<PAGE> 1
As filed pursuant to Rule 424(b)(4)
under the Securities Act of 1933
Registration No. 333-7543
5,250,000 SHARES
THE DESSAUER GLOBAL EQUITY FUND
SHARES OF BENEFICIAL INTEREST
The Dessauer Global Equity Fund (the "Fund") is a newly organized,
non-diversified, closed-end management investment company. The Fund's investment
objective is long-term capital appreciation. The Fund will seek to achieve its
investment objective by investing primarily in the securities of issuers that it
believes are positioned to benefit from growth in the global economy. Generally,
the companies in which the Fund intends to invest will be traded in the markets
of, or derive a substantial portion of their revenues from business activities
within North America (the U.S. and Canada), Western Europe, Asia and Japan.
There is no assurance that the Fund will achieve its objective. See "The Fund
and its Objective and Policies."
INVESTMENT IN EQUITY SECURITIES OF FOREIGN ISSUERS AND IN SECURITIES
DENOMINATED IN FOREIGN CURRENCIES INVOLVES A SIGNIFICANT DEGREE OF RISK.
ACCORDINGLY, AN INVESTMENT IN THE FUND INVOLVES SPECIAL CONSIDERATIONS AND RISKS
AND SHOULD NOT BE CONSIDERED A COMPLETE INVESTMENT PROGRAM. SEE "RISK FACTORS"
COMMENCING ON PAGE 11.
Dessauer Asset Management, Inc. and Guinness Flight Investment Management
Limited are the Fund's investment advisers. Prior to this offering, there has
been no public market for the shares of beneficial interest (the "Shares") in
the Fund. See "Underwriting." The Shares have been approved for listing, subject
to notice of issuance, on the New York Stock Exchange, under the symbol "DGE."
Investors should be aware that shares of closed-end investment companies in
the past frequently have traded at a discount to their net asset value. The risk
of loss associated with this characteristic of closed-end investment companies
may be greater for investors purchasing Shares in the initial public offering
and expecting to sell such Shares soon after the completion thereof.
The Prospectus sets forth concisely information about the Fund that a
prospective investor should consider before investing. Investors are advised to
read this Prospectus carefully and to retain it for future reference. Additional
information about the Fund has been filed with the Securities and Exchange
Commission and is available upon request without charge and on the Commission's
web site (http://www.sec.gov_). See "Additional Information."
The Fund is the first closed-end investment company to contain an automatic
conversion feature (the "Automatic Conversion Provision").
(Continued on next page)
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 REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<S> <C> <C> <C>
PRICE TO PROCEEDS
PUBLIC SALES LOAD(1) TO FUND(2)
--------------------- --------------------- ---------------------
Per Share.................... $12.50 $0.625 $11.875
Total(3)..................... $65,625,000 $3,281,250 $62,343,750
</TABLE>
(1) The Fund and the Investment Advisers have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deduction of organizational and offering expenses payable by the
Fund, estimated to be $170,000 and $330,000, respectively, which includes up
to $100,000 to be paid to the Underwriter in partial reimbursement of its
expenses. Organizational expenses will be amortized over a period not to
exceed 60 months from the date that the Fund commences investment
operations.
(3) The Fund has granted to the Underwriter an option, exercisable within 45
days of the date hereof, to purchase up to an additional 787,500 Shares
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Sales Load and Proceeds to Fund will be
$75,468,750, $3,773,438 and $71,695,312, respectively. See "Underwriting."
------------------------
The Shares are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to certain
conditions. Delivery of the Shares is expected against payment therefor on or
about June 4, 1997, at the offices of Wheat, First Securities, Inc., Richmond,
Virginia.
WHEAT FIRST BUTCHER SINGER
The date of this Prospectus is May 30, 1997.
<PAGE> 2
(Continued from page one)
The Fund's Declaration of Trust provides that beginning after 18 months
from the date of the initial public offering, the Fund will automatically
convert into an open-end investment company if its Shares close at a 5% or
greater discount from the net asset value of the Fund on the last business day
of any week and for each of the next 14 business days. No further approval of
the shareholders of the Fund would be necessary. See "Automatic Conversion to an
Open-End Investment Company."
The address of Dessauer Asset Mangement, Inc. is 5 Bay State Court, P.O.
Box 1689, Orleans, Massachusetts and its phone number is (508) 255-1651. The
address of Guinness Flight Investment Management Limited in England is
Lighterman's Court, 5 Gainsford Street, Tower Bridge, London, England and its
phone number is 44-171-522-2100, and its United States address is 225 South Lake
Avenue, Suite 777, Pasadena, California and its phone number is (818) 795-0039.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE SHARES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information, including "Risk Factors," included elsewhere in this
Prospectus. The discussion in this Prospectus contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), which involve risks and uncertainties and
represent the Fund's expectation or beliefs, including, but not limited to,
statements concerning the Fund's investment rationale, performance and financial
condition. For this purpose, any statements contained in this Prospectus that
are not statements of historical fact may be deemed to be forward-looking
statements. The Fund desires to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. The Fund wishes to
caution readers that actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" and "Taxes." Unless otherwise
indicated, the information in this Prospectus assumes that the Underwriter's
over-allotment option will not be exercised.
THE FUND.................... The Dessauer Global Equity Fund (the "Fund") is a
non-diversified closed-end management investment
company. The Fund is designed for investors
desiring to invest a portion of their assets in
the securities of issuers that, in the opinion of
Dessauer Asset Management, Inc. ("Dessauer") and
Guinness Flight Investment Management Limited
("Guinness Flight"), the Fund's investment
advisers, are likely to benefit from a high level
of global economic growth. See "Investment
Rationale."
INVESTMENT OBJECTIVE........ The Fund's investment objective is long-term
capital appreciation. The Fund will seek to
achieve its investment objective by investing
primarily in the securities of issuers that it
believes are positioned to benefit from growth in
the global economy. Generally, the companies in
which the Fund intends to invest will be traded in
the markets of, or will derive a substantial
portion of their revenues from business activities
within North America (the U.S. and Canada),
Western Europe, Asia and Japan (collectively, the
"Major Markets"). Under normal market conditions,
the Fund will invest at least 65% of its total
assets in a portfolio of equity securities of
companies located in at least three different
countries. See "The Fund and its Objective and
Policies."
Investment in equity securities of foreign issuers
and in securities denominated in foreign
currencies involves a significant degree of risk.
Accordingly, an investment in the Fund should be
considered as an investment for only a portion of
an investor's assets, not as a complete investment
program. See "Risk Factors."
THE OFFERING................ The Fund is offering 5,250,000 shares of
beneficial interest (the "Shares"), par value
$0.01 per Share, at a maximum offering price of
$12.50 per share. The Shares are being offered by
the underwriter, Wheat, First Securities, Inc.
(the "Underwriter"). The Fund has granted to the
Underwriter an option, exercisable within 45 days
of the date hereof, to purchase up to an
additional 787,500 Shares solely to cover
over-allotments, if any. The minimum investment in
the offering is 100 Shares ($1,250). See
"Underwriting."
INVESTMENT ADVISERS......... Dessauer and Guinness Flight will act as the
Fund's investment advisers (collectively, the
"Investment Advisers"). The Fund has an asset
allocation committee that will be chaired by John
P. Dessauer and will include an additional
representative from Dessauer and one from Guinness
Flight. The asset allocation committee will
allocate assets of the Fund among the Major
Markets and will designate the
3
<PAGE> 4
Fund's cash and cash equivalent holdings. At this
time, it is expected that Dessauer will be
responsible for investment decisions related to
North America and Western Europe and that Guinness
Flight will be responsible for investment
decisions related to Asia and Japan. The Fund will
pay Dessauer a monthly fee at an annual rate of
.60% of the average weekly net asset value of the
Fund and will pay Guinness Flight a monthly fee at
an annual rate of .40% of the average weekly net
asset value of the Fund. This fee, in the
aggregate, is higher than that paid by many other
investment companies.
Dessauer, an investment adviser registered with
the Securities and Exchange Commission (the
"SEC"), was founded in 1986 and as of March 31,
1997 managed $195.0 million in both U.S. and
international assets for individuals. Guinness
Flight, also an investment adviser registered with
the SEC, was founded in 1987. Guinness Flight and
its parent, Guinness Flight Global Asset
Management Limited, managed approximately $4.1
billion in international assets as of March 31,
1997. See "Management of the Fund." Additionally,
in May 1997 Guinness Flight's parent company
merged with Hambros Fund Management PLC. See
"Management of the Fund -- Investment Advisers and
Investment Advisory Agreements."
ADMINISTRATOR............... Investment Company Administration Corporation
("ICAC") will act as the Fund's administrator. The
Fund has agreed to pay ICAC a monthly fee at an
annual rate of .25% of the average weekly net
asset value of the Fund. ICAC has agreed to reduce
its annual fee to a maximum of .10% of the average
weekly net asset value of the Fund as long as the
Fund remains a closed-end investment company. See
"Management of the Fund."
DISTRIBUTIONS AND
DIVIDEND REINVESTMENT
PLAN........................ The Fund's policy is to distribute to its
shareholders all of its net investment income and
net realized capital gains, if any, for each year.
All distributions to shareholders whose Shares are
registered in their own names will be reinvested
automatically in additional Shares of the Fund,
unless the shareholders elect to receive cash.
Shares will be purchased in the open market or, if
the Shares are trading at a premium to net asset
value, issued directly by the Fund. Shareholders
whose Shares are held in the name of a broker or
nominee should contact such broker or nominee to
determine whether or how they may participate in
the Fund's dividend reinvestment plan. See "Taxes"
and "Automatic Dividend Reinvestment and Cash
Purchase Plan."
ESTIMATED EXPENSES.......... The Fund's annual operating expenses, including
advisory and administrative fees and other
expenses (excluding interest expenses), are
estimated to be approximately $1.0 million in its
first full year of operation. Estimated offering
expenses of $330,000 will be charged to capital
upon completion of the offering of the Shares.
Organizational expenses are estimated to be
$170,000 and will be amortized over a period not
to exceed 60 months from the date the Fund
commences operations. See "Summary of the Fund's
Expenses" and "Management of the Fund."
USE OF PROCEEDS............. The principal purpose for which nearly all the net
proceeds of the offering are intended to be used
is the purchase of securities consistent with the
Fund's investment objective and policies. Since
the Fund
4
<PAGE> 5
expects to invest its assets gradually to benefit
from short-term fluctuations in the price of
securities the Fund will purchase, the Fund
anticipates that it will take approximately six
months from the date of this Prospectus to invest
fully the proceeds of the offering in accordance
with its investment objective and policies. See
"Use of Proceeds."
LISTING..................... The Shares have been approved for listing, subject
to notice of issuance, on the New York Stock
Exchange (the "NYSE"), under the symbol "DGE."
AUTOMATIC CONVERSION TO
OPEN-END INVESTMENT
COMPANY..................... The Declaration of Trust provides that, beginning
after 18 months from the date of the Fund's
initial public offering, the Fund will
automatically convert to an open-end investment
company if its Shares close at a market price that
is at a 5% or greater discount to the net asset
value of the Fund on the last business day of any
week and for each of the next 14 business days. A
business day is any day that the NYSE is open. No
further approval of shareholders of the Fund would
be necessary. The Fund is the first closed-end
investment company to contain such an automatic
conversion feature (the "Automatic Conversion
Provision"). This provision may be changed only by
the affirmative vote of the holders of at least
80% of the Fund's outstanding voting securities.
