction or denominated in Currency other than its home jurisdiction or the conversion of cash from one Currency into another currency. The Custodian shall not be obligated to substitute another Currency for a Currency (including a Currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been affected by such law, regulation, rule or procedure. Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the Fund for any loss resulting from any of the foregoing events. ARTICLE XVIII CONCERNING THE CUSTODIAN 1. Except as hereinafter provided, or as provided in Article XVI neither the Custodian nor its nominee shall be liable for any loss or damage, including reasonable counsel fees, resulting from its action or omission to act or otherwise, either hereunder or under any Margin Account Agreement, except for any such loss or damage arising out of its own negligence or willful misconduct. The Custodian agrees to indemnify and hold harmless the Trust and Trust's Trustees and officers to the extent described below against any loss as a result of any breach or violation of this Agreement by the Custodian or its officers, employees and agents or its nominees, resulting from their negligence or willful misconduct. The Custodian may, with respect to ques- tions of law arising hereunder or under any Margin Account Agreement, apply for and obtain the advice and opinion of counsel to the Fund or of its own counsel, at the expense of the Fund, and shall be fully protected with respect to any- thing done or omitted by it in good faith in conformity with such advice or opinion. The Custodian shall be liable to the Fund for any loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence or willful misconduct on the part of the Custodian or any of its employees or agents. Notwithstanding the foregoing, or any other provision contained in this Agreement, in no event shall the Custodian be liable to the Trust, its Trustees or officers, or any third party, for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. 2. Without limiting the generality of the foregoing, the Custodian shall be under no obligation to inquire into, and shall not be liable for: (a) The validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor; (b) The legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor; (c) The legality of the declaration or payment of any dividend by the Fund; (d) The legality of any borrowing by the Fund using Securities as collateral; (e) The legality of any loan of portfolio Securi- ties, nor shall the Custodian be under any duty or obligation to see to it that any cash collateral delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio Securities of the Fund is adequate collateral for the Fund against any loss it might sustain as a result of such loan. The Custodian spe- cifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Fund that the amount of such cash collateral held by it for the Fund is sufficient collateral for the Fund, but such duty or obligation shall be the sole responsibility of the Fund. In addition, the Custodian shall be under no duty or obliga- tion to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent pursuant to Article XIV of this Agreement makes payment to it of any divi- dends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however, that the Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due; or (f) The sufficiency or value of any amounts of money and/or Securities held in any Margin Account, Senior Security Account or Collateral Account in connection with transactions by the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer, futures commission merchant or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or Clearing Member, to see that any payment received by the Custodian from any broker, dealer, futures commission merchant or Clearing Member is the amount the Fund is entitled to receive, or to notify the Fund of the Custodian's receipt or non-receipt of any such pay- ment. 3. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Fund until the Custo- dian actually receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book-Entry System or the Depository. 4. The Custodian shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, con- versions, exchange offers, tenders, interest rate changes or similar matters relating to Securities held in the Depository, unless the Custodian shall have actually received timely no- tice from the Depository. In no event shall the Custodian have any responsibility or liability for the failure of the Depository to collect, or for the late collection or late crediting by the Depository of any amount payable upon Securi- ties deposited in the Depository which may mature or be re- deemed, retired, called or otherwise become payable. However, upon receipt of a Certificate from the Fund of an overdue amount on Securities held in the Depository the Custodian shall make a claim against the Depository on behalf of the Fund, except that the Custodian shall not be under any obliga- tion to appear in, prosecute or defend any action suit or pro- ceeding in respect to any Securities held by the Depository which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required. 5. The Custodian shall not be under any duty or obliga- tion to take action to effect collection of any amount due to the Fund from the Transfer Agent of the Fund nor to take any action to effect payment or distribution by the Transfer Agent of the Fund of any amount paid by the Custodian to the Trans- fer Agent of the Fund in accordance with this Agreement. 6. The Custodian shall not be under any duty or obliga- tion to take action to effect collection of any amount if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfac- tion of reimbursement of its costs and expenses in connection with any such action. 7. The Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Article XVI appoint one or more banking institutions as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including, but not limited to, banking institu- tions located in foreign countries, of Securities and money at any time owned by the Fund, upon such terms and conditions as may be approved in a Certificate or contained in an agreement executed by the Custodian, the Fund and the appointed institution. 8. The Custodian shall not be under any duty or obliga- tion (a) to ascertain whether any Securities at any time de- livered to, or held by it or by any Foreign Sub-Custodian, for the account of the Fund and specifically allocated to a Series are such as properly may be held by the Fund or such Series under the provisions of its then current prospectus, or (b) to ascertain whether any transactions by the Fund, whether or not involving the Custodian, are such transactions as may properly be engaged in by the Fund. 9. The Custodian shall be entitled to receive and the Fund agrees to pay to the Custodian all out-of-pocket expenses and such compensation as may be agreed upon from time to time between the Custodian and the Fund. The Fund represents that the Administrator has agreed to pay such compensation and ex- penses promptly upon receipt of statements therefor, and hereby directs the Custodian to (i) send all statements for compensation to its attention care of FPS at the following address: FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406-0903, Attention: Mr. Elmer Gardner, Senior Vice President, and (ii) accept all payments made by Fund/Plan in the Fund's name as if such payments were made directly by the Fund. The Fund shall pay to FPS fees for services (including custodian services provided by the Custodian) in accordance with the Administration Agreement. The Custodian's compensation for services rendered hereunder is set forth in a separate agreement between the Custodian and Fund/Plan. Should Fund/Plan fail to pay or remit such compensation to the Custodian within 20 days of the date the same is due and pay- able, Custodian shall notify the Fund. If such payment or remittance is not received from FPS within 15 days of such notice, then the Custodian will be entitled to debit the Custody Account directly for such compensation. The Custodian may charge compensation with respect to which it has properly sent a notice to the Fund, as provided in the preceding sen- tence, and any expenses with respect to a Series incurred by the Custodian in the performance of its duties pursuant to such agreement against any money specifically allocated to such Series. Unless and until the Fund or the Administrator instructs the Custodian by a Certificate to apportion any loss, damage, liability or expense among the Series in a specified manner, the Custodian shall also be entitled to charge against any money held by it for the account of a Se- ries such Series' pro rata share (based on such Series net asset value at the time of the charge to the aggregate net asset value of all Series at that time) of the amount of any loss, damage, liability or expense, including counsel fees, for which it shall be entitled to reimbursement under the pro- visions of this Agreement. The expenses for which the Custo- dian shall be entitled to reimbursement hereunder shall in- clude, but are not limited to, the expenses of sub-custodians and foreign branches of the Custodian incurred in settling outside of New York City transactions involving the purchase and sale of Securities of the Fund. 10. The Custodian shall be entitled to rely upon any Certificate, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be a Certificate. The Custodian shall be entitled to rely upon any Oral Instructions actually received by the Custodian. The Fund agrees to forward or cause the Administrator to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or facsimile thereof is received by the Custodian, whether by hand delivery, telecopier or other similar device, or other- wise, by the close of business of the same day that such Oral Instructions are given to the Custodian. The Fund agrees that the fact that such confirming instructions are not received by the Custodian shall in no way affect the validity of the transactions or enforceability of the transactions hereby au- thorized by the Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in acting upon Oral In- structions given to the Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Officer. 11. The Custodian shall be entitled to rely upon any instrument, instruction or notice received by the Custodian and reasonably believed by the Custodian to be given in ac- cordance with the terms and conditions of any Margin Account Agreement. Without limiting the generality of the foregoing, the Custodian shall be under no duty to inquire into, and shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other no- tice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission mer- chant or Clearing Member. 12. The books and records pertaining to the Fund which are in the possession of the Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the Investment Company Act of 1940, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representa- tives, shall have access to such books and records during the Custodian's normal business hours. Upon the reasonable re- quest of the Fund, copies of any such books and records shall be provided by the Custodian to the Fund or the Fund's autho- rized representative, and the Fund shall reimburse the Custo- dian its expenses of providing such copies. Upon reasonable request of the Fund, the Custodian shall provide in hard copy or on micro-film, whichever the Custodian elects, any records included in any such delivery which are maintained by the Cus- todian on a computer disc, or are similarly maintained, and the Fund shall reimburse the Custodian for its expenses of providing such hard copy or micro-film. 13. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of the Book-Entry System, the Depository or O.C.C., and with such reports on its own systems of internal account- ing control as the Fund may reasonably request from time to time. 14. The Fund agrees to indemnify the Custodian against and save the Custodian harmless from all liability, claims, losses and demands whatsoever, including attorney's fees, how- soever arising or incurred because of or in connection with this Agreement, including the Custodian's payment or non-payment of checks pursuant to paragraph 6 of Article XIII as part of any check redemption privilege program of the Fund, except for any such liability, claim, loss and demand arising out of the Custodian's own negligence or willful misconduct. For any legal proceeding giving rise to the indemnification set forth above in this paragraph, the Fund shall be entitled to defend or prosecute any claim in the name of the Custodian at its own expense and through counsel of its own choosing reasonably acceptable to the Custodian if it gives written notice to the Custodian within ten (10) Business days of re- ceiving notice of such claim. Notwithstanding the foregoing, the Custodian may participate in the litigation at its own expense and with counsel of its own choosing. 15. Subject to the foregoing provisions of this Agree- ment, including, without limitation, those contained in Ar- ticle XVI the Custodian may deliver and receive Securities, and receipts with respect to such Securities, and arrange for payments to be made and received by the Custodian in ac- cordance with the customs prevailing from time to time among brokers or dealers in such Securities. When the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with the Custodian's delivery of Securities pursuant to Certifi- cates or instructions of the Fund or the Administrator which responsibility and liability shall continue until final pay- ment in full has been received by the Custodian. 16. In the event the Custodian is advised by the Fund that the Fund is no longer utilizing the services of the Ad- ministrator, then the Custodian shall furnish or give to the Fund the statements or notices described above as to be fur- nished or given to the Administrator. 