See "Automatic Conversion to Open-End Investment
Company."
If the Fund converts to an open-end investment
company, it will be able to continuously issue and
offer for sale Shares, and each such Share could
be presented to the Fund at the option of the
holder for redemption at a price based on the then
current net asset value per share. Shares would no
longer be listed on the NYSE. The Fund's
investment objective and policies, however, would
not change as a result of conversion to an
open-end investment company.
In the event of a conversion to an open-end
investment company, the Fund also may charge
additional fees in connection with distribution of
its Shares under Rule 12b-1 of the Investment
Company Act of 1940, as amended (the "1940 Act").
In addition, if the Fund converts to an open-end
investment company, its total annual expenses may
increase. As an open-end investment company, the
Fund may reserve the right to honor any request
for redemption by making payment in whole or in
part in securities chosen by the Fund and valued
in the same way as they would be valued for
purposes of computing the Fund's net asset value.
If payment is made in securities, a stockholder
may incur brokerage expenses in converting these
securities to cash. If such payment is made in
securities of issuers traded outside of the United
States, a shareholder may have more difficulty
disposing of such securities than the securities
of issuers traded within the United States.
QUALIFICATION AS A REGULATED
INVESTMENT COMPANY.......... The Fund intends to qualify as a regulated
investment company under Subchapter M of the U.S.
Internal Revenue Code of 1986, as amended. See
"Taxes."
5
<PAGE> 6
RISK FACTORS
Investors are advised to consider carefully the risks involved in investing
in foreign equity markets, which are in addition to the usual risks of investing
in equity securities. Due to these risks, an investment in the Fund should be
considered as an investment for only a portion of an investor's assets, not as a
complete investment program.
ECONOMIC AND POLITICAL
FACTORS AFFECTING FOREIGN
COUNTRIES................... In the course of investing in foreign countries,
the Fund may be exposed to the direct or indirect
consequences of political, social and economic
changes in one or more countries. In emerging
countries in particular, there is increased risk
of hyperinflation, currency devaluation and
government intervention in the economy in general.
See "Risk Factors -- Economic and Political
Factors Affecting Foreign Countries."
FOREIGN CURRENCY
CONSIDERATIONS.............. A portion of the Fund's assets will be invested in
securities denominated in foreign currencies. As a
result, changes in foreign currency exchange rates
will affect the value of securities in the Fund's
portfolio and the unrealized appreciation or
depreciation of the Fund's investments. Changes in
foreign exchange rates may also adversely affect
the Fund's ability to make distributions to its
shareholders. Although the Fund is authorized to
use various investment strategies to hedge
currency exchange rate risk, many of these
strategies may not initially be used by the Fund
to a significant extent. See "Risk
Factors -- Foreign Currency Considerations."
TRADING MARKETS IN FOREIGN
COUNTRIES................... Trading volume in certain foreign securities
markets is substantially less than that in the
securities markets of the United States or other
developed countries. In addition, securities held
by the Fund may be less liquid and their prices
more volatile than those of securities of
comparable U.S. issuers. Commissions for trading
on foreign country stock exchanges are generally
higher than commissions for trading on U.S.
exchanges, and companies in foreign countries are
not generally subject to uniform accounting,
auditing and financial reporting standards,
practices and disclosure requirements comparable
to those applicable to U.S. companies. Further,
certain foreign markets may have less government
supervision and regulation of the securities
markets as compared to the U.S. markets. See "Risk
Factors -- Trading Markets in Foreign Countries."
REPATRIATION; INVESTMENT
CONTROLS.................... Foreign investment in certain countries may be
restricted or controlled to varying degrees by
local or national governments. These restrictions
or controls may include the requirement of
governmental approval for the repatriation of
investment income or the proceeds of sales of
securities by foreign investors, and could limit
or preclude foreign investment in certain foreign
securities and increase the costs and expenses of
the Fund. See "Risk Factors -- Repatriation;
Investment Controls."
6
<PAGE> 7
DISCOUNT TO NET
ASSET VALUE................. Shares of closed-end investment companies in the
past frequently have traded at a discount to their
net asset value. This characteristic is a risk
separate and distinct from the risk that the
Fund's net asset value may decrease, and may be
greater for investors purchasing shares in the
initial public offering and expecting to sell such
Shares soon after the completion thereof. To
reduce or eliminate any discount to net asset
value, the Declaration of Trust of the Fund
provides that the Fund will automatically convert
to an open-end investment company if the
circumstances described herein exist. However,
notwithstanding the elimination of the market
discount upon conversion of the Fund to an
open-end investment company, a shareholder may
incur a loss upon the sale of its Shares. See
"Risk Factors -- Discount to Net Asset Value" and
"Automatic Conversion to an Open-End Investment
Company."
LACK OF OPERATING HISTORY;
DEPENDENCE ON INVESTMENT
ADVISERS.................... The Fund is a newly organized management
investment company with no prior operating
history. In addition, the Investment Advisers have
not provided advisory services to a U.S.
closed-end investment company. The Fund is
dependent upon the diligence and skill of the
Investment Advisers for the selection,
structuring, closing and monitoring of its
investments. See "Risk Factors -- Lack of
Operating History; Dependence on Investment
Advisers."
FOREIGN TAXATION............ Dividends, interest and capital gains received by
the Fund may be subject to withholding and other
taxes imposed by foreign countries, whose taxes
would reduce the return to the Fund on those
securities; this reduction may not be recoverable
by the Fund or its shareholders. See "Risk
Factors -- Foreign Taxation" and "Taxes."
NON-DIVERSIFIED STATUS...... The Fund is classified as a "non-diversified"
investment company under the 1940 Act, which means
that the Fund may invest in as few as 12 issuers.
To the extent that the Fund invests in a limited
number of issuers, the Fund will be subject to
greater risk of loss as a result of changes in the
value of any single investment. The Fund intends
to comply with the diversification requirements
imposed by Subchapter M of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). See
"Risk Factors -- Non-Diversified Status" and
"Taxes."
ANTI-TAKEOVER PROVISIONS.... Certain provisions of the Fund's Declaration of
Trust may have the effect of limiting the ability
of other persons to acquire control of the Fund.
In certain circumstances, these provisions might
also inhibit the ability of shareholders to sell
their Shares at a premium over prevailing market
prices. The Fund's Board of Trustees has
determined that these provisions are in the best
interests of shareholders generally. See "Risk
Factors -- Anti-Takeover Provisions" and "Shares
of Beneficial Interest in the Fund."
7
<PAGE> 8
SUMMARY OF THE FUND'S EXPENSES
The expense summary below was developed to help you make your investment
decisions. You should consider this expense information along with other
important information in this Prospectus, including the Fund's investment
objective.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)................... 5.00%
Dividend Reinvestment and Cash Purchase Plan Fees................ None
ANNUAL EXPENSES (as a percentage of average daily net assets)
Advisory Fees.................................................... 1.00%
Administration Fees (after fee waivers)(1)....................... 0.10%
Other Expenses................................................... 0.65%
-----
Total Annual Expenses......................................... 1.75%
=====
</TABLE>
- ---------------
(1) The Fund has agreed to pay ICAC a monthly fee at an annual rate of .25% of
the average weekly net assets of the Fund. ICAC has agreed to reduce its
annual fee to a maximum of .10% of the average weekly net assets of the Fund
as long as the Fund remains a closed-end investment company.
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you purchase
shares of the Fund.
ANNUAL EXPENSES are based on the Fund's anticipated expenses for the
current fiscal year. "Other Expenses" are based on estimated amounts for the
current fiscal year and assume that the Fund receives net proceeds of $62.0
million from the issue and sale of 5,250,000 Shares. The Investment Advisers or
the Administrator may, from time to time, voluntarily agree to defer or waive
fees or absorb some or all of the expenses of the Fund. To the extent they
should do so, the Investment Advisers and the Administrator may seek
reimbursement of such deferred fees or absorbed expenses; provided, no repayment
will be made if the Fund's expense ratio would exceed 1.75% of net assets.
EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment in the Fund,
assuming a 5% annual return:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- ---- ---- ---- ----
<S> <C> <C> <C>
$ 67 $102 $140 $246
</TABLE>
The purpose of the above table is to assist you in understanding the
various costs and expenses that an investor in the Fund would bear directly or
indirectly. See "Management of the Fund" for more complete descriptions of such
costs and expenses.
The Example of Expenses is a hypothetical example that illustrates the
expenses associated with a $1,000 investment in the Fund over periods of one,
three, five and ten years, based on the estimated expenses in the above table
and an assumed annual rate of return of 5%. The 5% return and expenses should
not be considered a representation of future levels. Actual returns and expenses
may be greater or less than those shown. In addition, the above Example of
Expenses does not reflect offering costs in connection with the public offering,
estimated to be approximately $330,000, which will be charged against the
proceeds of the offering. The Example of Expenses also assumes that all
dividends and other distributions are reinvested at net asset value and that the
percentage amounts listed under Annual Expenses remain the same in the years
shown. Although the Example of Expenses assumes reinvestment of all dividends
and distributions at net asset value, participants in the Fund's Automatic
Dividend Reinvestment and Cash Purchase Plan may receive shares issued at a
price or value different from net asset value. See "Automatic Dividend
Reinvestment and Cash Purchase Plan."
8
<PAGE> 9
INVESTMENT RATIONALE
The Fund's investment objective and policies reflect the belief of Dessauer
and Guinness Flight that the world economy is in the early stages of sustained
economic growth. The Investment Advisers believe that the convergence of certain
economic, political and technological changes are catalysts for this growth.
The International Monetary Fund (the "IMF") has reported that global
economic growth, as measured by gross domestic product, has been growing at an
average real rate of 3.3% per year for the past 20 years. Further, the IMF
projects the global economy to grow at a 4.5% real rate per year into the near
future. Dessauer and Guinness Flight believe that four primary trends will
support this global economic expansion:
DECLINE OF COMMUNISM. The collapse of Communism in the former Soviet
Union and Eastern Europe and the transformation of China's Communist
economy to a market-based economy has undermined the ideology of state
control of economies. This move to open markets will allow for more rapid
economic growth around the world.
OPENING OF WORLD TRADE. A decline in trade barriers globally over the
last two decades has increased international trade, enhanced the efficiency
of markets around the world and contributed to global economic expansion.
GROWTH IN ASIA. Economic reforms in China and other Asian countries
have stimulated significant economic growth within Asia. As a result of
this economic growth, vast numbers of people in Asia have been able to
emerge from poverty. In China alone, there are over 720 million people
under the age of 30. This class of young people may be the first generation
in recent Chinese history to have economic prosperity within their grasp.
The Investment Advisers believe that these trends will propel growth within
Asia, which in turn serves as a major catalyst for growth in the world
economy.
TECHNOLOGICAL INNOVATION. Rapid technological advancement, which is
the hallmark of the last quarter of the 20(th) century, is spurring global
economic growth for both developed and underdeveloped countries. This
technological innovation is creating whole new industries as well as
improving the efficiency and growth prospects of existing industries.