17. The Custodian shall have no duties or responsibili- ties whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Cus- todian. Without limiting the generality of the foregoing, the Custodian shall have no duties or responsibilities by reason of any terms or provisions in the Administration Agreement, and if such Administration Agreement shall cease to be in ef- fect the Custodian shall have no additional duties hereunder. ARTICLE XIX TERMINATION 1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice, provided, however, that if such notice is sent by the Fund and recites that it is being given contemporaneously with a termination of the Custody Administration any Agency Agreement with FPS, such notice may specify any date of termination selected by the Fund. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Cus- todian a copy of a resolution of the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, designating a successor cus- todian or custodians. In the absence of such designation by the Fund, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and money then owned by the Fund and held by it as Custodian, after de- ducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled. 2. If a successor custodian is not designated by the Fund or the Custodian in accordance with the preceding para- graph, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by the Custodian of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Fund) and money then owned by the Fund be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book Entry System which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement. ARTICLE XX MISCELLANEOUS 1. Annexed hereto as Appendix A is a Certificate signed by two of the present Officers of the Fund under its seal, setting forth the names and the signatures of the present Of- ficers. The Fund agrees to furnish to the Custodian a new Certificate in similar form in the event that any such present Officer ceases to be an Officer or in the event that other or additional Officers are elected or appointed. Until such new Certificate shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement upon Oral Instructions or signatures of the present Officers as set forth in the last delivered Certificate. 2. Any notice or other instrument in writing, autho- rized or required by this Agreement to be given to the Custo- dian, shall be sufficiently given if addressed to the Custo- dian and mailed or delivered to it at its offices at 90 Wash- ington Street, New York, New York 10286, or at such other place as the Custodian may from time to time designate in writing. 3. Any notice or other instrument in writing, autho- rized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed or delivered to it at its office at the address for the Fund first above written, or at such other place as the Fund may from time to time designate in writing, and any notice or other instrument in writing authorized or required to be given to the Administrator shall be sufficiently given if addressed to the Administrator at such address as the Administrator may from time to time designate in writing. 4. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement and approved by a resolution of the Board of Trustees of the Fund. 5. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Cus- todian, or by the Custodian without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Trustees. 6. This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws principles thereof. Each party hereby con- sents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder and hereby waives its right to trial by jury. 7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers, thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written. SPIRIT OF AMERICA INVESTMENT FUND, INC. [SEAL] By:/s/ David Lerner Attest: _______________________ THE BANK OF NEW YORK [SEAL] By:_______________________ Attest: _______________________ APPENDIX A I, David Lerner, President and I, of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), do hereby certify that: The following individuals including officers and employ- ees of the Administrator have been duly authorized by the Board of Trustees of the Fund in conformity with the Fund's Declaration of Trust and By-Laws to give Certificates or Oral Instructions on behalf of the Fund, and the signatures set forth opposite their respective names are their true and cor- rect signatures: Name Signature _David Lerner /s/ David Lerner APPENDIX B PORTFOLIO APPENDIX C I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do hereby designate the following publications: The Bond Buyer Depository Trust Company Notices Financial Daily Card Service JJ Kenney Municipal Bond Service London Financial Times New York Times Standard & Poor's Called Bond Record Wall Street Journal EXHIBIT A CERTIFICATION The undersigned, David Lerner , hereby certifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1997, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to deposit in the Book- Entry System, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Book-Entry System to the extent pos- sible in connection with its performance thereunder, in- cluding, without limitation, in connection with settle- ments of purchases and sales of securities, loans of se- curities, and deliveries and returns of securities col- lateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 1997. [SEAL] EXHIBIT B CERTIFICATION The undersigned, David Lerner , hereby certifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997, at which a quorum was at all times present and that such resolution has not been modified or re- scinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it re- ceives a Certificate, as defined in the Custody Agree- ment, to the contrary to deposit in the Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Depository to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and re- turns of securities collateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 1997. [SEAL] EXHIBIT B-1 CERTIFICATION The undersigned, David Lerner , hereby certifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997, at which a quorum was at all times present and that such resolution has not been modified or re- scinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it re- ceives a Certificate, as defined in the Custody Agree- ment, to the contrary to deposit in the Participants Trust Company as Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifi- cally allocated, and to utilize the Participants Trust Company to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and re- turns of securities collateral. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 199 . [SEAL] EXHIBIT C CERTIFICATION The undersigned, David Lerner , hereby certifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 199 , (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it re- ceives a Certificate, as defined in the Custody Agree- ment, to the contrary, to accept, utilize and act with respect to Clearing Member confirmations for Options and transaction in Options, regardless of the Series to which the same are specifically allocated, as such terms are defined in the Custody Agreement, as provided in the Cus- tody Agreement. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 1997. [SEAL] EXHIBIT D The undersigned, David Lerner , hereby certifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), further certifies that the following resolutions were adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997, at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof. RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody Agreement between The Bank of New York and the Fund dated as of , 1997 (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to act in accordance with, and to rely on Instructions (as defined in the Custody Agreement). RESOLVED, that the Fund shall establish access codes and grant use of such access codes only to Officers of the Fund as defined in the Custody Agreement, shall establish internal safekeeping procedures to safeguard and protect the confidentiality and availability of user and access codes, passwords and authentication keys, and shall use Instructions only in a manner that does not contravene the Investment Company Act of 1940, as amended, or the rules and regulations thereunder. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 1997. [SEAL] EXHIBIT E The undersigned, David Lerner , hereby cer- tifies that he or she is the duly elected and acting President of SPIRIT OF AMERICA INVESTMENT FUND, INC., a Maryland corporation (the "Fund"), further certifies that the following resolutions were adopted by the Board of Trustees of the Fund at a meeting duly held on July 9, 1997 at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and effect as of the date hereof. RESOLVED, that the maintenance of the Fund's assets in each country listed in Schedule I hereto be, and hereby is, approved by the Board of Trustees as consistent with the best interests of the Fund and its shareholders; and further RESOLVED, that the maintenance of the Fund's assets with the foreign branches of The Bank of New York (the "Bank") listed in Schedule I located in the countries specified therein, and with the foreign sub-custodians and depositories listed in Schedule I located in the countries specified therein be, and hereby is, approved by the Board of Directors as consistent with the best interest of the Fund and its shareholders; and further RESOLVED, that the Sub-custodian Agreements presented to this meeting between the Bank and each of the foreign sub-custodians and depositories listed in Schedule I providing for the maintenance of the Fund's assets with the applicable entity, be and hereby are, approved by the Board of Trustees as consistent with the best interests of the Fund and its shareholders; and further RESOLVED, that the appropriate officers of the Fund are hereby authorized to place assets of the Fund with the afore- mentioned foreign branches and foreign sub-custodians and de- positories as hereinabove provided; and further RESOLVED, that the appropriate officers of the Fund, or any of them, are authorized to do any and all other acts, in the name of the Fund and on its behalf, as they, or any of them, may determine to be necessary or desirable and proper in connection with or in furtherance of the foregoing resolu- tions. IN WITNESS WHEREOF, I hereunto set my hand and the seal of SPIRIT OF AMERICA INVESTMENT FUND, INC., as of the day of , 1997. [SEAL] EX-9 5 INVESTMENT COMPANY SERVICES AGREEMENT Investment Company Services Agreement This Agreement, dated as of the 16th day of December, 1997, made by and between Spirit of America Investment Fund, Inc. (the "Fund"), a corporation operating as an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the "Act"),duly organized and existing under the laws of the State of Maryland and FPS Services, Inc. ("FPS"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). Witnesseth That: Whereas, the Fund is authorized by its Articles of Incorporation to issue separate series of shares representing interests in separate investment portfolios which are identified on Schedule "C" attached hereto, and which Schedule "C" may be amended from time to time by mutual agreement of the Fund and FPS; and Whereas, the Parties desire to enter into an agreement whereby FPS will provide the services to the Fund as specified herein and set forth in particular in Schedule "A" which is attached hereto and made a part hereof. Now Therefore, in consideration of the premises and mutual covenants contained herein, and in exchange of good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows: General Provisions Section 1. Appointment. The Fund hereby appoints FPS as its servicing agent and FPS hereby accepts such appointment. In order that FPS may perform its duties under the terms of this Agreement, the Board of Directors of the Fund shall direct the officers, investment adviser, legal counsel, independent accountants and custodian of the Fund to cooperate fully with FPS and, upon request of FPS, to provide such information, documents and advice relating to the Fund which FPS requires to execute its responsibilities hereunder. In connection with its duties, FPS shall be entitled to rely, and will be held harmless by the Fund when acting in reasonable reliance, upon any instruction, advice or document relating to the Fund as provided to FPS by any of the aforementioned persons on behalf of the Fund. All fees charged by any such persons acting on behalf of the Fund will be deemed an expense of the Fund. Any services performed by FPS under this Agreement will conform to the requirements of: (1) the provisions of the Act and the Securities Act of 1933, as amended, and any rules or regulations in force thereunder; (2) any other applicable provision of state and federal law; (3) the provisions of the Fund's Articles of Incorporation and the By-Laws as amended from time to time and delivered to FPS; (4) any policies and determinations of the Board of Directors of the Fund which are communicated to FPS; and (5) the policies of the Fund as reflected in the Fund's registration statement as filed with the U.S. Securities and Exchange Commission. Nothing in this Agreement will prevent FPS or any officer thereof from providing the same or comparable services for or with any other person, firm or corporation. While the services supplied to the Fund may be different than those supplied to other persons, firms or corporations, FPS will provide the Fund equitable treatment in supplying services. The Fund recognizes that it will not receive preferential treatment from FPS as compared with the treatment provided to other FPS clients. Section 2. Duties and Obligations of FPS. Subject to the provisions of this Agreement, FPS will provide to the Fund the specific services as set forth in Schedule "A" attached hereto. Section 3. Definitions. For purposes of this Agreement: "Certificate" will mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement or the custody agreement executed by the Fund ("Custody Agreement"). To be effective, such Certificate shall be given to and received by the custodian and shall be signed on behalf of the Fund by any two of its designated officers. The term Certificate shall also include instructions communicated to the custodian by FPS. "Custodian" will refer to that agent which provides safekeeping of the assets of the Fund. "Instructions" will mean communications containing instructions transmitted by electronic or telecommunications media including, but not limited to, Industry Standardization for Institutional Trade Communications ("I.S.I.T.C."), computer-to-computer interface, dedicated transmission line, facsimile transmission (which may be signed by an officer or unsigned) and tested telex. "Oral Instruction" will mean an authorization, instruction, approval, item or set of data, or information of any kind transmitted to FPS in person or by telephone, telegram, telecopy or other mechanical or documentary means lacking original signature, by a person or persons reasonably identified to FPS to be a person or persons so authorized by a resolution of the Board of Directors of the Fund to give Oral Instructions to FPS on behalf of the Fund. "Shareholders" will mean the registered owners of the shares of the Fund in accordance with the share registry records maintained by FPS for the Fund. "Shares" will mean the issued and outstanding shares of the Fund. "Signature Guarantee" will mean the guarantee of signatures by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 members of a clearing corporation or maintain net capital of at least $100,000. Signature guarantees will be accepted from any eligible guarantor institution which participates in a signature guarantee program. "Written Instruction" will mean an authorization, instruction, approval, item or set of data or information of any kind transmitted to FPS in an original writing containing an original signature or a copy of such document transmitted by telecopy including transmission of such signature reasonably identified to FPS to be the signature of a person or persons so authorized by a resolution of the Board of Directors of the Fund, or so identified by the Fund to give Written Instructions to FPS on behalf of the Fund. Concerning Oral and Written Instructions For all purposes under this Agreement, FPS is authorized to act upon receipt of the first of any Written or Oral Instruction it receives from the Fund or its agents. In cases where the first instruction is an Oral Instruction that is not in the form of a document or written record, a confirmatory Written Instruction or Oral Instruction in the form of a document or written record shall be delivered. In cases where FPS receives an Instruction, whether Written or Oral, to enter a portfolio transaction onto the Fund's records, the Fund shall cause the broker/dealer executing such transaction to send a written confirmation to the Custodian. FPS shall be entitled to rely on the first Instruction received. For any act or omission undertaken by FPS in compliance therewith, it shall be free of liability and fully indemnified and held harmless by the Fund, provided however, that in the event a Written or Oral Instruction received by FPS is countermanded by a subsequent Written or Oral Instruction received prior to acting upon such countermanded Instruction, FPS shall act upon such subsequent Written or Oral Instruction. The sole obligation of FPS with respect to any follow-up or confirmatory Written Instruction, Oral Instruction in documentary or written form shall be to make reasonable efforts to detect any such discrepancy between the original Instruction and such confirmation and to report such discrepancy to the Fund. The Fund shall be responsible and bear the expense of its taking any action, including any reprocessing, necessary to correct any discrepancy or error. To the extent such action requires FPS to act, the Fund shall give FPS specific Written Instruction as to the action required. The Fund will file with FPS a certified copy of each resolution of its Board of Directors authorizing execution of Written Instructions or the transmittal of Oral Instructions as provided above. Section 4. Indemnification. (a) FPS, its directors, officers, employees, shareholders, and agents will be liable for any loss suffered by the Fund resulting from the willful misfeasance, bad faith, gross negligence or reckless disregard on the part of FPS in the performance of its obligations and duties under this Agreement. (b) Any director, officer, employee, shareholder or agent of FPS, who may be or become an officer, director, employee or agent of the Fund, will be deemed, when rendering services to the Fund, or acting on any business of the Fund (other than services or business in connection with FPS' duties hereunder), to be rendering such services to or acting solely for the Fund and not as a director, officer, employee, shareholder or agent of, or under the control or direction of FPS even though such person may be receiving compensation from FPS. (c) The Fund agrees to indemnify and hold FPS harmless, together with its directors, officers, employees, shareholders and agents from and against any and all claims, demands, expenses and liabilities (whether with or without basis in fact or law) of any and every nature which FPS may sustain or incur or which may be asserted against FPS by any person by reason of, or as a result of: (i) any action taken or omitted to be taken by FPS except claims, demands, expenses and liabilities arising from willful misfeasance, bad faith, gross negligence or reckless disregard on the part of FPS in the performance of its obligations and duties under this Agreement; or (ii) any action taken or omitted to be taken by FPS in reliance upon any Certificate, instrument, order or stock certificate or other document reasonably believed by FPS to be genuine and signed, countersigned or executed by any duly authorized person, upon the Oral Instructions or Written Instructions of an authorized person of the Fund, or upon the written opinion of legal counsel for the Fund or FPS; or (iii) the offer or sale of shares of the Fund to any person, natural or otherwise, which is in violation of any state or federal law. If a claim is made against FPS as to which FPS may seek indemnity under this Section, FPS will notify the Fund promptly after receipt of any written assertion of such claim threatening to institute an action or proceeding with respect thereto and will notify the Fund promptly of any action commenced against FPS within ten (10) days after FPS has been served with a summons or other legal process. Failure to notify the Fund will not, however, relieve the Fund from any liability which it may have on account of the indemnity under this Section so long as the Fund has not been prejudiced in any material respect by such failure. The Fund and FPS will cooperate in the control of the defense of any action, suit or proceeding in which FPS is involved and for which indemnity is being provided by the Fund to FPS. The Fund may negotiate the settlement of any action, suit or proceeding subject to FPS' approval, which will not be unreasonably withheld. FPS reserves the right, but not the obligation, to participate in the defense or settlement of a claim, action or proceeding with its own counsel. Costs or expenses incurred by FPS in connection with, or as a result of, such participation will be borne solely by the Fund if: (i) FPS has received an opinion of counsel from counsel to the Fund stating that the use of counsel to the Fund by FPS would present an impermissible conflict of interest; (ii) the defendants in, or targets of, any such action or proceeding include both FPS and the Fund, and legal counsel to FPS has reasonably concluded that there are legal defenses available to it which are different from or additional to those available to the Fund or which may be adverse to or inconsistent with defenses available to the Fund (in which case the Fund will not have the right to direct the defense of such action on behalf of FPS); or (iii) the Fund authorizes FPS to employ separate counsel at the expense of the Fund. (d) The terms of this Section will survive the termination of this Agreement. Section 5. Representations and Warranties. (a) FPS represents and warrants that: (i) it is a corporation duly organized and existing and in good standing under the laws of Delaware; (ii) it is empowered under applicable laws and by its Certificate of Incorporation and By-Laws to enter into and perform this Agreement; (iii) all requisite corporate proceedings have been taken to authorize FPS to enter into and perform this Agreement; (iv) it has and will continue to have, access to the facilities, personnel and equipment required to fully perform its duties and obligations hereunder; (v) no legal or administrative proceeding have been instituted or threatened which would impair FPS's ability to perform its duties and obligations under this Agreement; (vi) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of FPS or any law or regulation applicable to it; (vii) it is registered as a transfer agent under Section 17A(c)(2) of the Exchange Act; (viii) this Agreement has been duly authorized by FPS, and when executed and delivered, will constitute valid, legal and binding obligation of FPS, enforceable in accordance with its terms. (b) The Fund represent and warrant that: (i) it is a corporation duly organized and existing and in good standing under the laws of the State of Maryland; (ii) it is empowered under applicable laws and by its Certificate of Incorporation and By-Laws to enter into and perform this Agreement; (iii) all requisite proceedings have been taken to authorize the Fund to enter into and perform this Agreement; (iv) no legal or administrative proceedings have been instituted or threatened which would impair the Fund's ability to perform its duties and obligations under this Agreement; (v) the Fund's entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligations of the Fund, or any law or regulation applicable to either; (vi) the Shares are properly registered or otherwise authorized for issuance and sale; (vii) this Agreement has been duly authorized by the Fund and, when executed and delivered, will constitute valid, legal and binding obligation of the Fund, enforceable in accordance with its terms. (c) Delivery of Documents The Fund will furnish or cause to be furnished to FPS the following documents; (i) current Prospectus and Statement of Additional Information; (ii) most recent Annual Report; (iii) most recent Semi-Annual Report for registered investment companies on Form N-SAR; (iv) certified copies of resolutions of the Fund's Board of Directors authorizing the execution of Written Instructions or the transmittal of Oral Instructions and those persons authorized to give those Instructions. (d) Record Keeping and Other Information FPS will create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule "A" in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the Act. All such records will be the property of the Fund and will be available during regular business hours for inspection, copying and use by the Fund. Where applicable, such records will be maintained by FPS for the periods and in the places required by Rule 31a-2 under the Act. Upon termination of this Agreement, FPS will deliver all such records to the Fund or such person as the Fund may designate. In case of any request or demand for the inspection of the Share records of the Fund, FPS shall notify the Fund and secure instructions as to permitting or refusing such inspection. FPS may, however, exhibit such records to any person in any case where it is advised by its counsel that it may be held liable for failure to do so. Section 6. Compensation. The Fund agrees to pay FPS compensation for its services, and to reimburse it for expenses, at the rates, times, manner and amounts as set forth in Schedule "B" attached hereto and incorporated herein by reference, and as will be set forth in any amendments to such Schedule "B" agreed upon in writing by the Parties. Upon receipt of an invoice therefor, FPS is authorized to collect such fees by debiting the Fund's custody account. In addition, the Fund agrees to reimburse FPS for any out-of-pocket expenses paid by FPS on behalf of the Fund within ten (10) calendar days of the Fund's receipt of an invoice therefor. For the purpose of determining fees payable to FPS, the value of the Fund's net assets will be computed at the times and in the manner specified in the Fund's Prospectus and Statement of Additional Information then in effect. During the term of this Agreement, should the Fund seek services or functions in addition to those outlined below or in Schedule "A" attached hereto, a written amendment to this Agreement specifying the additional services and corresponding compensation will be executed by the Parties. Section 7. Days of Operation. Nothing contained in this Agreement is intended to or will require FPS, in any capacity hereunder, to perform any functions or duties on any holiday, day of special observance or any other day on which the New York Stock Exchange ("NYSE") is closed. Functions or duties normally scheduled to be performed on such days will be performed on, and as of, the next succeeding business day on which the NYSE is open. Notwithstanding the foregoing, FPS will compute the net asset value of the Fund on each day required pursuant to Rule 22c-1 promulgated under the Act. Section 8. Acts of God, etc. FPS will not be liable or responsible for delays or errors caused by acts of God or by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, labor difficulties, mechanical breakdown, insurrection, war, riots, or failure or unavailability of transportation, communication or power supply, fire, flood or other catastrophe. In the event of equipment failures beyond FPS' control, FPS will, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but will have no liability with respect thereto. The foregoing obligation will not extend to computer terminals located outside of premises