As a result of these and other factors, Dessauer and Guinness Flight
believe that the opportunity exists to make investments in certain companies
that have the potential to benefit from these macroeconomic trends toward
worldwide growth. The Fund will seek to invest in the securities of issuers that
Dessauer and Guinness Flight believe are positioned to benefit from this growth
in the global economy. The Investment Advisers further believe that certain
issuers whose stock is traded in the markets of, or who derive a substantial
portion of their revenues from business activities within, the Major Markets may
be able to capitalize on the convergence of these four trends.
THE FUND AND ITS OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a newly organized, non-diversified, closed-end management
investment company organized under the laws of the State of Delaware. The Fund
intends to allocate the net proceeds of the offering in accordance with the
investment objective and policies as described below. Since the Fund expects to
invest its assets gradually to benefit from short-term fluctuations in the
prices of securities the Fund is purchasing, the Investment Advisers believe the
net proceeds of the offering will be fully invested within six months depending
on market conditions.
The Fund's investment objective is long-term capital appreciation. The Fund
will seek to achieve its investment objective by investing primarily in the
securities of issuers that it believes are positioned to benefit
9
<PAGE> 10
from the growth in the global economy. Generally, the companies in which the
Fund intends to invest will be traded in the markets of, or derive a substantial
portion of their revenues from business activities within, North America (the
U.S. and Canada), Western Europe, Asia and Japan. Under normal market
conditions, the Fund will invest at least 65% of its total assets in a portfolio
of equity securities of companies located in at least three different countries.
Although the Fund will not have a general limit as to the types of
securities which it can purchase, most of the Fund's investments will be in
marketable common stocks or marketable securities convertible into common
stocks. Such securities may be traded on an exchange or in the over-the-counter
market. Securities other than common stock or securities convertible into common
stock may be held from time to time, but the Fund normally will not invest in
fixed income securities except for defensive purposes or to temporarily employ
uncommitted cash balances.
The investment objective and policies described herein will not change if
the Fund converts to an open-end investment company. See "Automatic Conversion
to an Open-End Investment Company."
INVESTMENT PRACTICES
In pursuing its investment objective, the Fund does not intend to lend
portfolio securities or invest in illiquid or restricted securities. In
addition, the Fund will observe a non-fundamental policy of not investing for
the purpose of exercising control over management, even though it may take
substantial positions in securities of small companies and in certain
circumstances this may result in the acquisition of such control. Such
circumstances could arise, for example, when existing controlling persons of an
issuer dispose of their holdings to larger groups or to the public or where an
issuer defaults to the Fund on its obligations pursuant to the provisions of a
purchase agreement or instrument governing the rights of a senior security held
by the Fund.
INVESTMENT RESTRICTIONS AND INVESTMENT POLICIES
Investment restrictions are fundamental and cannot be changed without
approval of the holders of a majority (as defined in the 1940 Act) of the
outstanding shares of the Fund. The term "majority of the outstanding shares" of
the Fund means the vote of the lesser of (i) 67% or more of the shares of the
Fund present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the Fund. Investment policies are not fundamental and
may be changed by the Board of Trustees without shareholder approval. The
following are the Fund's investment restrictions set forth in their entirety.
INVESTMENT RESTRICTIONS. The Fund may not:
1. (a) With respect to 50% of its assets, invest more than 5% of its
total assets, at market value, in the securities of one issuer (except the
securities of the United States Government) and may not purchase more than
10% of the outstanding voting securities of a single issuer.
(b) With respect to the other 50% of its assets, invest more than
25% of the market value of its total assets in a single issuer.
These two restrictions, hypothetically, could give rise to a portfolio
with as few as 12 issuers. To the extent that the Fund's assets are
invested in a small number of issuers, there may be a greater risk in an
investment in the Fund than in a diversified investment company.
2. Borrow money or issue senior securities, borrow money or pledge its
assets, except that the Fund may borrow up to 33 1/3% of the value of its
total assets from a bank (i) for temporary or emergency purposes, including
to meet redemption requests if the Fund is operating as an open-end
investment company, (ii) for such short-term credits necessary for the
clearance or settlement of the transactions, (iii) to finance repurchases
of its Shares or (iv) to pay dividends required to be distributed in order
for
10
<PAGE> 11
the Fund to maintain its qualification as a regulated investment company
under the Code or otherwise to avoid taxation under the Code, in amounts
not exceeding 5% of its total assets (including the amount borrowed and
excluding the liability for the borrowings).
3. Invest 25% or more of the total value of its assets in a particular
industry, except that this restriction shall not apply to U.S. Government
Securities.
4. Buy or sell commodities or commodity contracts or real estate or
interests in real estate (including real estate limited partnerships),
except that it may purchase and sell futures contracts on stock indices,
interest rate instruments, and foreign currencies; securities which are
secured by real estate or commodities; and securities of companies which
invest or deal in real estate or commodities.
5. Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under applicable securities laws.
Changes in the market value of securities in the Fund's portfolio generally
will not cause the Fund to violate these investment restrictions unless any
failure to satisfy these restrictions exists immediately after the acquisition
of any security or other property and is wholly or partly the result of such
acquisition.
INVESTMENT POLICIES. The Fund may not make short sales of securities, other
than short sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions, provided
that this policy will not be applied to limit the use of options, futures
contracts, and related options, in the manner otherwise permitted by the
investment restrictions, policies, and investment program of the Fund.
RISK FACTORS
The Fund should be considered as an investment for only a portion of an
investor's assets and not as a complete investment program. Investors should
carefully consider the following risk factors described below before investing
in the Fund:
ECONOMIC AND POLITICAL FACTORS AFFECTING FOREIGN COUNTRIES
In the course of investment in foreign countries, the Fund may be exposed
to the direct or indirect consequences of political, social and economic changes
in one or more countries. The economies of individual foreign countries may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, currency appreciation or
depreciation, capital reinvestment, resource self-sufficiency and balance of
payments position. These economies may also be dependent upon international
trade and, as a result, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade.
The possibility exists in some, if not all, foreign countries of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) that could affect adversely the economies of those countries or the value
of the Fund's investments in the countries. It may be difficult for a company
operating in a foreign country to obtain and enforce a legal judgement outside
of the United States. In emerging countries in particular, there is increased
risk of hyperinflation, currency devaluation and government intervention in the
economy in general.
It is likely that a portion of the Fund's assets will be invested in
companies trading or doing business in Hong Kong. There are specific risks
associated with the transition of Hong Kong to China after June 30, 1997. If
China takes certain unexpected actions towards Hong Kong during and after this
transition such actions could adversely affect the markets in Hong Kong and Asia
and corporations operating in those regions.
11
<PAGE> 12
FOREIGN CURRENCY CONSIDERATIONS
The Fund will invest in securities denominated or quoted in currencies
other than the U.S. dollar. As a result, changes in foreign currency exchange
rates will affect the value of securities in the Fund's portfolio and the
unrealized appreciation or depreciation of the Fund's investments. The Fund will
also incur costs in connection with conversions between various currencies.
Although the Fund is authorized to use various investment strategies to
hedge currency exchange rate risk, many of these strategies may not initially be
used by the Fund to a significant extent. The Fund will conduct its foreign
currency exchange transactions either on a spot (that is, cash) basis at the
spot rate prevailing in the foreign currency exchange market, or by entering
into forward, futures or options contracts to purchase or sell foreign
currencies. The use of forwards, futures and options contracts entails certain
special risks. The variable degree of correlation between exchange rate
movements of futures contracts and exchange rate movements of the related
portfolio position of the Fund, for example, could create the possibility that
losses on the hedging instrument would be greater than gains in the value of the
Fund's position. In addition, forwards, futures and options markets may not be
liquid in all circumstances and certain over-the-counter options may have no
markets. As a result, in certain markets, the Fund may not be able to close out
a transaction without incurring substantial losses. Although the use of
forwards, futures and options transactions for hedging would tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time it could limit any potential gains that might result from an increase
in value of the position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk than would
purchases of options, in which case the exposure is limited to the cost of the
initial premium.
Much of the income received by the Fund may be in foreign currencies. The
Fund will, however, compute and distribute its income in U.S. dollars, and the
computation of income will be made on the date on which the income is earned by
the Fund at the foreign exchange rate in effect on that date. As a result, if
the value of the foreign currencies in which the Fund receives its income falls
relative to the U.S. dollar between the receipt of the income and the time at
which the Fund converts the foreign currencies to U.S. dollars, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements. The
liquidation of investments, if required, could have an adverse effect on the
Fund's performance.
TRADING MARKETS IN FOREIGN COUNTRIES
Trading volume in certain foreign country securities markets is
substantially less than that in the securities markets of the United States or
other developed countries. In addition, securities of some companies located in
foreign countries will be less liquid and more volatile than securities of
comparable U.S. companies. Commissions for trading on foreign country stock
exchanges are generally higher than commissions for trading on U.S. exchanges,
although the Fund will seek the most favorable net results on its portfolio
transactions and may, in certain instances, be able to purchase its portfolio
investments on stock exchanges on which commissions are negotiable. Further,
some foreign markets are subject to less government supervision and regulation
of the securities markets and their participants and have significantly smaller
capitalization as compared to the U.S. markets. Investments in certain foreign
markets are also likely to experience delays in settlement of securities
transactions. Clearing and registration of securities transactions in certain
countries are subject to significant risks not associated with investments in
the U.S. and other more developed markets.
Companies in certain foreign countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
less information about a foreign company may be available than about a U.S.
publicly-traded company. When a foreign issuer's financial statements are not
deemed to reflect accurately its financial situation, Guinness Flight or
Dessauer may take additional steps to evaluate the proposed investment. These
steps may include an on-site inspection of the company, interviews with its
management and
12
<PAGE> 13
consultations with accountants, bankers and other specialists. In certain cases,
financial statements must be developed or verified by these specialists. In
addition, government supervision and regulation of foreign stock exchanges,
brokers and listed companies is generally less than in the United States.
REPATRIATION; INVESTMENT CONTROLS
Foreign investment in certain countries may be restricted or controlled to
varying degrees by local or national governments. These restrictions or controls
at times may include the requirement of governmental approval for the
repatriation of investment income or the proceeds of sales of securities by
foreign investors. Certain countries may require governmental approval prior to
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company, limit the investment by foreign persons only to
a specific class of securities of a company that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain countries may also
restrict investment opportunities in issuers in industries deemed important to
national interests. The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments. Indirect foreign investment in the securities of companies listed
and traded on the stock exchanges in emerging countries may be permitted by
certain of these countries in certain instances through investment funds that
have been specifically authorized.
DISCOUNT TO NET ASSET VALUE
Shares of closed-end investment companies in the past frequently have
traded at a discount to net asset value. This characteristic is a risk separate
and distinct from the risk that the Fund's net asset value may decrease. The
risk of loss associated with this characteristic of closed-end investment
companies may be greater for investors purchasing Shares in the initial public
offering and expecting to sell such Shares soon after the completion thereof.
For those investors, realization of gain or loss on their investments is likely
to be more dependent upon the existence of a premium or discount than upon
portfolio performance. The net asset value per Share immediately following the
completion of the offering will be the initial offering price per Share of
$12.50, minus the sales load and other per Share offering expenses. The Fund
cannot predict whether the Shares will trade at, below or above net asset value.