maintained by FPS. FPS has entered into and maintains in effect agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available. Section 9. Inspection and Ownership of Records. In the event that any request or demand for the inspection of the records of the Fund, FPS will use its best efforts to notify the Fund and to secure instructions as to permitting or refusing such inspection. FPS may, however, make such records available for inspection to any person in any case where it is advised in writing by its counsel that it may be held liable for failure to do so after notice to the Fund. FPS recognizes that the records it maintains for the Fund are the property of the Fund and will be surrendered to the Fund upon written notice to FPS as outlined under Section 10(c) below and the payment in advance of any fees owed to FPS. FPS agrees to maintain the records and all other information of the Fund in a confidential manner and will not use such information for any purpose other than the performance of FPS' duties under this Agreement. Section 10. Duration and Termination. (a) The initial term of this Agreement will be for the period of three (3) years, commencing on the date hereinabove first written (the "Effective Date") and will continue thereafter subject to termination by either Party as set forth in subsection (c) below. (b) The fee schedules set forth in Schedule "B" attached hereto will be fixed for two (2) years commencing on the Effective Date of this Agreement and will continue thereafter subject to their review and any adjustment. (c) After the initial term of this Agreement, a Party may give written notice to the other (the day on which the notice is received by the Party against which the notice is made shall be the "Notice Date") of a date on which this Agreement shall be terminated ("Termination Date"). The Termination Date shall be set on a day not less than one hundred eighty (180) days after the Notice Date. The period of time between the Notice Date and the Termination Date is hereby identified as the "Notice Period". Any time up to, but not later than ninety (90) days prior to the Termination Date, the Fund will pay to FPS such compensation as may be due as of the Termination Date and will likewise reimburse FPS for any out-of-pocket expenses and disbursements reasonably incurred or expected to by incurred by FPS up to and including the Termination Date. (d) In connection with the termination of this Agreement, if a successor to any of FPS' duties or responsibilities under this Agreement is designated by the Fund by written notice to FPS, FPS will promptly, on the Termination Date and upon receipt by FPS of any payments owed to it as set forth in Section 10(c) above, shall transfer to the successor, at the Fund's expense, all records which belong to the Fund and will provide appropriate, reasonable and professional cooperation in transferring such records to the named successor. (e) Should the Fund desire to move any of the services outlined in this Agreement to a successor service provider prior to the Termination Date, FPS shall make a good faith effort to facilitate the conversion on such prior date; however, there can be no guarantee that FPS will be able to facilitate a conversion of services prior to the end of the Notice Period. Should services be converted to a successor service provider prior to the end of the Notice Period, or if the Fund is liquidated or its assets merged or purchased or the like with another entity, payment of fees to FPS shall be accelerated to a date prior to the conversion or termination of services and calculated as if the services had remained at FPS until the expiration of the Notice Period and calculated at the asset levels on the Notice Date. (f) Notwithstanding the foregoing, this Agreement may be terminated at any time by either Party in the event of a material breach by the other Party involving gross negligence, willful misfeasance, bad faith or a reckless disregard of its obligations and duties under this Agreement provided that such breach shall have remained unremedied for sixty (60) days or more after receipt of written specification thereof. Section 11. Rights of Ownership. All computer programs and procedures developed to perform services required to be provided by FPS under this Agreement are the property of FPS. All records and other data except such computer programs and procedures are the exclusive property of the Fund and all such other records and data will be furnished to the Fund in appropriate form as soon as practicable after termination of this Agreement for any reason. Section 12. Amendments to Documents. The Fund will furnish FPS written copies of any amendments to, or changes in, the Fund's Articles of Incorporation or By-Laws, and each Prospectus or Statement of Additional Information in a reasonable time prior to such amendments or changes becoming effective. In addition, the Fund agrees that no amendments will be made to the Prospectus or Statement of Additional Information of the Fund which might have the effect of changing the procedures employed by FPS in providing the services agreed to hereunder or which amendment might affect the duties of FPS hereunder unless the Fund first obtains FPS' approval of such amendments or changes. Section 13. Confidentiality. Both Parties hereto agree that any non-public information obtained hereunder concerning the other Party is confidential and may not be disclosed to any other person without the consent of the other Party, except as may be required by applicable law or at the request of the U.S. Securities and Exchange Commission or other governmental agency. FPS agrees that it will not use any non-public information for any purpose other than performance of its duties or obligations hereunder. The obligations of the Parties under this Section will survive the termination of this Agreement. The Parties further agree that a breach of this Section would irreparably damage the other Party and accordingly agree that each of them is entitled, without bond or other security, to an injunction or injunctions to prevent breaches of this provision. Section 14. Notices. Except as otherwise provided in this Agreement, any notice or other communication required by or permitted to be given in connection with this Agreement will be in writing, and will be delivered in person or sent by first class mail, postage prepaid or by prepaid overnight delivery service to the respective parties as follows: If to the Fund: If to FPS: Spirit of America Investment Fund, Inc. FPS Services, Inc. 477 Jericho Turnpike 3200 Horizon Drive Syosset, NY 11791 King of Prussia, PA 19406 Attention: David Lerner Attention: Kenneth J. Kempf President President Section 15. Amendment. No provision of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by FPS and the Fund. This Agreement may be amended from time to time by supplemental agreement executed by the Fund and FPS and the compensation stated in Schedule "B" attached hereto may be adjusted accordingly as mutually agreed upon. Section 16. Authorization. The Parties represent and warrant to each other that the execution and delivery of this Agreement by the undersigned officer of each Party has been duly and validly authorized; and when duly executed, this Agreement will constitute a valid and legally binding enforceable obligation of each Party. Section 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed will be deemed to be an original, but such counterparts will together constitute but one and the same instrument. Section 18. Assignment. This Agreement will extend to and be binding upon the Parties hereto and their respective successors and assigns; provided, however, that this Agreement will not be assignable by the Fund without the written consent of FPS or by FPS without the written consent of the Fund which consent will be authorized or approved by a resolution of its respective Boards of Directors. Section 19. Governing Law. This Agreement will be governed by the laws of the State of Pennsylvania and the exclusive venue of any action arising under this Agreement will be Montgomery County, Commonwealth of Pennsylvania. Section 20. Severability. If any part, term or provision of this Agreement is held by any court to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions will be considered severable and not be affected and the rights and obligations of the parties will be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid, provided that the basic Agreement is not thereby materially impaired. In Witness Whereof, the Parties hereto have caused this Agreement consisting of twelve (12) typewritten pages, together with Schedules "A," "B" and "C" to be signed by their duly authorized officers as of the day and year first above written. Spirit of America Investment Fund, Inc. By: /s/ David Lerner David Lerner, President FPS Services, Inc. By: /s/ Kenneth J. Kempf Kenneth J. Kempf, President Schedule "A" Services To Be Provided by FPS Services, Inc. FPS Services, Inc. ("FPS") will (i) provide its own office space, facilities, equipment and personnel for the performance of its duties under this Agreement; and (ii) take all actions it deems necessary to properly execute its responsibilities hereunder. I. Services Related to Administration (Compliance and Financial Reporting) Regulatory Compliance A. Compliance - Investment Company Act of 1940, as amended 1. Review, report and renew a. investment advisory contracts b. fidelity bond c. underwriting contracts d. distribution (12b-1) plans e administration contracts f. accounting contracts g. custody administration contracts h. transfer agent and shareholder services contracts 2. Filings a N-SAR (semi-annual report) b. N-1A (prospectus), post-effective amendments and supplements ("stickers") c. 24f-2 indefinite registration of shares d. filing fidelity bond under 17g-1 e. filing shareholder reports under 30(b)2-1 3. Annual up-dates of biographical and financial information through questionnaires for Directors and Officers B. Compliance - Other 1. applicable stock exchange rules 2. applicable state tax laws Corporate Business and Shareholder/Public Information A. Directors/Management 1. Preparation of Directors' meetings a. agendas - all necessary items of compliance b. arrange and conduct meetings c. prepare minutes of meetings d. keep attendance records e. maintain corporate records/minute book B. Coordinate Proposals 1. Printers 2. Auditors 3. Literature fulfillment 4. Insurance C. Maintain Corporate Calendars and Files D. Release Corporate Information (as directed by management) 1. To shareholders 2. To financial and general press 3. To industry publications a. distributions (dividends and capital gains) b. tax information c. changes to prospectus d. letters from management e. fund performance 4. Respond to: a. financial press b. miscellaneous shareholders inquiries c. industry questionnaires E. Communications to Shareholders 1. Coordinate printing and distribution of annual, semi-annual reports, and prospectus Financial and Management Reporting A. Income and Expenses 1. Monitoring of expense accruals, expense payments and expense caps 2. Approve and coordinate payment of expenses 3. Establish Fund's operating expense checking account and perform monthly reconciliation of checking account 4. Calculation of advisory fee, 12b-1 fee and reimbursements to Fund (if applicable) 6. Authorize the recording and amortization of organizational costs and pre-paid expenses (supplied by Adviser) for start-up funds and reorganizations 7. Calculation of average net assets 8. Calculation of expense ratios B. Distributions to Shareholders 1. Calculations of dividends and capital gain distributions (in conjunction with the Fund and its auditors) a. compliance with income tax provisions b. compliance with excise tax provisions c. compliance with Investment Company Act of 1940, as amended 3. Book/Tax identification and adjustments at required distribution periods (in conjunction with the Fund and its auditors) C. Financial Reporting 1. Liaison between Fund management, independent auditors and printers for semi-annual and annual shareholder reports 2. Preparation of semi-annual and annual reports to shareholders 3. Preparation of semi-annual and annual N-SAR's (Financial Data) 4. Preparation of Financial Statements for required SEC Post-Effective Amendments (if applicable) 5. Preparation of required performance graph (annually)(based on . . . Adviser supplied indicies) D. Subchapter M Compliance (monthly) 1. Asset diversification test 2. Short/short test E. Other Financial Analyses 1. Upon request from Fund management, other budgeting and analyses can be constructed to meet the Fund's specific needs (additional fees may apply) 2. Sales information, portfolio turnover (monthly) 3. Work closely with independent auditors on return of capital presentation and excise tax calculation 4. Monthly performance calculation (total return) 5. 