The Fund contains an Automatic Conversion Provision whereby, beginning after 18
months from the date of this offering, the Fund will automatically convert to an
open-end investment company after trading at a 5% or greater discount from net
asset value for 15 consecutive days beginning on the last business day of any
week. See "Automatic Conversion to an Open-End Investment Company."
LACK OF OPERATING HISTORY; DEPENDENCE ON INVESTMENT ADVISERS
The Fund is a newly organized investment company with no prior operating
history. Prior to this offering, there has been no public market for the Fund's
Shares. The Fund has been organized to make investments selected by the
Investment Advisers. Although Dessauer and Guinness Flight have a prior record
of making and managing investments similar to those to be made by the Fund, the
Fund itself has no operating history. In addition, neither Dessauer nor Guinness
Flight has provided advisory services to a U.S. closed-end investment company.
However, Guinness Flight currently advises four U.S. operated investment
companies, and Guinness Flight Hambro Asset Management Limited, the parent of
Guinness Flight, provides advisory services to non-U.S. closed-end investment
companies. The Fund is dependent upon the diligence and skill of the Investment
Advisers for the selection, structuring, closing and monitoring of its
investments. See "Management of Fund."
13
<PAGE> 14
FOREIGN TAXATION
Dividends, interest and capital gains received by the Fund may be subject
to withholding and other taxes imposed by foreign countries, whose taxes would
reduce the return to the Fund on those securities; this reduction may not be
recoverable by the Fund or its shareholders. See "Taxes."
NON-DIVERSIFIED STATUS
The Fund is classified as a "non-diversified" investment company under the
1940 Act, which means that the Fund may invest in as few as 12 issuers. To the
extent that the Fund invests in a limited number of issuers, the Fund will be
subject to risk of loss as a result of changes in the value of any single
investment. Investment in the Fund, therefore, may present greater risks to
investors than an investment in a diversified fund. The investment return on a
non-diversified investment company typically is dependent upon the performance
of a smaller number of securities relative to the number of securities held in a
diversified fund. Moreover, with respect to 50% of its portfolio, the Fund may
assume large positions in the obligations of a limited number of issuers. To the
extent the Fund exercises this ability, the value of the securities the Fund
holds will be affected to a greater extent than those in a diversified fund in
the event of changes in the financial condition or the market's assessment of
such limited number of issuers. See "The Fund and its Objective and Policies --
Investment Restrictions and Investment Policies."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Fund's Declaration of Trust may have the effect
of limiting the ability of other persons to acquire control of the Fund. In
certain circumstances, these provisions might also inhibit the ability of
shareholders to sell their Shares at a premium over prevailing market prices.
The Fund's Board of Trustees has determined that these provisions are in the
best interests of shareholders generally. See "Shares of Beneficial Interest in
the Fund."
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<PAGE> 15
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The overall management of the business and affairs of the Fund is vested in
the Board of Trustees. The Board of Trustees approves all significant agreements
between the Fund and persons or companies furnishing services to the Fund,
including the Fund's investment advisory agreements with Dessauer and Guinness
Flight, the agreement with Investors Bank and Trust Company ("IB&T") as the
custodian, the agreement with State Street Bank & Trust Company ("State Street")
as transfer agent, the agreement with ICAC as the administrator and the
underwriting agreement relating to the offering of Shares contemplated hereby
with the Underwriter. The day-to-day operations of the Fund are delegated to the
officers, subject to the investment objective and policies of the Fund and to
the general supervision of the Board of Trustees.
The Trustees and principal executive officers of the Fund and their
principal occupations are noted below. The address of each individual is c/o
Dessauer Asset Management, Inc., 5 Bay State Court, P.O. Box 1689, Orleans,
Massachusetts 02653.
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATIONS
NAME AND AGE REGISTRANT DURING PAST 5 YEARS
- --------------------------- ------------------------- ------------------------
<S> <C> <C>
John P. Dessauer, 61 Chairman, Trustee Chairman, Dessauer Asset
Management, Inc.
Thomas P. McIntyre, 41 President, Trustee President, Dessauer
Asset Management, Inc.
James J. Atkinson, Jr., 40 Trustee Director, Guinness
Flight Global Asset
Management; Senior Vice
President, Huntington
Advisers, Inc.
Max A. Fischer, 60 Trustee Independent Financial
Consultant; General
Manager, Shearson Lehman
Brothers Bank
(Switzerland)
Ingrid R. Hendershot, 39 Trustee President, Hendershot
Investments; Vice
President, Financial
Analyst, Growth Stock
Outlook, Inc.
Geoffrey O. Lubbock, 50 Trustee Director, Generation
Divestitures, Boston
Edison Company;
Financial Strategic
Planner, Boston Edison
Company
Kevin Melich, 54 Trustee Partner, Chartwell
Investment Partners;
Portfolio Manager,
Delaware Investment
Advisers
J. Brooks Reece, 50 Trustee Vice President, Sales &
Marketing, Adcole
Corporation
</TABLE>
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<PAGE> 16
The annual compensation of the Trustees is noted below. Since the Fund has
not yet completed its first fiscal year, the amounts listed are estimates based
upon an understanding between the Fund and each Trustee.
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
COMPENSATION BENEFITS ACCRUED AS BENEFITS FUND AND FUND COMPLEX
NAME OF PERSON FROM FUND PART OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
- ---------------------- ------------ --------------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
John P. Dessauer...... -- -- -- --
Thomas P. McIntyre.... -- -- -- --
James J. Atkinson,
Jr.................. -- -- -- --
Max A. Fischer........ $5,000 -- -- $ 5,000
Ingrid R.
Hendershot.......... $5,000 -- -- $ 5,000
Geoffrey O. Lubbock... $5,000 -- -- $ 5,000
Kevin Melich.......... $5,000 -- -- $ 5,000
J. Brooks Reece....... $5,000 -- -- $ 5,000
</TABLE>
INVESTMENT ADVISERS AND INVESTMENT ADVISORY AGREEMENTS
Dessauer and Guinness Flight are investment managers of the Fund. Dessauer,
an investment adviser registered with the SEC, was founded in 1986 and as of
March 31, 1997 managed $195.0 million in both U.S. and international assets for
individuals. John P. Dessauer and Thomas P. McIntyre own 100% of the common
stock of Dessauer and therefore are "controlling persons" as defined by the 1940
Act.
Guinness Flight, also an investment adviser registered with the SEC, was
founded in 1987. Timothy Guinness and Howard Flight are joint managing directors
of Guinness Flight and its former parent, Guinness Flight Global Asset
Management Limited (collectively, the "Guinness Flight Firm"). As of March 31,
1997, the Guinness Flight Firm employed 237 professional staff worldwide with
offices in London, Pasadena, Hong Kong and Guernsey, and associated investments
and joint ventures in Zurich, Montreal, Madras and Mexico City. As of March 31,
1997, the Guinness Flight Firm managed 65 non-U.S. based investment funds, four
U.S.-open-end funds ($417.4 million in assets) and separate accounts for
individual and institutional clients totalling $4.1 billion in assets. Guinness
Flight is a private company that is owned 100% indirectly by the The Bank of
Yokohama Limited, Hambros PLC and the management and employees of Guinness
Flight and Guinness Flight Global Asset Management Limited.
Pursuant to a transaction completed in May 1997, Guinness Flight Global
Asset Management Limited ("GFGAM") acquired the entire issued share capital of
Hambros Fund Management PLC. At the same time, further shares in GFGAM were
acquired by Hambros PLC from Guinness Mahon Holdings plc ("Guinness Mahon"), the
former parent of GFGAM, and other shareholders of GFGAM. As a result of the
transaction, Guinness Mahon and Hambros PLC each own approximately 42.5% and
Guinness Flight management owns the remaining approximately 15% of GFGAM.
Following the transaction, the name of GFGAM was changed to Guinness Flight
Hambro Asset Management Limited. In addition, option plans will be established
for management which could, when appropriate targets are met, increase
management's ownership percentage to approximately 30%. As a result of the
transaction, Guinness Flight Hambro Asset Management Limited manages and advises
approximately $15.0 billion in international assets.
The Fund has an asset allocation committee (consisting of two
representatives of Dessauer and one representative of Guinness Flight) that will
allocate Fund assets among the markets in which the Fund may invest. Dessauer
will be responsible for investment decisions related to North America and
Western Europe, and Guinness Flight will be responsible for managing the portion
of the Fund's assets allocated to Asia and Japan.
16
<PAGE> 17
ADVISORY AGREEMENTS. Pursuant to separate investment advisory agreements
(the "Advisory Agreements") with the Fund, Dessauer and Guinness Flight will
provide investment management and financial advisory services, including causing
the purchase and sale of securities in the Fund's portfolio at all times subject
to the policies set forth by the Board of Trustees. The Advisory Agreements
provide that Dessauer and Guinness Flight will identify and analyze possible
investments for the Fund, determine the amount and timing of such investments,
and determine the forms of investments. Dessauer and Guinness Flight each have
the responsibility of monitoring and reviewing the Fund's portfolio.
Under the terms of the Advisory Agreements, the Fund pays all of its
expenses (other than those expenses specifically assumed by Dessauer and
Guinness Flight) including the costs incurred in connection with its
registration under the Securities Act and the 1940 Act; printing of the
prospectus distributed to shareholders; taxes or governmental fees; brokerage
commissions; custodial, transfer and shareholder servicing agents; expenses of
outside counsel and independent accountants; preparation of shareholder reports;
and expenses of Trustee and shareholder meetings. Dessauer and Guinness Flight
may from time to time, subject to the Board of Trustees approval, contract with
other service providers to perform support services that aid in managing the
assets of the Fund.
The Fund's Advisory Agreements were approved initially by the Board of
Trustees (including the affirmative vote of all the Trustees who were not
parties to the Agreements or interested persons of any such party) on May 23,
1997. Each Advisory Agreement may be terminated without penalty on 60 days'
written notice by a vote of the majority of the Fund's Board of Trustees or by
the respective investment adviser or by holders of a majority of the Fund's
outstanding shares. Each Advisory Agreement will continue for two years from its
effective date and from year to year thereafter, provided it is approved, at
least annually, in the manner stipulated in the 1940 Act. The 1940 Act requires
that the Advisory Agreements and any renewal thereof be approved by a vote of
the majority of the Fund's Trustees who are not parties thereto or interested
persons of any such party, cast in person at a meeting specifically called for
the purpose of voting on such approval.
Pursuant to the Advisory Agreements, the Fund will pay Dessauer a monthly
fee calculated at an annual rate of .60% of the Fund's average weekly net assets
and will pay Guinness Flight a monthly fee calculated at an annual rate of .40%
of the Fund's average weekly net assets. The Board of Trustees believes that
such fees are appropriate because of the complexity of managing funds that
invest in international securities. From time to time, Dessauer and/or Guinness
Flight may voluntarily agree to defer or waive fees or absorb some or all of the
expenses of the Fund. To the extent that they should do so, they may seek
reimbursement of such deferred fees and absorbed expenses after they discontinue
this practice. However, no repayment would be made if it would result in the
Fund's expense ratio exceeding 1.75% of net assets.
MANAGEMENT OF DESSAUER. John P. Dessauer and Thomas P. McIntyre are
principals of Dessauer and will manage the portion of the Fund's portfolio
advised by Dessauer. Mr. Dessauer has more than 25 years experience as an
investment professional. In the 1970s, Mr. Dessauer was a senior investment
officer in Europe for Citibank and was responsible for managing all of
Citibank's European money management services for four years. He later served as
a member of the investment policy committee of a German private bank in
Dusseldorf. Mr. Dessauer has experience in foreign currencies, international
stocks, and international bonds. He founded John Dessauer's Investor's World, an
investment newsletter, in order to bring professional, international money
management services within the reach of individual investors. John Dessauer's
Investor's World is a monthly investor newsletter specializing in international
investing with a circulation of approximately 84,000 as of March 31, 1997. Mr.
Dessauer also is a regular panelist on "Wall Street Week with Louis Rukeyser,"
and the author of two books on international investing, Passport to Profits and
International Strategies for American Investors. Mr. Dessauer will be Chairman
of the asset allocation committee of the Fund.
Mr. McIntyre joined Dessauer in 1989 and became President in 1990. For two
years prior to joining Dessauer, he served as an assistant treasurer for the
National Association of Securities Dealers, Inc. and was
17
<PAGE> 18
responsible for their $84 million fixed-income portfolio. He previously served
as Vice President and Controller for a $140 million closed-end equity fund. Mr.
McIntyre graduated from Notre Dame University (with high honors) in 1977 with a
degree in economics and went on to earn an M.B.A. from Notre Dame in 1979. Mr.
McIntyre is a Certified Public Accountant and a Chartered Financial Analyst with
over 15 years experience in financial analysis and portfolio management. Mr.
McIntyre, together with Mr. Dessauer, manage $195.0 million in both U.S. and
international assets for individuals. Mr. McIntyre will be a member of the asset
allocation committee of the Fund.
MANAGEMENT AND KEY PERSONNEL OF GUINNESS FLIGHT. Timothy Guinness and
Howard Flight are principals of Guinness Flight. The portion of the Fund's
portfolio advised by Guinness Flight will be managed by Timothy Thomas, Richard
Farrell, Lynda Johnstone, Nerissa Lee, and Philip Whittome. Mr. Guinness
originally joined Guinness Mahon, a predecessor entity of Guinness Flight, in
1977 in the Corporate Finance Department, and later transferred to the
investment department, becoming Senior Investment Director in 1982. He served as
Fund Manager of both the Guinness Flight Global Equity Fund and United Kingdom
Equity Fund, which are foreign investment funds. In 1987, he became Joint
Managing Director of Guinness Flight.
Mr. Flight has been involved in asset management for over 25 years
throughout the world. He joined Guinness Mahon in 1979 as a director of the
investment department. In 1987, he became Joint Managing Director of Guinness
Flight. Presently, he is responsible for Guinness Flight's currency and fixed
income activities. Until its dissolution, he was a member of H.M. Treasury Tax
Consultative Committee.
Mr. Thomas joined Guinness Mahon in 1984 as an assistant manager in the
investment department. After leaving the organization to receive an M.B.A., he
re-joined Guinness Mahon in 1987 to specialize in international equity
investment. He manages the Guinness Flight Global Strategy Fund's Global Equity
Fund and the Guinness Flight International Accumulation Fund's International
Equity Fund, which are foreign investment funds. Mr. Thomas will be a member of
the asset allocation committee of the Fund.
Mr. Farrell joined Guinness Mahon in 1978. He specializes in Asian markets
and currently is the investment adviser to the Guinness Flight Global Strategy
Fund's Japan Fund, Japan & Pacific Fund, and Japan Smaller Companies Fund, all
of which are foreign investment funds. As the head of Guinness Flight's Asia
Equity Desk, Mr. Farrell has strategic input on all of Guinness Flight's Asia
Equity Funds. In addition, Mr. Farrell serves as the portfolio manager of the
Guinness Flight Asia Blue Chip Fund and co-manager of the Guinness Flight China
& Hong Kong Fund, which are U.S. registered open-end funds.
Ms. Johnstone joined Guinness Mahon in 1986 in the investment department as
a member of the Equity Team. Currently, she is responsible for running the
Guinness Flight Global Strategy Fund's Hong Kong Fund and ASEAN Fund, which are
foreign investment funds. Ms. Johnstone serves as the co-manager of the Guinness
Flight China & Hong Kong Fund, a U.S. registered open-end fund.
Ms. Lee joined Guinness Flight's Hong Kong office in 1995 and specializes
in Asian markets. She has a degree in economics from Hong Kong University and 20
years of experience in Asian markets. She started in the research department of
the Hong Kong Stock Exchange and has been managing funds for eight years.
Currently, Ms. Lee manages the Guinness Flight Global Strategy Fund's Asian
Smaller Companies Fund and the Guinness Flight Select Fund's China Fund, which
are foreign investment funds. Ms. Lee also serves as the Manager of the Guinness
Flight Asia Small Cap Fund, which is a U.S. registered open-end fund.
Mr. Whittome joined Guinness Flight in 1996. He currently is a Japanese
equities analyst at Guinness Flight. Prior to joining Guinness Flight, he held
positions at IBJ International as a Senior Japanese Equity Analyst and at
Barings London in the Japanese and Korean Equity Capital Markets Department.
18
<PAGE> 19
ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND PAYING AGENT
ICAC will supervise administration of the Fund pursuant to an
administration agreement with the Fund. State Street will act as the Fund's
transfer agent and dividend paying agent. As of the date of this Prospectus,
ICAC acts as administrator of registered investment companies with total assets
of approximately $3.0 billion.
Under the administration agreement, ICAC will supervise the administration
of all aspects of the Fund's operations, including the Fund's receipt of
services for which the Fund is obligated to pay, provide the Fund with general
office facilities, and provide, at the Fund's expense, the services of persons
necessary to perform such supervisory, administrative, and clerical functions as
are needed to operate the Fund effectively. Those persons, as well as certain
employees and trustees of the Fund, may be directors, officers, or employees of
ICAC and its affiliates. For these services and facilities, the Fund has agreed
to pay ICAC a monthly fee at an annual rate of .25% of the average weekly net
assets of the Fund. ICAC has agreed to reduce its annual fee to a maximum of
.10% of the average weekly net assets of the Fund so long as the Fund remains a
closed-end investment company.
State Street, a registered transfer agent, will act as the Fund's transfer
agent and dividend disbursing agent. State Street will maintain an account for
each shareholder of the Fund (unless such accounts are maintained by subtransfer
agents or processing agents) and will perform other transfer agency and related
functions. For these services, State Street will receive an annual fee based on
the number of shareholder accounts or a minimum of $1,000 per month, plus
account charges and expenses. The Fund will also reimburse State Street for
certain expenses incurred on behalf of the Fund. State Street is authorized to
subcontract any or all of its functions to one or more qualified sub-transfer
agents, shareholder servicing agents or processing agents, who may be affiliates
of State Street, and who agree to comply with the terms of State Street's
agreement with the Fund.
CUSTODIAN
IB&T is custodian for the securities and cash of the Fund and will perform
portfolio accounting services for the Fund. IB&T will receive a fee for
custodial services computed and paid monthly at an annual rate based on a
percentage of the average weekly net assets of the Fund, which percentage varies
depending on the location of custody. IB&T will receive an annual fee of $50,000
for fund accounting and calculation of the Fund's net asset value. IB&T also
charges certain transaction-based fees.
EXPENSES
The Fund will bear certain offering expenses, which are not expected to
exceed $330,000, and $170,000 in organizational expenses, including legal and
accounting fees relating to its organization, regulatory filing fees and the
costs of preparing solicitation materials. Offering expenses will be charged to
capital upon completion of the Offering. Organizational expenses will be
capitalized and amortized over a period of five years. In addition to the fees
to be paid to the investment advisers, administrator, transfer agent, dividend
paying agent and custodian discussed within this prospectus, the Fund will pay
all other ongoing expenses, including but not limited to legal fees, accounting
fees for preparation of financial statements and tax returns, annual audits,
brokerage commissions, transfer taxes and other clearing, settlement and
transactional charges.
PRIOR PERFORMANCE OF THE INVESTMENT ADVISERS
The following tables set forth composite performance data relating to the
Fund based on accounts managed by each of the Investment Advisers that are
substantially similar to the Fund. The data are provided to illustrate the past
performance of the Investment Advisers in managing such substantially similar
accounts, as measured against specified market indices. In addition, the
Investment Advisers have provided information assuming their past performance
with respect to such accounts was subject to the Fund's projected expenses for
each individual calendar year and was subject to the Fund's sales and other
projected expenses for the one-year and multiple year periods. Investors should
not consider this performance data as an indication of future performance of the
Fund.
19
<PAGE> 20
All information in the tables relies on data supplied by the Investment
Advisers or from statistical services, reports or other sources believed by the
Investment Advisers to be reliable. Such information has not been independently
verified by the Fund. Each Investment Adviser has indicated that such results
are net of the investment advisory fees paid by such accounts and give effect to
all transaction costs as well as reinvestment of income and gains.
DESSAUER ASSET MANAGEMENT, INC.
Set forth below are certain performance data of the asset management
accounts managed by Dessauer. Dessauer has advised the Fund that its net
performance results in the table with respect to its accounts are the annual
rates of return for the composite of all fully discretionary accounts of
Dessauer from their first full month or quarter (as described in footnote(1)
below) under management, net of management fees. Dessauer has advised the Fund
that these accounts are managed under the same investment objective and
substantially similar policies and strategies as those of the Fund.
TOTAL RETURN FOR PERIODS ENDING DECEMBER 31
<TABLE>
<CAPTION>
DESSAUER ASSET
MANAGEMENT, DESSAUER ADJUSTED MORGAN STANLEY
INC.(1)(2) PERFORMANCE(3) WORLD INDEX(4)
-------------------- ------------------ ---------------
<S> <C> <C> <C>
1991.................. 51.9% 51.5% 16.0%
1992.................. 18.5 18.1 (7.1)
1993.................. (0.6) (1.0) 20.4
1994.................. (13.6) (14.0) 3.4
1995.................. 46.9 46.5 18.7
1996.................. 27.1 26.7 11.7
One-Year Period(5).... 27.1 20.4 11.7
Three-Year
Period(5)........... 17.3 14.9 11.1
Five-Year Period(5)... 13.7 12.1 8.9
From 1991(5).......... 19.3 17.9 10.1
</TABLE>
- ---------------
(1) General. The rates of return for the asset management accounts (the
"Accounts") managed by Dessauer include the rates of return on all Accounts
managed by Dessauer, which comprise one composite, for the period from
January 1, 1991 through December 31, 1996. Dessauer began asset management
services in January 1986. Rates of return are not presented for Accounts
managed by Dessauer prior to January 1, 1991, however, as the data for the
period from January 1986 through December 1990 are not sufficiently adequate
to accurately determine performance or whether they were managed in a
substantially similar manner to the Fund.