1099 Miscellaneous - prepared and filed for Directors (annual) 6. Annual analysis of interest derived from various Government obligations and prepare detail schedule showing same 7. Review and characterize 1099-DIV forms 8. Prepare and coordinate with printer the printing and mailing of 1099-Dividend insert cards. F. Review and Monitoring Functions (monthly) 1. Review expense and reclassification entries to ensure proper update 2. Perform various reviews to ensure accuracy of Accounting (the monthly expense analysis) and Custody (review of daily bank statements to ensure accurate expense money movements for expense payments) 3. Review accruals and expenditures (where applicable) G. Preparation and distribution of monthly operational reports to management by 10th business day 1. Management Statistics (Recap) a.portfolio summary b.book gains/losses/per share c.net income, book income/per share d.capital stock activity e. .distributions 2. Performance Analysis a.total return b.monthly, quarterly, year to date, average annual returns 3. Expense Analysis a. . .schedule b. summary of due to/from Adviser c. .expenses paid d. expense cap e.accrual monitoring f.advisory fee 4. Short-Short Analysis a.short-short income b. . . . . .gross income (components) 5. Portfolio Turnover a.market value b.cost of purchases c.net proceeds of sales d. average market value 6. Asset Diversification Test a.gross assets b.non-qualifying assets 7. Activity Summary a.shares sold, redeemed and reinvested b. change in investment H. Provide rating agencies statistical data as requested (monthly/quarterly) I. Standard schedules for Board Package (Quarterly) 1. Activity Summary (III-G-7 from above) 2. Expense analysis 3. Other schedules can be provided (additional fees may apply) Blue Sky Administration A. Sales Data 1. Receive daily sales figures through SUNGARD interface with Price Waterhouse Blue 2 System 2. Receive daily sales figures broken down by state from Charles Schwab (if applicable) 3. Produce daily warning report for sales in excess of pre-determined percentage 4. Analysis of all sales data to determine trends within certain states B. Filings 1. Produce and mail the following required filings: a. Initial filings - produce all required forms and follow-up on any comments, including notification of SEC effectiveness b. Renewals - produce all renewal documents and mail to states, including follow-up to ensure all is in order to continue selling in states c. Sales Reports - produce all relevant sales reports for the states and complete necessary documents to properly file sales reports with states d. Annual Report Filings - file copies of all annual reports with states e. Prospectus filings - file all copies of definitive Prospectus and Statement of Additional Information with the states f. Post-Effective Amendment filing - file all Post-Effective Amendments with the states as well as with other required documents 2. On demand additional states - complete filing for any additional states requested for filing. This includes all of the items in 1(A). 3. Amendments to current permits - file in a timely manner any amendment to registered share amounts 4. Update and file hard copy of all data pertaining to individual permits C. Consulting and Analysis - We will supply you with the most current fee structure for each state and ascertain procedures to minimize Blue Sky State Registration expenditures II. Services Related to Portfolio Valuation and Mutual Fund Accounting All financial data provided to, processed and reported by FPS under this Agreement shall be stated in U. S. dollars. FPS' obligation to convert, equate or deal in foreign currencies or values extends only to the accurate transposition of information received from the various pricing and information services. A. Daily Accounting Services 1. Calculate Net Asset Value ("NAV") and Offering Price Per Share ("POP"): Fund Level Update the daily market value of securities held by the Fund using FPS' standard agents for pricing U.S. equity and bond securities. The U.S. equity pricing services are Reuters, Inc., Muller Data Corporation, J.J. Kenny Co., Inc. and Interactive Data Corporation (IDC). Muller Data, Dow Jones Markets (formerly Telerate Systems, Inc.), J.J. Kenny Co., Inc., Municipal Market Data and IDC are also used for bond and money market prices/yields. Bloomberg is available and used for price research. Enter limited number of manual prices supplied by Spirit of America Management Corp. (the "Adviser") and/or broker. Review variance reporting on-line and in hard copy for price changes in individual securities using variance levels established by the Adviser. Verify U.S. dollar security prices exceeding variance levels by notifying the Adviser and pricing sources of noted variances. Review for ex-dividend items indicated by pricing sources; trace to Fund's general ledger for agreement. Fund and Each Class Allocate daily unrealized Fund appreciation/depreciation to classes based upon value of outstanding class shares. Prepare NAV proof sheets. Review components of change in NAV for reasonableness. Complete Fund and class control proofs. Communicate pricing information (NAV/Offering Price) to Adviser, the Fund's transfer agent ("Transfer Agent") and, electronically, to NASDAQ. 2. Determine and Report Cash Availability to Adviser by approximately 9:30 a.m. Eastern Time: Fund Level Receive daily cash and transaction statements from the agent responsible for the safekeeping of the Fund's assets (the "Custodian") by 8:30 a.m. Eastern time. Receive previous day shareholder activity reports from the Transfer Agent 8:30 a.m. Eastern time. Class level shareholder activity will be accumulated into the Fund's available cash balances. Fax hard copy of Cash Availability calculations with all details to Adviser. Supply Adviser with 3-day cash projection report. For the Fund, prepare daily bank cash reconciliations. Notify the Custodian and Adviser of any reconciling items. 3. Reconcile and Record All Daily Expense Accruals: Fund Level Accrue expenses based on budget supplied by the Adviser either as percentage of net assets or specific dollar amounts. If applicable, monitor expense limitations established by the Adviser. If applicable, accrue daily amortization of organizational expense. If applicable, complete daily accrual of 12b-1 expenses. Fund and Each Class Class specific accruals completed such as daily accrual of 12b-1 expenses. Allocate Fund expenses to classes based upon value of outstanding class shares. 4. Verify and Record All Daily Income Accruals for Debt Issues: Fund Level Review and verify all system generated interest and amortization reports. . . . . . . . . . . . Establish unique security codes for bond issues to permit segregated trial balance income reporting. Fund and Each Class Allocate Fund income to classes based upon value of outstanding class shares. 5. Monitor Securities held for cash dividends, corporate actions and capital changes such as splits, mergers, spinoffs, etc. and process appropriately. Fund Level Monitor electronically received information from Muller Data Corporation for all domestic securities. Review current daily security trades for dividend activity. Monitor collection and postings of corporate actions, dividends and interest. Fund and Each Class Allocate Fund dividend income to classes based upon value of outstanding class shares. 6. Enter All Security Trades on Investment Accounting System (IAS) based on written instructions from the Adviser. Fund Level Review system verification of trade and interest calculations. Verify settlement through statements supplied by the Custodian. Maintain security ledger transaction reporting. Maintain tax lot holdings. Determine realized gains or losses on security trades. Provide broker commission reporting. Fund and Each Class Allocate all Fund level realized and unrealized capital gains/losses to classes based upon value of class outstanding shares. 7. Enter All Fund Share Transactions on IAS: Each Class Process activity identified on reports supplied by the Transfer Agent. Verify settlement through statements supplied by the Custodian. Reconcile report balances to the Transfer Agent. Roll each classes' capital share values into Fund and determine allocation percentages based upon the value of each classes' outstanding shares to the Fund total. 8. Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing all asset, liability, equity, income and expense accounts) Fund Level Post manual entries to the general ledger. Post Custodian activity. Post security transactions. Post and verify system generated activity, i.e., income and expense accruals. Fund and Each Class Prepare Fund's general ledger net cash proof used in NAV calculation. Post class specific shareholder activity and roll values into Fund. Allocate all Fund level net cash accounts on the Fund trial balance to each specific class based upon value of class outstanding shares. Maintain allocated Trial Balance accounts on class specific Allocation Reports. Maintain class-specific expense accounts. Prepare class-specific proof/control reports to ensure accuracy of allocations. 9. Review and Reconcile with Custodian Statements: Fund Level Verify all posted interest, dividends, expenses, and shareholder and security payments/receipts, etc. (Discrepancies will be reported to and resolved by the Custodian.) Post all cash settlement activity to the trial balance. Reconcile to ending cash balance accounts. Clear IAS subsidiary reports with settled amounts. Track status of past due items and failed trades as reported by the Custodian. 10. Submission of Daily Accounting Reports to Adviser: (Additional reports readily available.) Fund Level Portfolio valuation (listing inclusive of holdings, costs, market values, unrealized appreciation/depreciation and percentage of portfolio comprised of each security.) Cash availability. 3-day Cash Projection Report Fund and Each Class Fund Trial Balance and Class Allocation Report NAV Calculation B. Monthly Accounting Services 1. For each Fund, full Financial Statement Preparation (automated Statements of Assets and Liabilities, of Operations and of Changes in Net Assets) and submission to Adviser by 10th business day. Class specific capital share activity and expenses will be disclosed also. 2. Submission of Monthly Automated IAS Reports to Adviser: Fund Level Security Purchase/Sales Journal Interest and Maturity Report Brokers Ledger (Commission Report) Security Ledger Transaction Report with Realized Gains/Losses Security Ledger Tax Lot Holdings Report Additional reports available upon request 3. Reconcile Accounting Asset Listing to Custodian Asset Listing: Fund Level Report any security balance discrepancies to the Custodian and the Adviser. 4. Provide Monthly Analysis and Reconciliation of Additional Trial Balance Accounts, such as: Fund Level Security cost and realized gains/losses Interest/dividend receivable and income Payable/receivable for securities purchased and sold Fund and Each Class Payable/receivable for Fund's shares; issued and redeemed Expense payments and accruals analysis C. Annual (and Semi-Annual) Accounting Services 1. Annually assist and supply Fund's auditors with schedules supporting securities and shareholder transactions, income and expense accruals, etc. for each Fund and each Class during the year in accordance with standard audit assistance requirements. 2. Provide N-SAR Reporting (Accounting Questions) on a Semi-Annual Basis: If applicable for Fund and Classes, answer the following items: 2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75 and 76. D. Accounts and Records On each day the NYSE is open for regular trading and subject to the proper receipt (via Oral or Written Instructions) by FPS of all information required to fulfill its duties under this Agreement, FPS will maintain and keep current the following Accounts and Records and any other records required to be kept pursuant to Rule 31a-1 of the Act relating to the business of the Fund in such form as may be mutually agreed upon between the Fund and FPS: (1) Net Asset Value Calculation Reports; (2) Cash Receipts Report; (3) Cash Disbursements Report; (4) Dividends Paid and Payable Schedule; (5) Purchase and Sales Journals - Portfolio Securities; (6) Subscription and Redemption Reports; (7) Security Ledgers - Transaction Report and Tax Lot Holdings Report; (8) Broker Ledger - Commission Report; (9) Daily Expense Accruals; (10) Daily Interest Accruals; (11) Daily Trial Balance; (12) Portfolio Interest Receivable and Income Reports; (13) Portfolio Dividend Receivable and Income Reports; (14) Listing of Portfolio Holdings - showing cost, market value and percentage of portfolio comprised of each security; and (15) Average Daily Net assets provided on monthly basis. E. Protocol concerning accuracy of Pricing Portfolio Securities FPS shall perform the ministerial calculations necessary to calculate the net asset value each day that the New York Stock Exchange is open for business, in accordance with; (i) the current Prospectus and Statement of Additional Information for the Fund, and (ii) procedures with respect thereto approved by the Board of Directors of the Fund and supplied in writing to FPS. Portfolio items for which market quotations are available by FPS' use of an automated financial information service (the "Service") shall be based on the closing prices of such Service except where the Fund or the Adviser has given or caused to be given specific Written or Oral Instructions to utilize a different value subject to the appropriate provisions in the Fund's Prospectus and Statement of Additional Information then in effect. All of the portfolio securities shall be given such values as the Fund or the Adviser provides by Written or Oral Instructions including all restricted securities and other securities requiring valuation not readily ascertainable solely by such Service subject to the appropriate provisions in the Fund's Prospectus and Statement of Additional Information then in effect. FPS will have no responsibility or liability for (i) the accuracy of prices quoted by such Service; (ii) the accuracy of the information supplied by the Fund; or (iii) any loss, liability, damage, or cost arising out of any inaccuracy of such data. FPS will have no responsibility or duty to include information or valuations which are to be provided by the Fund in any computation unless and until it is supplied to FPS in usable form by 4:45 p.m. on the day which such calculation is made. FPS will record corporate action information as received from the Custodians, the Service or the Fund. FPS will not have any duty to gather or record corporate action information not supplied by these sources. FPS will assume no liability for price changes caused by the Adviser or any subadvisor, Custodian, suppliers of security prices, corporate action and dividend information, or any party other than FPS itself. Assumptions Regarding Portfolio Valuation and Mutual Fund Accounting The fees as set forth in Schedule "B" are based on the following assumptions. To the extent these assumptions are inaccurate or require change, fee revisions may be necessary. Basic Assumptions: 1. It is assumed that the portfolio asset composition will be primarily real estate securities such as REITS and securities of publicly traded real estate companies. Trading activity is expected to be 20 trades per month with an annual turnover rate not to exceed 100%. 