Calculations of the Accounts' rates of return. Dessauer utilizes a
time-weighted rate of return formula. For the singular years 1991 and 1992,
Dessauer calculated quarterly rates of return using the Dietz Method, which
assumes that all cash flows into a portfolio occur at the mid-point of the
quarter. For all singular years beginning in 1993, Dessauer calculated
quarterly rates of return (monthly rates of return beginning in 1994) using
the Modified Dietz Method, which weights each cash flow by the amount of
time it is held in the portfolio. The formula for the Modified Dietz Method
is:
RDIETZ = MVE -- MVB -- F/MVB + FW
For this formula, "MVE" means the market value of an account at the end of a
period; "MVB" means the market value of an account at the beginning of a
period; "F" means the sum of cash flows within a period; and "FW" means the
sum of each cash flow multiplied by its weight.
For the years ended December 31, 1991, 1992 and 1993 the composite quarterly
rate of return was calculated by adding each Account's quarterly rate of
return and dividing by the number of Accounts (equal weighting). For the
years ended December 31, 1994, 1995 and 1996, the composite monthly rate of
return was calculated by asset weighting each Account's monthly rate of
return based on its liquidation value to the composite's liquidation value.
For the years ended December 31, 1991, 1992 and 1993, the annual rate of
return was computed by linking the composite quarterly rates of return
through multiplication. For the years ended December 31, 1994, 1995 and
1996, the annual rate of return was computed by linking the composite
monthly rates of return through multiplication.
For each of the six years in the period ended December 31, 1996, the rates
of return are net of a management fee and are without a provision for
federal or state income tax effects. Additionally, the rates of return
include realized and unrealized gains and losses and the reinvestment of
dividends and interest. No sales load is included because Dessauer has not
historically charged up front fees.
(2) Dessauer performance figures provided by Dessauer Asset Management, Inc.
(3) The Dessauer performance figures have been restated in this column to show
what such performance figures would have been for the individual years
indicated if the projected expenses of the Fund had been applicable instead
of the actual average annual advisory fee of 1.35% charged by Dessauer. In
addition, the One-, Three- and Five-Year and From 1991 periods are restated
to show what such performance figures would have been if the projected
expenses of the Fund had been applicable and assume a sales load of 5%
charged at the beginning of the period.
20
<PAGE> 21
(4) Source: Bloomberg L.P. Index performance figures do not include the sales
load and other expenses.
(5) Annualized return for the period ended December 31, 1996.
GUINNESS FLIGHT INVESTMENT MANAGEMENT LIMITED
Set forth below are certain performance data of Guinness Flight Global
Equity Fund, which is a non-U.S. based fund. Guinness Flight has advised the
Fund that the Guinness Flight Global Equity Fund is managed under the same
investment objective and substantially similar policies and strategies as those
of the Fund.
TOTAL RETURN FOR PERIODS ENDING DECEMBER 31
<TABLE>
<CAPTION>
GUINNESS FLIGHT GLOBAL
GUINNESS FLIGHT EQUITY FUND MORGAN STANLEY
GLOBAL EQUITY FUND(1) ADJUSTED PERFORMANCE(2) WORLD INDEX(3)
--------------------- ------------------------ ---------------
<S> <C> <C> <C>
1985(4).................. 49.7% 49.6% N/A
1986(4).................. 57.3 57.2 N/A
1987(4).................. 10.2 10.0 N/A
1988(4).................. 10.4 10.2 21.2%
1989(4).................. 25.8 25.5 14.7
1990(4).................. (5.2) (5.5) (18.6)
1991(4).................. 14.5 14.3 16.0
1992(4).................. 2.5 2.2 (7.1)
1993(4).................. 31.1 30.8 20.4
1994(4).................. 0.4 0.0 3.4
1995(4).................. 14.0 13.7 18.7
1996(4).................. 9.8 9.5 11.7
One-Year Period(5)(6).... 4.3 4.0 11.7
Three-Year
Period(5)(6)........... 6.1 5.7 11.1
Five-Year Period(5)(6)... 9.9 9.6 8.9
Ten-Year Period(5)(6).... 10.3 10.0 N/A
From Inception(5)(6)..... 16.6 16.4 N/A
Inception Date........... 1/25/85 1987
</TABLE>
- ---------------
(1) Guinness Flight Global Equity Fund performance figures provided by Guinness
Flight Investment Management Limited.
(2) The Guinness Flight Global Equity Fund performance figures have been
restated in this column to show what such performance figures would have
been for the individual years indicated if the projected expenses of the
Fund had been applicable. In addition, the One-, Three-, Five- and Ten-Year
and From Inception periods are restated to show what such performance
figures would have been if the 5% sales load and other projected expenses of
the Fund had been applicable.
(3) Source: Bloomberg L.P. Index performance figures do not include the sales
load and other expenses.
(4) Guinness Flight Global Equity Fund rates of return were calculated using the
mean net asset value, calculated in accordance with accounting standards of
the United Kingdom as reported in the Guinness Flight Global Equity Fund's
financial statements, which do not include a sales load.
(5) For the period ending December 31, 1996.
(6) Guinness Flight Global Equity Fund rates of return were calculated using the
mean net asset value as reported in the Guinness Flight Global Equity Fund's
financial statements and have been adjusted to include a 5% sales load.
The results presented above are not intended to predict or suggest the
return to be experienced by the Fund, or the return an individual investor might
achieve by investing in the Fund. Results may differ because of, among other
factors, differences in brokerage commissions, expenses (including investment
advisory fees), diversification of securities, timing of purchases and sales. In
addition, these results do not reflect the effects of federal, state or excise
taxes or 1940 Act investment restrictions applicable to registered investment
companies. Investors should not rely on the above performance data.
21
<PAGE> 22
USE OF PROCEEDS
The net proceeds to the Fund of the offering are estimated to be $62.0
million after deducting the sales load and estimated offering expenses and will
be invested in accordance with the policies described above under "The Fund and
its Objective and Policies." Since the Fund expects to invest its assets
gradually to benefit from short-term fluctuations in the price of securities the
Fund is purchasing, the Fund expects that net proceeds will be invested fully,
consistent with its investment objective and policies, within six months of the
date of this Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy and
sell securities for the Fund will be made by the Investment Advisers. The
Investment Advisers are authorized to allocate the orders placed by them on
behalf of the Fund to such brokers who also provide research or statistical
material, or other services to the Fund or the Investment Advisers for the
Fund's use. Such allocation shall be in such amounts and proportions as the
Investment Advisers shall determine and the Investment Advisers will report on
such allocations regularly to the Board of Trustees indicating the brokers to
whom such allocations have been made and the basis thereof. In addition, the
Investment Advisers may consider sales of shares of the Fund and of any other
funds advised or managed by the Investment Advisers as a factor in the selection
of unaffiliated brokers to execute portfolio transactions for the Fund, subject
to the requirements of best execution.
In selecting a broker to execute each particular transaction, the
Investment Advisers will take the following into consideration: the best net
price available; the reliability, integrity, and financial condition of the
broker; the size and difficulty in executing the order; and the value of the
expected contribution of the broker to the investment performance of the Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions to the
Fund in any transaction may be greater than that available from other brokers if
the difference is justified reasonably by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, neither Investment Adviser shall be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused the Fund to pay an unaffiliated broker that provides research services to
the Investment Advisers for the Fund's use a commission for effecting a
portfolio investment transaction in excess of the commission another broker
would have charged for effecting the same transaction. The Investment Adviser
must determine in good faith, however, that the commission was reasonable in
relation to the value of the research service provided by such broker with
respect to the particular transaction or the Investment Adviser's ongoing
responsibilities with respect to the Fund.
ALLOCATION OF INVESTMENTS
The Investment Advisers have other advisory clients, including individuals,
trusts, pensions, and profit sharing funds, that have investment objectives
similar to the Fund's investment objective. As such, there will be times when
the Investment Advisers may recommend purchases and/or sales of the same
portfolio securities for the Fund and their other clients. In such
circumstances, it will be the policy of the Investment Advisers to allocate
purchases and sales among the Fund and their other clients in a manner which the
Investment Advisers deem equitable, taking into consideration such factors as
size of account, concentration of holdings, investment objectives, tax status,
cash availability, purchase cost, holding period and other pertinent factors
relative to each account. Simultaneous transactions may have an adverse effect
upon the price or amount of a security purchased by the Fund.
22
<PAGE> 23
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
All distributions to shareholders whose shares are registered in their own
names automatically will be reinvested in additional shares of the Fund pursuant
to the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), unless they elect to receive cash. Shareholders whose shares are held
in the name of a broker or nominee should contact such broker or nominee to
determine whether or how they may participate in the Plan. Participation in the
Plan is voluntary and may be terminated or resumed at any time upon written
notice from the participant received by State Street, the plan agent (the "Plan
Agent"), prior to the record date of the next dividend. Additional information
regarding such election may be obtained from the Fund.
Dividend payments and other distributions to be made by the Fund to
participants in the Plan ("Plan Participants") either will be paid to the Plan
Agent in cash (which then must be used to purchase shares in the open market) or
will be represented by the delivery of shares, depending upon which of the two
options would be the most favorable to participants, as determined in accordance
with the procedures hereafter described. On each date the Fund determines the
net asset value of the shares (the "Valuation Date"), and which occurs not more
than five business days prior to a date fixed for payment of a dividend or other
distribution from the Fund, the Plan Agent will compare the determined net asset
value per share with the market price per share. For all purposes of the Plan,
"market price" shall be deemed to be the highest price bid at the close of the
NYSE or other primary exchange on which the Fund is traded on the date which
coincides with the relevant Valuation Date, or, if no bids were made on such
date, the next preceding day on which a bid was made. If the net asset value in
any such comparison is found to be lower than the market price, the Plan Agent
will demand that the Fund satisfy its obligation with respect to any such
dividend or other distribution by issuing additional shares to the Plan
Participants at a price per share equal to the greater of the determined net
asset value per share or 95% of the market price per share determined as of the
close of business on the relevant Valuation Date. However, if the net asset
value per share is higher than the market price per share, then the Plan Agent
will demand that the Fund satisfy its obligation with respect to any such
dividend or other distribution by a cash payment to the Plan Agent for the
account of Plan Participants. The Plan Agent then shall use such cash payment to
buy additional shares of the Fund in the "open market" for the account of the
Plan Participants; provided, however, that the Plan Agent shall not purchase
shares in the "open market" at a price in excess of the net asset value as of
the relevant Valuation Date. In the event the Plan Agent is unable to complete
its acquisition of shares to be purchased in the "open market" by the end of the
first trading day following receipt of the cash payment from the Fund, any
remaining funds shall be used by the Plan Agent to purchase newly issued Shares
from the Fund at the greater of the determined net asset value per share or 95%
of the market price per share as of the relevant Valuation Date or the next
preceding date.