2. The Fund has a tax year-end which coincides with its fiscal year-end. No additional accounting requirements are necessary to identify or maintain book-tax differences. FPS does not provide security tax accounting which differs from its book accounting under this fee schedule 3. The Fund agrees to the use of FPS' standard current pricing services for domestic equity and debt securities. It is assumed that FPS will work closely with the Fund to ensure the accuracy of the Fund's NAV and to obtain the most satisfactory pricing sources and specific methodologies prior to the actual start-up date. The Fund will establish security variance procedures to minimize NAV miscalculations. 4. To the extent the Fund requires a limited number of daily security prices from specific brokers for domestic securities (as opposed to pricing information received electronically), these manual prices will be obtained by the Fund's Adviser and faxed to FPS by 4:00 p.m. Eastern time for inclusion in the NAV calculations. The Adviser will supply FPS with the appropriate pricing contacts for these manual quotes. 5. Procedural discussions between FPS and the Fund are required to clarify the appropriate pricing and dividend rate sources if the Fund invests in open-end regulated investment companies (RIC's). Depending on the methodologies selected by the Fund, additional fees may apply. 6. FPS will supply daily Portfolio Valuation Reports to the Fund's Adviser identifying current security positions, original/amortized cost, security market values and changes in unrealized appreciation/depreciation. It will be the responsibility of the Adviser to review these reports and to promptly notify FPS of any possible problems, trade discrepancies, incorrect security prices or corporate action/capital change information that could result in a misstated Fund NAV. 7. The Fund does not currently expect to invest in swaps, futures, hedges, derivatives or foreign (non-U.S. dollar denominated) securities and currency. To the extent these investment strategies should change, additional fees may apply after the appropriate procedural discussions have taken place between FPS and Fund management. (Two weeks advance notice is required should the Fund commence trading in these investments.) 8. The Fund will supply FPS with income information such as accrual methods, interest payment frequency details, coupon payment dates, floating rate reset dates, and complete security descriptions with issue types and CUSIP numbers for all debt issues. The Fund's Adviser shall supply the yield to maturity and related cash flow schedules for any mortgage/asset-backed securities held in the Fund. Depending on the level of support required for the mortgage-backed securities and asset-backed securities held in the Fund, additional fees may apply. 9. With respect to mortgage/asset-backed securities including GNMA's, FHLMC's, FNMA's, CMO's and ARM's, the Fund shall direct the Custodian or an Adviser supplied source, to provide FPS with current principal repayment factors on a timely basis in accordance with the appropriate securities schedule. Income accrual adjustments (to the extent necessary) based upon initial estimates will be completed by FPS when actual principal/income payments are collected by the Custodian and reported to FPS. 10. FPS will use the ICI\NAREIT Tracking System along with Bloomberg to obtain receipt of complete and accurate information on REITs. The Adviser will supply/support FPS in timely receipt of dividend information and return of capital characterization for the REITs held in the Fund, if not available from the ICI or Bloomberg systems. To the extent applicable, FPS will maintain on a daily basis U.S. dollar denominated qualified covered call options and index options reporting on the daily Trial Balance and value the respective options and underlying positions. This Agreement does not provide for tax classifications if they are required. 11. The Fund is responsible for the establishment and monitoring of any segregated accounts pertaining to any line of credit for temporary administrative purposes, and/or leveraging/hedging the portfolio. FPS will reflect appropriate trial balance account entries and interest expense accrual charges on the daily trial balance adjusting as necessary at month-end. 12. If the Fund commences participation in security lending or short sales within its portfolio securities, additional fees may apply. Should the Fund require these additional services, procedural discussions must take place between FPS and the Fund's Adviser to clarify responsibilities. (Two weeks advance notice to FPS is required should the Fund desire to participate in the above.) 13. The following specific deadlines will be met and complete information will be supplied by the Fund in order to minimize any settlement problems, NAV miscalculations or income accrual adjustments. The Fund will direct the Adviser to provide Trade Authorization Forms to FPS with the appropriate officer's signature on all security trades placed by the Fund no later than 12:30 p.m. Eastern time on settlement/value date for short term money market securities issues (assuming that trade date equals settlement date); and by 11:00 a.m. Eastern time on trade date plus one for non-money market securities. Receipt by FPS of trade information within these identified deadlines may be made via telex, fax or on-line system access. The Adviser will supply FPS with the trade details in accordance with the above stated deadlines. The Adviser will provide all information required by FPS, including CUSIP numbers and/or ticker symbols for all U.S. dollar denominated trades on the Trade Authorization, telex or on-line support. FPS will supply the Adviser with recommended trade ticket documents to minimize receipt of incomplete information. FPS will not be responsible for NAV changes or distribution rate adjustments that result from incomplete trade information. 14. To the extent the Fund utilizes purchases in-kind (U.S. dollar denominated securities only) as a method for shareholder subscriptions, FPS will provide the Fund with procedures to properly handle and process such transactions. Should the Fund prefer procedures other than those provided by FPS, additional fees may apply. Discussions shall take place at least two weeks in advance between FPS and the Fund to clarify the appropriate in-kind operational procedures to be followed. 15. The Parties will establish mutually agreed upon amortization procedures and accretion requirements for debt issues held by the Fund prior to commencement of operations. Adjustments for financial statements regarding any issues with original issue discount (OID) are not included under this Agreement. The Fund will direct its independent auditors to complete the necessary OID adjustments for financial statements and/or tax reporting. III. Services Related to Shareholder and Share Transactions The following services related to Shareholder and Share Transactions shall be performed under this Agreement. A. Shareholder File 1. Establish new accounts and enter demographic data into shareholder base. Includes . . . . . . . . . . . in-house processing and National Securities Clearing Corporation (NSCC) - Fund/SERV - Networking transmissions. 2. Create Customer Information File (CIF) to link accounts within the Fund. Facilitates account maintenance, lead tracking, quality control, household mailings and combined statements. 3. 100% quality control of new account information including verification of initial investment. 4. Maintain account and customer file records based on shareholder request and routine quality review. 5. Maintain tax ID certification and Non Resident Agent (NRA) records for each account, including backup withholding. 6. Provide written confirmation of address changes. 7. Produce shareholder statements for daily activity, dividends, on-request, interested party and periodic mailings. 8. Establish and maintain dealer file by fund group, including dealer, branch, representative number and name. 9. Automated processing of dividends and capital gains with daily, monthly, quarterly or annual distributions. Payment options include reinvestment, directed payment to another fund, cash via mail, Fed wire or ACH. 10. Image all applications, account documents, data changes, correspondence, monetary transactions and other pertinent shareholder documents. B. Shareholder Services 1. Provide quality service through a staff of highly trained NASD licensed customer service personnel, including phone, research and correspondence representatives. 2. Answer shareholder calls: provide routine account information, transaction details including direct and wire purchases, redemptions, exchanges, systematic withdrawals, pre-authorized drafts, FundSERV and wire order trades, problem solving and process telephone transactions. 3. Silent monitoring of shareholder calls by the phone supervisor to ensure exceptional customer service. 4. Record and maintain tape recordings of all shareholder calls for a six month period. 5. Phone Supervisor produces daily management reports of shareholder calls which track volumes, length of calls, average wait time and abandoned call rates to ensure quality service. 6. Customer inquiries received by letter or telephone are thoroughly researched by a correspondence team member. These inquires include such items as account/customer file information, complete historical account information, stop payments on checks, transaction details and lost certificates. 7. Provide written correspondence in response to shareholder inquiries and request through the CORRO Letter Writer System. Whenever possible, unclear shareholder instructional letters are handled by a phone call to the shareholder from our phone representatives to avoid delay in processing of the request. C. Investment Processing 1. Establish and maintain Rights of Accumulation and Letter of Intent files. 2. Initial investment (checks or Fed wires). 3. Subsequent investments processed through lock box. 4. Pre-authorized investments (PAD) through ACH system. 5. Government allotments through ACH system. 6. NSCC-Fund/SERV trades. 7. Prepare and process daily bank deposit of shareholder investments. D. Redemption Processing 1. Process mail redemption requests. 2. Process telephone redemption transactions. 3. Establish Systematic Withdrawal File and process automated transactions on monthly basis. 4. Distribute redemption proceeds distributed to shareholder by check, wire or ACH processing. 5. Provide NSCC-Fund/SERV trade processing. E. Exchange & Transfer Processing 1. Process legal transfers. 2. Issue and cancel certificates. 3. Replace certificates through surety bonds (separate charge to shareholder). 4. Process exchange transactions (letter and telephone request). 5. Process Automated Customer Account Transfer Service (ACATS) transfers. F. Retirement Plan Services 1. Fund sponsored IRAs offered using Semper Trust Company as "custodian." Services include: a. Contribution processing b. Distribution processing c. Apply rollover transactions d. Process Transfer of Assets e. Letters of Acceptance to prior custodians f. Notify IRA holders of 70 one-half requirements g. Calculate Required Minimum Distributions (RMD) h. Maintain beneficiary information file i. Solicit birth date information 2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as "custodian." Services include those listed under IRA's and: a. Identification of employer contributions 3. Fund sponsored Qualified plans offered: a. Plan document available b. Omnibus/master account processing only c. Produce annual statements d. Process contributions e. Process distributions f. Process rollover and Transfer of Assets transactions G. Commission Processing 1. Settlement and payment of dealer commissions on the 10th and 25th of each month for front-end load funds. 2. Settlement and payment of CDSC fees on the 1st of each month for back-end load funds. H. Settlement & Control 1. Daily review of processed shareholder transactions to assure input was processed correctly. Accurate trade activity figures passed to the Fund's accounting agent by 10:00 a.m. Eastern Time. 2. Preparation of daily cash movement information to be passed to the Fund's accounting agent and Custodian by 10:00 a.m. Eastern Time for use in determining the Fund's daily cash availability. 3. Prepare a daily share reconcilement which balances the shares on the Transfer Agent system to those on the books of the Fund. 4. Resolve any outstanding share or cash issues that are not cleared by trade date + 2. 5. Process shareholder adjustments to also include the proper notification of any booking entries needed, as well as any necessary cash movement. 6. Settlement and review of the Fund's declared dividends and capital gains to include the following: a. Review record date report for accuracy of shares. b. Preparation of dividend settlement report after dividend is posted. Verify the posting date shares, the rate used and the NAV price of reinvest date to ensure dividend was posted properly. c. Distribute copies to the Fund's accounting agent. d. Preparation of the checks prior to being mailed. e. Sending of any dividends via wires if requested. f. Preparation of cash movement information for the cash portion of the dividend payout on payable date. 7. Placement of stop payments on dividend and liquidation checks as well as the issuance of their replacements. 8. Maintain inventory control for stock certificates and dividend check form. 9. Aggregate tax filings for all FPS clients. All types of monthly deposits to the IRS of all taxes withheld from shareholder disbursements, distributions and foreign account distributions. Correspond with the IRS concerning any of the above issues. 