Plan Participants will also have the option of making additional cash
payments to the Plan Agent, on a monthly basis, for investment in the Fund's
shares. Such payments may be made in any amount from a minimum of $50 to a
maximum of $1,000 per month per Plan Participant. The Fund may, in its
discretion, waive the maximum monthly limit with respect to any participant. At
the end of each calendar month, the Plan Agent will determine the amount of
funds accumulated in the Fund. Purchases made from the accumulation of payments
during any one calendar month will be made on or about the first business day of
the following month (the "Investment Date"). The funds will be used to purchase
Shares from the Fund. If the net asset value of the shares is lower than the
market price as of the Valuation Date which occurs not more than five business
days prior to the relevant Investment Date, such shares will be newly issued
shares and will be issued at a price per share equal to the greater of the
determined net asset value per share or 95% of the market price per share. If
the net asset value per share is higher than the market price per share, then
the Plan Agent shall use such cash payments to buy additional shares in the
"open market" for the account of the Plan Participants; provided, however, that
the Plan Agent shall not purchase shares in the "open market" at a price in
excess of the net asset value as of the relevant Valuation Date. In the event
that the Plan Agent is unable to
23
<PAGE> 24
complete its acquisition of shares to be purchased in the "open market" by the
end of the Investment Date, any remaining cash payments shall be used by the
Plan Agent to purchase newly issued Shares from the Fund at the greater of the
determined net asset value per share or 95% of the market price per share as of
the relevant Valuation Date. All cash payments received by the Plan Agent in
connection with the Plan will be held without earning interest. To avoid
unnecessary cash accumulations, and also to allow ample time for receipt and
processing by the Plan Agent, participants that wish to make voluntary cash
payments should send such payments to the Plan Agent in such a manner that
assures that the Plan Agent will receive and collect Federal Funds by the end of
the month. This procedure will avoid unnecessary accumulations of cash and will
enable participants to realize lower brokerage commissions and to avoid
additional transaction charges. If a voluntary cash payment is not received in
time to purchase shares in any calendar month, such payment shall be invested on
the next Investment Date. A participant may withdraw a voluntary cash payment by
written notice to the Plan Agent if the notice is received by the Plan Agent at
least 48 hours before such payment is to be invested by the Plan Agent.
State Street will perform bookkeeping and other administrative functions,
such as maintaining all shareholder accounts in the Plan and furnishing written
confirmation of all transactions in the account, including information needed by
shareholders for personal and tax records. Shares in the account of each Plan
Participant will be held by the Plan Agent in noncertificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan and of record as of the record date for
determining those shareholders who are entitled to vote on any matter involving
the Fund. In case of shareholders who hold shares for others who are the
beneficial owners, such as banks, brokers, or nominees, the Plan Agent will
administer the Plan on the basis of the number of Shares certified from time to
time by such shareholders as representing and limited to the total number of
Shares registered in the shareholder's name and held for the account of
beneficial owners who have elected to participate in the Plan.
There are no special fees or charges to participants other than reasonable
transactions fees, which shall not exceed $0.75 per dividend reinvestment per
participant.
With respect to purchases from voluntary cash payments, the Plan Agent will
charge $0.75 per investment, plus a pro rata share of the brokerage commissions,
if any. Brokerage charges for purchasing small blocks of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, as the Plan Agent will purchase shares for all
participants in large blocks and prorate the commission rate.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax liability associated therewith.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payment received and any dividend or distribution
to be paid subsequent to a date specified in a notice of the change sent to all
shareholders at least 90 days before such specified date. The Plan may also be
terminated on at least 90 days' written notice to all shareholders in the Plan.
24
<PAGE> 25
AUTOMATIC CONVERSION TO AN
OPEN-END INVESTMENT COMPANY
AUTOMATIC CONVERSION PROVISION
The Fund is the first closed-end investment company to contain an automatic
conversion feature. The Fund's conversion to an open-end investment company will
occur automatically upon the occurrence of the conditions described below
without requiring a vote of the shareholders of the Fund.
The Declaration of Trust provides that, beginning after 18 months from the
date of the initial public offering, the Fund will automatically convert into an
open-end investment company if its Shares close at a market price that is a 5%
or greater discount to the net asset value of the Fund on the last business day
of any week and for each of the next 14 business days thereafter. A business day
is any day that the NYSE is open. This provision may be amended only by the
affirmative vote of the holders at least 80% of the Fund's outstanding voting
securities.
Once the Automatic Conversion Provision is triggered, the Fund may not
continue to operate as a closed-end investment company even if the Fund ceases
to trade at a 5% or greater discount to the net asset value of the Fund. Within
one week thereafter, the Fund will file a registration statement with the SEC to
register as an open-end investment company. The disclosure concerning the Fund
contained in such registration statement will be substantially identical to the
disclosure contained in this offering document except for the provisions
concerning the purchase and sale of Shares and any other item pertaining to
open-end investment companies.
If the Fund converts to an open-end investment company, it will be able to
continuously issue and offer for sale Shares, and each such Share could be
presented to the Fund at the option of the holder for redemption at a price
based on the then-current net asset value per share. Further, Shares would no
longer be listed on the NYSE. After the conversion, Shares may be purchased from
and redeemed by the Fund at net asset value as follows.
PURCHASING SHARES
Investors will be permitted to purchase Shares from the Fund's transfer
agent or from other selected securities brokers or dealers following conversion
to an open-end investment company. A buyer whose purchase order is received by
the transfer agent before the close of trading on the NYSE, currently 4:00 p.m.
Eastern time, will acquire Shares at the net asset value determined as of that
day. A buyer whose purchase order is received by the transfer agent after the
close of trading on the NYSE will acquire Shares at the net asset value set as
of the next trading day. A broker may charge a transaction fee for the purchase.
The Fund anticipates that, should it convert to an open-end investment
company, the minimum initial investment in the Fund will be $2,500 for regular
accounts and $1,000 for tax-qualified retirement plans. The Fund anticipates
that the minimum additional investment in the Fund will be $1,000 for regular
accounts and $500 for tax-qualified retirement plans. The Fund may further
reduce or waive the minimums for certain retirement and other employee benefit
plans; for the Adviser's employees, clients and their affiliates; for advisers
or financial institutions offering investors a program of services; or any other
person or organization deemed appropriate by the Funds. Investors will be
permitted to purchase Shares by check or by wire. The Fund will provide a
pre-authorized investment plan to investors.
Upon conversion, the Fund may institute a distribution plan pursuant to
Rule 12b-1 of the 1940 Act. Pursuant to the Plan, the Fund would be permitted to
incur distribution expenses related to the sale of its shares of up to .25% per
annum of the Fund's average daily net assets. The Plan would provide that the
Fund may finance activities which are primarily intended to result in the sale
of the Fund's shares, including, but not limited to, advertising, printing of
prospectuses and reports for other than existing shareholders, preparation
25
<PAGE> 26
and distribution of advertising material and sales literature and payments to
dealers and shareholder servicing agents who enter into agreements with the Fund
or its distributor.
REDEEMING SHARES
Investors will be permitted to redeem Shares through the transfer agent of
the Fund or from other selected securities brokers or dealers following
conversion to an open-end investment company. A shareholder whose redemption
order is received by the Transfer Agent before the close of trading on the NYSE,
currently 4:00 p.m. Eastern time, will redeem Shares at the net asset value set
as of that day. A shareholder whose redemption order is received by the Transfer
Agent after the close of trading on the NYSE will redeem Shares at the net asset
value set as of the next trading day on the NYSE. A broker may charge a
transaction fee for the redemption.
SHARES OF BENEFICIAL INTEREST IN THE FUND
The Fund is a Delaware business trust that was created on June 28, 1996.
The Fund is authorized to issue 50 million shares of beneficial interest, par
value $.01 per share. Each Share has equal voting, dividend, distribution, and
liquidation rights. The Shares offered hereby, when issued and paid for pursuant
to the terms of this offering, will be fully paid and non-assessable. The Shares
are not redeemable and have no preemptive, conversion, or cumulative voting
rights.
The Fund's Declaration of Trust provides that under certain conditions the
affirmative vote of at least 75% of the outstanding voting stock is required:
(i) to voluntarily convert the Fund into an open-end investment company; (ii) to
approve any proposal to dissolve, merge, or consolidate the Fund; (iii) to sell
all or substantially all of its assets; or (iv) to effect any amendment to the
Declaration of Trust to voluntarily make the Shares a redeemable security (as
well as to amend any of the foregoing provisions). These provisions and others
in the Declaration of Trust make it more difficult for a third party to obtain
control of the Fund. "Anti-takeover" provisions could have the effect of
depriving stockholders of an opportunity to sell their shares at a premium over
prevailing market prices by discouraging third parties from seeking to gain
control in a tender offer, proxy contest or similar transaction.
Under Delaware law, shareholders of the Fund are not held personally liable
for the obligations of the Fund. The Declaration of Trust of the Fund provides
that, to the fullest extent permitted by the law, no Trustee or officer of the
Fund will have any liability to the Fund or its stockholders for damages. The
Fund will indemnify and advance expenses to its Trustees or officers to the
fullest extent that indemnification is permitted by law.
The Declaration of Trust does not waive a Trustee's or officer's duty to
comply with the Securities Act or the 1940 Act or any rule, regulation, or order
thereunder. Further, the Declaration of Trust does not protect the officers and
Trustees against any liability to the Fund or its stockholders to which such
others or Trustees would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their offices.
Shares entitle the holders to one vote per share. The shareholders have
certain rights, as set forth in the Bylaws of the Fund, to call a meeting for
any purpose, including the purpose of voting on removal of one or more Trustees.
TAXES
Under certain circumstances, the Fund may be in a position to (in which
case it would) elect to "pass-through" to its shareholders the right to a credit
or deduction for income or other creditable taxes paid by the Fund to foreign
governments.
26
<PAGE> 27
It is the Fund's policy to distribute to shareholders all of its investment
income (net of expenses) and any capital gains (net of capital losses) in
accordance with the requirements imposed by the Code. The Fund may, however,
subject to the review of the Board of Trustees, retain the net realized
long-term capital gains of the Fund. In such event, the taxes thereon would be
paid by the Fund and appropriate credit allowed to the shareholders of the Fund,
pursuant to Code section 852(b)(3)(D).
A statement setting forth the federal income tax status of all
distributions made (or deemed made) during the year will be sent to shareholders
promptly after the end of each year.
Qualification as a Regulated Investment Company
The Fund will elect to be taxed as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, the Fund will not
be subject to federal income tax on the portion of its net investment income
(i.e., taxable interest, dividends, and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains over
capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year (the "Distribution Requirement"),
and satisfies certain other requirements of the Code that are described below.
Distributions by the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and will
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities, or foreign
currencies (or options, futures, or forward contracts thereon) held for less
than three months (the "Short-Short Gain Test"). Because of the Short-Short Gain
Test, the Fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent the Fund from disposing of investments at a loss, since the recognition
of a loss before the expiration of the three-month holding period is disregarded
for this purpose. Interest (including original issue discount) received by the
Fund at maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of the Short-Short Gain Test.
However, income that is attributable to realized market appreciation will be
treated as gross income from such sale or other disposition of securities for
this purpose.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code section 988, gain or loss recognized as
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to extent attributable to changes in foreign
currency exchange rates) and gain or loss recognized on the disposition of a
forward foreign currency contract, futures contract, option or similar financial
investment, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code section 1256, will generally be
treated as ordinary income or loss.
27
<PAGE> 28
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
Certain transactions that may be engaged in by the Fund (such as regulated
futures contracts and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, even though a taxpayer's obligations (or
rights) under such contracts have not terminated (by delivery, exercise,
entering into a closing transaction, or otherwise) as of such date. Any gain or
loss recognized as a consequence of the year-end deemed disposition of Section
1256 contracts is taken into account for the taxable year together with any
other gain or loss that was previously recognized upon the termination of
Section 1256 contracts during that taxable year. Any capital gain or loss for
the taxable year with respect to Section 1256 contracts (including any capital
gain or loss arising as a consequence of the year-end deemed sale of such
contracts) generally is treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. The Fund, however, may elect not to have this
special tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of the Fund that are not Section 1256
contracts. Under Treasury Regulations, gains arising from Section 1256 contracts
will be treated for purposes of the Short-Short Gain Test as being derived from
securities held for not less than three months.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
or any net long-term capital loss incurred after October 31 as if it had been
incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which each of the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option.