10. Timely settlement and cash movement for all NSCC - Fund/SERV activity. I. Year-End Processing 1. Maintain shareholder records in accordance with IRS notices for under-reporting and invalid Tax IDs. This includes initiating 31% backup withholding and notifying shareholders of their tax status and the corrective action which is needed. 2. Conduct annual W-9 solicitation of all uncertified accounts. Update account tax status to reflect backup withholding or certified status depending upon responses. 3. Conduct periodic W-8 solicitation of all non-resident alien shareholder accounts. Update account tax status with updated shareholder information and treaty rates for NRA tax. 4. Review IRS Revenue Procedures for changes in transaction and distribution reporting and specifications for the production of forms to ensure compliance. 5. Coordinate year-end activity with client. Activities include producing year-end statements, scheduling record dates for year-end dividends and capital gains, production of combined statements and printing of inserts to be mailed with tax forms. 6. Distribute Dividend Letter to Fund for sign off on all distributions paid year-to-date. Dates and rates must be authorized so that they can be used for reporting to the IRS. 7. Coordinate the ordering of forms and envelopes from vendor in preparation of tax reporting. Review against IRS requirements to ensure accuracy. 8. Prepare form flashes for the microfiche vendor. Test and oversee the production of fiche for year end statements and tax forms. 9. Match and settle tax reporting totals to fund records and on-line data from INVESTAR. 10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end valuations. Quality assure forms before mailing to shareholders. 11. Monitor IRS deadlines and special events such as cross over dividends and prior year IRA contributions. 12. Prepare magnetic tapes and appropriate forms for the filing of all reportable activity to the IRS. J. Client Services 1. An Account Manager shall be assigned to the Fund. The Account Manager is the liaison between the Fund and FPS. Responsibilities include scheduling of events, system enhancement implementation, special promotion/event implementation and follow-up, and constant interaction with the Fund on daily operational issues. Specifically: a. Scheduling of dividends, proxies, report mailing and special mailings. b. Coordinate with the Fund the shipment of materials for scheduled mailings. c. Liaison between the Fund and support services for preparation of proofs and eventual printing of statement forms, certificates, proxy cards, envelopes, etc. d. Handle all notification to the client regarding proxy tabulation through the meeting. Coordinate scheduling of materials, including voted cards, tabulation letters, and shareholder list, to be available for the meeting. e. Order special reports, tapes, discs for special systems requests received. f. Implement any new operational procedures, i.e., check writing feature, load discounts, minimum waivers, sweeps, telephone options, PAD promotions, etc. g. Coordinate with other operating departments any special events, i.e., mergers, new fund start ups, small account liquidations, combined statements, household mailings, additional mail files, etc. h. Prepare standard operating procedures and review prospectuses. Coordinate implementation of suggested changes with the Fund. i. Liaison between the Fund and FPS staff regarding all service and operational issues. 2. Blue Sky Processing a. Maintain file with additions, deletions, changes and updates at the Fund's direction. K. Other Related Services Although not included under the terms hereunder, the following services are available by amendment to this Agreement. 1. Systematic linkage of shareholder accounts with exact matches of social security numbers (SSN) and address for the purpose of consolidated account history reporting. Periodic production of laser printed combined statements. 2. Production of household mailing labels which enable the Fund to do special mailings to each address as opposed to each account. 3. Produce shareholder lists, labels and ad hoc reports as requested. Daily Reports Report Number Report Description -- Daily Activity Register 024 Tax Reporting Proof 051 Cash Receipts and Disbursement Proof 053 Daily Share Proof 091 Daily Gain/Loss Report 104 Maintenance Register 044 Transfer/Certificate Register 056 Blue Sky Warning Report Monthly Reports Report Description: Blue Sky Certificate Listing State Sales and Redemption Monthly Statistical Report Account Demographic Analysis MTD Sales - Demographics by Account Group Account Analysis by Type iv. Services Related to Custody Administration The following services related to Administration of the custody of the assets of the Fund shall be performed under this Agreement. Assign a Custody Administrator to accept, control and process daily portfolio transactions through direct computer link with the Custodian. Match and review DTC eligible ID's and trade information with the Fund's instructions for accuracy and coordinating with the Custodian and the Fund's accounting agent for recording and affirmation processing with the depository. Systematically settle all depository eligible issues. Transactions requiring physical delivery will be settled through the Custodian's New York Office. Assist the Fund in placing cash management trades through the Custodian, such as commercial paper, CD's and repurchase agreement. Provide the Fund's accounting agent and investment adviser with daily custodian statements reflecting all prior cash activity on behalf of each portfolio by 8:30 a.m. Eastern time. Complete description of any posting, inclusive of Sedol/CUSIP numbers, interest/dividend payment date, capital stock details, expense authorizations, beginning/ending cash balances, etc., will be provided by the Custodian's reports or system. Provide monthly activity statements combining both cash changes and security trades and a full portfolio listing. Communicate to the Fund and the Fund's accounting agent on any corporate actions, capital changes and interest rate changes supported by appropriate supplemental reports received from the Custodian. Follow-up will be made with the Custodian to ensure all necessary actions and/or paperwork is completed. Work with fund accounting and the Custodian on monthly asset reconciliations. Coordinate and resolve unsettled dividends, interest, paydowns and capital changes. Assist in resolution of failed transactions and any settlement problems. Arrange for securities lending, lines of credit, and/or letters of credit through the Custodian. Provide automated mortgage-backed processing through the Custodian. Provide broker interface ensuring trade settlement with fail trade follow-up. Provide the Fund's auditors with trade documentation to help expedite the Fund's audit. Schedule "B" FEE SCHEDULE FOR SPIRIT OF AMERICA INVESTMENT FUND, INC. INVESTMENT COMPANY SERVICES FEE SCHEDULE This Fee Schedule is fixed for a period of two (2) years from the Effective Date as that term is defined in the Agreement. A third year term will be offered at fees that shall be increased at a rate that is less than or equal to 10%. I. Fees related to Administration (Compliance and Financial Reporting) A. Subject to a minimum annual fee of $55,000 for the initial Series' first class of shares and $12,000 for each additional domestic portfolio or class thereof, the Fund agrees to pay FPS each month an asset-based fee calculated at the annual rate of: .0015 On the First $ 50 Million of Average Net Assets .0010 On the Next $ 50 Million of Average Net Assets .0005 Over $100 Million of Average Net Assets II. Fees related to Portfolio Valuation and Mutual Fund Accounting A. Annual Fee Schedule Per Domestic Portfolio U.S. Dollar Denominated Securities only (1/12th payable monthly ) $24,000 Minimum to $ 10 Million of Average Net Assets* .0004 On the Next $ 40 Million of Average Net Assets* .0003 On the Next $ 50 Million of Average Net Assets* .0001 Over $100 Million of Average Net Assets* Each additional class is $12,000 minimum per year. *For multiple class portfolios, fees are based on combined classes' average net assets. B. Pricing Services Quotation Fee Specific costs will be identified based upon options selected by the Adviser and will be billed monthly. FPS does not currently pass along charges for U.S. equity prices supplied by Muller Data. Should the Fund invest in security types other than domestic equities supplied by Muller Data, the following fees would apply. Security Types: Muller Data Corp.* Interactive Data Corp.* J.J. Kenney Co., Inc. Government Bonds Muller Data Corp.* $.50 Interactive Data Corp.* $.50 J.J. Kenney Co., Inc. $.25 (a) Mortgage-Backed (evaluated, seasoned, closing) Muller Data Corp.* $.50 Interactive Data Corp.* $.50 J.J. Kenney Co., Inc. $.25 (a) Corporate Bonds (short and long term) Muller Data Corp.* $.50 Interactive Data Corp.* $.50 J.J. Kenney Co., Inc. $.25 (a) U.S. Municipal Bonds (short and long term) Muller Data Corp.* .55 Interactive Data Corp.* .80 J.J. Kenney Co., Inc. .50 (b) CMO's/ARM's/ABS Muller Data Corp. 1.00 Interactive Data Corp.* .80 J.J. Kenney Co., Inc. 1.00 (a) Convertible Bonds Muller Data Corp. .50 Interactive Data Corp.* .50 J.J. Kenney Co., Inc. 1.00 (a) High Yield Bonds Muller Data Corp. .50 Interactive Data Corp.* .50 J.J. Kenney Co., Inc. 1.00 (a) Mortgage-Backed Factors (per Issue per Month) Muller Data Corp. 1.00 Interactive Data Corp.* n/a J.J. Kenney Co., Inc. n/a U.S. Equities Muller Data Corp. (d) Interactive Data Corp.* .15 J.J. Kenney Co., Inc. n/a Domestic Options Muller Data Corp. n/a Interactive Data Corp.* .15 J.J. Kenney Co., Inc. n/a Domestic Dividends & Capital Changes(per Issue per month) Muller Data Corp. (d) Interactive Data Corp.* 3.50 J.J. Kenney Co., Inc. n/a Foreign Securities Muller Data Corp. .50 Interactive Data Corp.* .50 J.J. Kenney Co., Inc. n/a Foreign Securities Dividends & Capital Changes(per Issue per Month) Muller Data Corp. 2.00 Interactive Data Corp.* 4.00 J.J. Kenney Co., Inc. n/a Set-up Fees Muller Data Corp. n/a Interactive Data Corp.* n/a(e) J.J. Kenney Co., Inc. .25 (c) All Added Items Muller Data Corp. n/a Interactive Data Corp.* n/a J.J. Kenney Co., Inc. .25 (c) * Based on current Vendor costs, subject to change. Costs are quoted based on individual security CUSIP/identifiers and are per issue per day. (a) $35.00 per day minimum (b) $25.00 per day minimum (c) $ 1.00, if no cusip (d) At no additional cost to FPS clients(e) Interactive Data also charges monthly transmission costs and disk storage charges. 1) Futures and Currency Forward Contracts - $ 2. 00 per Issue per Day 2) Dow Jones Markets (formerly Telerate Systems, Inc.)* (if applicable) *Based on current vendor costs, subject to change. Specific costs will be identified based upon options selected by the Adviser and will be billed monthly. 3) Reuters, Inc.* *Based on current vendor costs, subject to change. FPS does not currently pass along the charges for the domestic security prices supplied by Reuters, Inc. 4) Municipal Market Data* (if applicable) *Based on current vendor costs, subject to change. Specific costs will be identified based upon options selected by the Adviser and will be billed monthly. C. SEC Yield Calculation: (if applicable) Provide up to 12 reports per year to reflect the yield calculations for non-money market funds required by the SEC, $1,000 per year per Fund. For multiple class Funds, $1,000 per year per class. (U.S. dollar denominated securities only). III. Fees related to Transfer Agency and Shareholder Servicing A. Transfer Agent and Shareholder Services: $20.00 per account per year per portfolio Minimum monthly fee - $2,250 per portfolio. This fee is reduced to $24,000/year for the first two years of a 3-year contract. Each additional class has a $1,250 minimum monthly fee. B. IRA's, 403(b) Plans, Defined Contribution/Benefit Plans: Annual Maintenance Fee - $12.00 per account per year (normally charged to participants) C. FUND/SERV Processing (if applicable) $1,000 One time start-up fee $50.00 Per month/per Fund monthly maintenance fee D. Networking Processing (if applicable) $1,000 One time start-up fee $75.00 Per month/per Fund monthly maintenance fee IV. Fees related to Custody Administration A. Domestic Securities and ADRs: (1/12th payable monthly) .0002 On the First $ 50 Million of Combined Average Net Assets .00015 On the Next $150 Million of Combined Average Net Assets .000125 Over $200 Million of Combined Average Net Assets Minimum is $6,000 per portfolio per year ($500 monthly). B. Custody Domestic Securities Transactions Charge: (billed monthly) Book Entry DTC, Federal Book Entry, PTC. . . . . . . . . $12.00 Physical Securities, Options/Futures . . . . . . . $20.00 RIC's. . . . . . . . . . . . . . . . . . . . . . . $24.50 P & I Paydowns . . . . . . . . . . . . . . . . . . $7.00 Wires. . . . . . . . . . . . . . . . . . . . . . . $7.00 Check Request. . . . . . . . . . . . . . . . . . . $6.00 Euro CD's. . . . . . . . . . . . . . . . . . . . . $45.00 Eurotime Deposit . . . . . . . . . . . . . . . . . $15.00 A transaction includes buys, sells, maturities or free security movements. Cedel/Euroclear 4 BPS safekeeping charge, $20 transaction charge. Fee expressed in basis points per annum based upon month end market value. Global Network Fee $500 per portfolio per month C. When Issued, Securities Lending, Index Futures, etc. Should any investment vehicle require a separate segregated custody account, a fee of $250 per account per month will apply. D. Custody Miscellaneous Fees Administrative fees incurred in certain local markets will be passed onto the customer with a detailed description of the fees. Fees include income collection, corporate action handling, overdraft charges, funds transfer, special local taxes, stamp duties, registration fees, messenger and courier services and other out-of-pocket expenses. V. Out-of-Pocket Expenses The Fund will reimburse FPS monthly for all reasonable out-of-pocket expenses which including telephone, postage, EDGAR filings, Fund/SERV and Networking expenses, telecommunications, special reports, record retention, special transportation costs, copying and sending materials to auditors and/or regulatory agencies as incurred and approved. VI. Additional Services To the extent the Fund commences investment techniques such as futures, security lending, swaps, leveraging, short sales, derivatives, precious metals, or foreign (non-U.S.) securities and currency, additional fees will apply. Activities of a non-recurring nature such as shareholder in-kinds, fund consolidations, mergers or reorganizations will be subject to negotiation. To the extent that the Fund should decide to issue multiple/separate classes of shares in excess of those listed on Schedule "C", additional fees will apply. Any additional/enhanced services, programming requests or reports will be quoted upon request. Schedule "C" Identification of Separate Series of Shares to which this Agreement applies: 1. Spirit of America Investment Fund, Inc. EX-15 6 DISTRIBUTION PLAN DISTRIBUTION AND SERVICES PLAN PURSUANT TO RULE 12b-1 This Plan constitutes the DISTRIBUTION AND SERVICES PLAN (the "Plan") of Spirit of America Investment Fund, Inc.(the "Fund"), a Maryland corporation, adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"). The Plan relates to the shares of stock ("Shares") of the Fund. Section 1. The Fund shall pay SSH Securities, Inc. (the "Distributor") a fee in an amount not to exceed on an annual basis 0.30% of the average daily net assets of the Fund (the "Fee") to compensate the Distributor for the following: (i) payments the Distributor makes to other institutions and industry professionals, broker-dealers, including the investment adviser, Distributor and their affiliates or subsidiaries (collectively referred to as "Participating Organizations"), pursuant to an agreement in connection with providing administrative support services to the holders of the Fund's shares; (ii) payments to financial institutions and industry professionals (such as insurance companies, investment counselors, accountants and estate planning firms, but not including banks and savings and loan associations), broker-dealers, the Distributor and the Distributor's affiliates and subsidiaries in consideration for distribution services provided and expenses assumed in connection with distribution assistance, including but not limited to printing and distributing Prospectuses to persons other than current shareholders of the Fund, printing and distributing advertising and sales literature and reports to shareholders used in connection with the sale of the Fund's shares, and personnel and communication equipment used in servicing shareholder accounts and prospective shareholder inquiries; or (iii) services rendered by the Distributor pursuant to the Distribution Services Agreement between the Fund and the Distributor. Section 2. The Fee shall be accrued daily and payable monthly, and shall be paid by the Fund to the Distributor to compensate the Distributor for payments made and services rendered pursuant to Section 1. Section 3. The Plan shall not take effect until it has been approved, together with any related agreements, by votes of a majority of both (a) the Board of Directors of the Fund and (b) the "Disinterested Directors" (as defined below) cast in person at a meeting called for the purpose of voting on the Plan or such related agreements. Section 4. This Plan shall continue automatically for successive annual periods, provided such continuance is specifically approved at least annually in the manner provided for approval of the Plan in Section 3, unless earlier terminated in accordance with the terms hereof. Section 5. The Distributor shall provide to the Directors of the Fund, and the Directors shall review, at least quarterly, a written report of the amounts expended pursuant to Section 1 and the purposes for which such expenditures were made. Section 6. The Plan may be terminated with respect to the Fund at any time by vote of a majority of the Disinterested Directors (as defined below), or by vote of a majority of the outstanding voting securities of the Fund. Section 7. Payments by the Distributor to a Participating Organization shall be subject to compliance by the Participating Organization with the terms of an agreement with the Distributor. All agreements with any person relating to implementation of the Plan shall be in writing, and any agreement related to the Plan shall provide: A. That such agreement may be terminated with respect to the Fund at any time, without payment of any penalty, by vote of a majority of the Disinterested Directors, or by vote of a majority of the outstanding voting securities of the Fund, on not more than 60-days' written notice; and B. That such agreement shall terminate automatically in the event of its assignment. Section 8. The Plan may not be amended to increase materially the amount of distribution expenses permitted pursuant to Section 1 hereof with respect to the Fund without approval in the manner provided in Section 3 hereof, and all material amendments to the Plan shall be approved in the manner provided for approval of the Plan in Section 3. Section 9. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Agreement shall provide to the Distributor and the Board of Directors of the Fund or its designees, and the Board will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, each Participating Organization shall furnish the Fund or its designees with such information as may be reasonably requested (including, without limitation, periodic certifications confirming the provision to Customers of the services described herein) and will otherwise cooperate with the Fund or its designees (including, without limitation, any auditors designated by the Fund or the Distributor), in connection with the preparation of reports to the Board of Directors concerning this Agreement and the monies paid or payable by the Fund pursuant hereto, as well as any other reports or filing that may be required by law. Section 10. (a) The monthly payments to the Distributor under this Plan shall be made in accordance with, and subject to, the following conditions: (i) that payments made out of or charged against the assets of the Fund must be in payment for services rendered on behalf of the Fund; and (ii) that payments of the Fee by the Fund pursuant to this Plan will be reduced to the extent necessary to ensure that the amount of the Fee and any other operating expenses that are accrued on any day with respect to the Fund will not exceed the gross income accrued on that day (with written notice at the time of payment to a Participating Organization). (b) Joint distribution financing by the Fund on behalf of shares (which financing may also involve other investment portfolios or companies that are affiliated persons of the Fund, affiliated persons of such a person, or affiliated persons of the Distributor) shall be permitted in accordance with applicable regulations of the Securities and Exchange Commission as in effect from time to time, and nothing in subparagraph (a) above or any other provision herein shall be construed to the contrary. (c) For the purposes of determining the amounts payable under this Plan, the value of the Fund's net assets shall be computed in the manner specified in the Fund's current Prospectus as then in effect. Section 11. As used herein, (a) the term "Disinterested Directors" shall mean those Directors of the Fund who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it and (b) the terms "affiliated person," "assignment," "interested person," and "majority of the outstanding voting securities" shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. Spirit of America Investment Fund, Inc. /s/ David Lerner By: David Lerner, President /s/ Constance Ferreira Attest: Constance Ferreira,Secretary SSH Securities, Inc. /s/ David Lerner By: David Lerner, President /s/ Attest: , Secretary EX-19 7 POWERS OF ATTORNEY POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams, William J. Baltrus and Carolyn Mead, Esq. and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to take any appropriate action to execute and file with the U.S. Securities Exchange Commission, any amendment to the registration statement of Spirit of America Investment Fund, Inc. (the "Fund"), file any request for exemptive relief from state and federal regulations, to file the prescribed notices in the various states regarding the sale of shares of the Fund, to perform on behalf of the Fund any and all such acts as such attorneys-in-fact may deem necessary or advisable in order to comply with the applicable laws of the United States or any such state, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as each might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 15th day of December, 1997. /s/ David Lerner David Lerner Chairman of the Board, President, Director & Treasurer ACKNOWLEDGMENT State of New York ) ) ss: County of Nassau ) The foregoing instrument was acknowledged before me this 15th day of December, 1997, by David Lerner, Chairman of the Board, President, Director & Treasurer of Spirit of America Investment Fund, Inc. /s/ Daniel Rensch Notary Public POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams, William J. Baltrus and Carolyn Mead, Esq. and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to take any appropriate action to execute and file with the U.S. Securities Exchange Commission, any amendment to the registration statement of Spirit of America Investment Fund, Inc. (the "Fund"), file any request for exemptive relief from state and federal regulations, to file the prescribed notices in the various states regarding the sale of shares of the Fund, to perform on behalf of the Fund any and all such acts as such attorneys-in-fact may deem necessary or advisable in order to comply with the applicable laws of the United States or any such state, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as each might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 2nd day of September, 1997. /s/ Herbert Grant Herbert Grant Director ACKNOWLEDGEMENT State of New York ) ) ss: County of Rockland ) The foregoing instrument was acknowledged before me this 2nd day of September, 1997, by Herbert Grant, Director of Spirit of America Investment Fund, Inc. /s/ Edythe L. DeGroat Notary Public POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams, William J. Baltrus and Carolyn Mead, Esq. and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to take any appropriate action to execute and file with the U.S. Securities Exchange Commission, any amendment to the registration statement of Spirit of America Investment Fund, Inc. (the "Fund"), file any request for exemptive relief from state and federal regulations, to file the prescribed notices in the various states regarding the sale of shares of the Fund, to perform on behalf of the Fund any and all such acts as such attorneys-in-fact may deem necessary or advisable in order to comply with the applicable laws of the United States or any such state, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as each might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the 2nd day of September, 1997. /s/ Allen Kaufman Allen Kaufman Director ACKNOWLEDGEMENT State of New York ) ) ss: County of Nassau ) The foregoing instrument was acknowledged before me this 2nd day of September, 1997, by Allen Kaufman, Director of Spirit of America Investment Fund, Inc. /s/ Bernice Cherry Notary Public POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams, William J. Baltrus and Carolyn Mead, Esq. and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to take any appropriate action to execute and file with the U.S. Securities Exchange Commission, any amendment to the registration statement of Spirit of America Investment Fund, Inc. (the "Fund"), file any request for exemptive relief from state and federal regulations, to file the prescribed notices in the various states regarding the sale of shares of the Fund, to perform on behalf of the Fund any and all such acts as such attorneys-in-fact may deem necessary or advisable in order to comply with the applicable laws of the United States or any such state, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as each might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the the day of December, 1997. /s/ Daniel Lerner Daniel Lerner Director ACKNOWLEDGEMENT State of New York ) ) ss: County of Nassau ) The foregoing instrument was acknowledged before me this 15th day of December, 1997, by Daniel Lerner, Director of Spirit of America Investment Fund, Inc. /s/ Daniel Rensch Notary Public POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and appoints Joseph M. O'Donnell, Esq., Sandra L. Adams, William J. Baltrus and Carolyn Mead, Esq. and each of them, with full power to act without the other, as a true and lawful attorney-in-fact and agent, with full and several power of substitution, to take any appropriate action to execute and file with the U.S. Securities Exchange Commission, any amendment to the registration statement of Spirit of America Investment Fund, Inc. (the "Fund"), file any request for exemptive relief from state and federal regulations, to file the prescribed notices in the various states regarding the sale of shares of the Fund, to perform on behalf of the Fund any and all such acts as such attorneys-in-fact may deem necessary or advisable in order to comply with the applicable laws of the United States or any such state, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act requisite and necessary to be done in connection therewith, as fully as each might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the the 15th day of December, 1997. /s/ Constance Ferreira Constance Ferreira Director ACKNOWLEDGEMENT State of New York ) ) ss: County of Nassau ) The foregoing instrument was acknowledged before me this 15th day of December, 1997, by Daniel Lerner, Director of Spirit of America Investment Fund, Inc. /s/ Daniel Rensch Notary Public -----END PRIVACY-ENHANCED MESSAGE-----