28
<PAGE> 29
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year.
The Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes. Such dividends paid by the Fund will qualify for the 70%
dividends-received deduction for corporate shareholders only to the extent
discussed below.
Ordinary income dividends paid by the Fund with respect to a taxable year
will qualify for the 70% dividends received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4),
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to such (or
substantially identical) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced (1) if the corporate
shareholder fails to satisfy the foregoing requirements with respect to its
shares of the Fund or (2) by application of Code Section 246(b) which in general
limits the dividends-received deduction to 70% of the shareholder's taxable
income (determined without regard to the dividends-received deduction and
certain other items).
29
<PAGE> 30
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. For purposes of the corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, corporate shareholders generally will be required to take the full
amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining their adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. Net capital gain distributed and designated as a capital gain dividend
will be taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder has held his Shares or whether such gain was
recognized by the Fund prior to the date on which the shareholder acquired his
Shares. The Code provides, however, that under certain conditions only 50% of
the capital gain recognized upon the Fund's disposition of domestic "small
business" stock will be subject to tax.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, its pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid its pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income its pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions.
Distributions by the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his Shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether they are paid in cash or reinvested in additional Shares
of the Fund (or of another fund). Shareholders receiving a distribution in the
form of additional Shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of the Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November, or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually
30
<PAGE> 31
paid in January of the following year. Shareholders will be advised annually as
to the U.S. federal income tax consequences of distributions made (or deemed
made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
redemption proceeds, if any, paid to any shareholder (1) who has provided either
an incorrect tax identification number or no number at all, (2) who is subject
to backup withholding for failure to report the receipt of interest or dividend
income properly, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is an "exempt recipient" (such as a
corporation).
Sale of Shares
A shareholder will recognize gain or loss on the sale of shares of the Fund
in an amount equal to the difference between the proceeds of the sale and the
shareholder's adjusted tax basis in the Shares. All or a portion of any loss so
recognized may be disallowed if the shareholder purchases other Shares of the
Fund within 30 days before or after the sale. In general, any gain or loss
arising from (or treated as arising from) the sale of Shares of the Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the Shares were held for longer than one year. However, any capital loss arising
from the sale of Shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such Shares. For this purpose, the special holding period rules of
Code Section 246(c)(3) and (4) (discussed above in connection with the
dividends-received deduction for corporations) generally will apply in
determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
The same rules will apply to redemptions of Fund Shares should the Fund
convert into an open-end investment company.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder generally would be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends, and amounts
retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers
31
<PAGE> 32
with respect to the particular tax consequences to them of an investment in the
Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Prospectus. Future legislative or administrative changes or
court decisions may significantly change the conclusions expressed herein, and
any such changes or decisions may have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
THE TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. EACH SHAREHOLDER IS ADVISED TO CONSULT ITS OWN TAX
ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO IT OF AN INVESTMENT IN
THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
32
<PAGE> 33
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Wheat,
First Securities, Inc. (the "Underwriter") has agreed to purchase the 5,250,000
Shares offered hereby from the Fund, and the Fund has agreed to sell the
5,250,000 Shares offered hereby to the Underwriter.
The Underwriting Agreement provides that the obligations of the Underwriter
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions. The nature of the Underwriter's obligation is such
that it is committed to purchase and pay for all of the Shares if any are
purchased.
The Underwriter proposes to offer the Shares offered hereby initially at
the offering price set forth on the cover page of this Prospectus. The
Underwriter proposes to offer the Shares to certain securities dealers at such
price less a concession not in excess of $0.375 per share. After the offering,
the price to the public, concession and allowance may be changed by the
Underwriter. The Underwriting Agreement provides that the Fund will pay the
Underwriter up to $100,000 in partial reimbursement of its expenses.
The Fund has granted to the Underwriter an option, exercisable within 45
days of the date of this Prospectus, to purchase up to an additional 787,500
additional Shares to cover over-allotments, if any, at the same price per share
as the initial 5,250,000 Shares to be purchased by the Underwriter from the
Fund. To the extent that the Underwriter exercises this option, the Underwriter
will be committed, subject to certain conditions, to purchase such additional
Shares. The Underwriter may purchase such Shares only to cover over-allotments
made in connection with this offering.
Investors must pay for the Shares on the third business day following the
date of the final Prospectus. Investors should consult their brokers concerning
the manner and method of payment. In addition, physical delivery of certificates
representing Shares initially may be required to transfer ownership.
In connection with the requirements for listing of the Shares on the NYSE,
the Underwriter has undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial owners in the United States. The minimum investment
requirement is 100 Shares ($1,250).
The Fund anticipates that from time to time the Underwriter may act as
broker or dealer in connection with the execution of its portfolio transactions
after it has ceased to be an Underwriter and, subject to certain restrictions,
may act as broker while it is Underwriter.
The Fund has agreed not to issue, and all Trustees and executive officers
of the Fund have agreed not to resell, any additional Shares or other equity
securities of the Fund for 180 days after the date of this Prospectus without
the prior written consent of the Underwriter.
The Fund and the Investment Advisers have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriter may be required to
make in respect thereof.
NET ASSET VALUE
The net asset value of shares of the Fund will be determined no less
frequently than weekly, on the last business day of each week and at such other
times as the Fund's Board of Trustees may determine as of the close of regular
trading on the NYSE by dividing the value of the total assets of the Fund, less
all liabilities, by the total number of shares outstanding.
An exchange-traded equity security (not subject to resale restrictions) is
valued at its most recent sale price. Lacking any sales, the security is valued
at the calculated mean between the most recent bid quotation
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<PAGE> 34
and the most recent asked quotation (the "Calculated Mean"). If there are no bid
and asked quotations, the security is valued at the most recent bid quotation.
An unlisted equity security which is traded on the Nasdaq Stock Market or the
Nasdaq National Market is valued at the most recent sale price. If there are no
such sales, the security is valued at the high or "inside" bid quotation. The
value of an equity security not quoted on the Nasdaq Stock Market or the Nasdaq
National Market but traded in another over-the-counter market, is the most
recent sale price. If there are no such sales, the security is valued at the
Calculated Mean. If there is no Calculated Mean, the security is valued at the
most recent bid quotation.
GENERAL INFORMATION
ACCOUNTANTS
Ernst & Young LLP is the independent accountant of the Fund. Generally, the
independent accountant will audit the financial statements and the financial
highlights of the Fund, as well as provide reports to the Trustees.
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York
10022 is legal counsel of the Fund. In addition, Kramer Levin will provide
counsel to the Board of Trustees of the Fund.
Hunton & Williams, Riverfront Plaza, East Tower, 951 East Byrd Street,
Richmond, Virginia 23219-4047 is legal counsel to the Underwriter.
ADDITIONAL INFORMATION
The Fund has filed with the SEC a Registration Statement under the
Securities Act and the 1940 Act with respect to the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and its exhibits and schedules. For further information with respect
to the Fund and the Shares offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules filed as part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document are not necessarily complete, and, in each such instance,
reference is hereby made to the copy of the contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by this reference thereto. The Registration Statement, together
with its exhibits and schedules, may be inspected without change at the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
and the regional offices of the SEC located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at 500 West Madison Street, Suite 1400 Chicago,
Illinois 60661. Copies of all or any part of such materials may be obtained from
any such office upon payment of the fees prescribed by the SEC. Such information
may also be inspected and copied at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. The SEC maintains an internet site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Fund, that file
electronically with the SEC.
FINANCIAL STATEMENTS
Shareholders receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders receive financial
statements examined by the Fund's independent accountant.
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<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
The Dessauer Global Equity Fund
We have audited the accompanying statement of assets and liabilities of The
Dessauer Global Equity Fund (the "Fund") as of May 23, 1997. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Fund at
May 23, 1997 in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Los Angeles, California
May 23, 1997
35
<PAGE> 36
THE DESSAUER GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 23, 1997
<TABLE>
<S> <C>
ASSETS
Assets:
Cash............................................................................ $100,000
Deferred offering costs......................................................... 330,000
Deferred organization expenses (Note 1)......................................... 170,000
---------
Total Assets............................................................ 600,000
Liabilities:
Due to investment advisers (Note 3)............................................. 330,000
Organization expenses payable................................................... 170,000
---------
Total Liabilities....................................................... 500,000
---------
Commitments (Note 2)
Net Assets........................................................................ $100,000
========
Represented by:
Common Stock, $.01 par value, authorized 50,000,000 shares;
8,418 shares issued and outstanding.......................................... 84
Paid-in Surplus................................................................. 99,916
---------
$100,000
========
Net Asset Value per share......................................................... $11.88
========
Maximum Offering Price per share ($11.88/0.95).................................... $12.50
========
</TABLE>
NOTE 1. ORGANIZATION:
The Dessauer Global Equity Fund (the "Fund") was organized in Delaware on
June 28, 1996 and is registered with the Securities and Exchange Commission as a
non-diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The objective of the Fund is long-term capital
appreciation in the global economy. The Fund has no operations other than the
issue of shares of its common stock on May 23, 1997 to Dessauer Asset
Management, Inc. and Guinness Flight Investment Management Limited. As of May
23, 1997, the Fund is preparing for the registration and offering of 6,037,500
shares of its common stock at $12.50 per share.
Organization costs estimated at $170,000 will be deferred and amortized on
a straight-line basis over a 60-month period from the date the Fund commences
operations. In the event that any of the initial shares of the Fund are redeemed
during the amortization period by any holder thereof, the redemption proceeds
will be reduced by any unamortized organization costs in the same proportion as
the number of such shares being redeemed bears to the number of initial shares
that are outstanding at the time of the redemption. Deferred offering costs will
be charged against the proceeds of the offering upon its successful closing or
will be expensed otherwise.
NOTE 2. AGREEMENTS:
The Fund intends to enter into investment advisory agreements with Dessauer
Asset Management, Inc. ("Dessauer") and Guinness Flight Investment Management
Limited ("Guinness Flight") (together, the "Investment Advisers") pursuant to
which the Investment Advisers will be responsible for providing
36
<PAGE> 37
investment advisory services to the Fund (the "Advisory Agreements"). For
services under the Investment Advisory Agreements, the Fund will pay Dessauer a
monthly fee at an annual rate of .60% of the average weekly net asset value of
the Fund and will pay Guinness Flight a monthly fee at an annual rate of .40% of
the average weekly net asset value of the Fund.
The Fund intends to enter into an administrative agreement with Investment
Company Administration Corporation (the "Administrator") pursuant to which the
Administrator will provide the Fund with certain administrative services. For
its services, the Administrator will receive a monthly fee at an annual rate of
.25% of the average weekly net asset value of the Fund. The Administrator has
agreed to an annual rate of .10% instead of the .25% as long as the Fund is a
closed-end investment company. Certain employees of the Administrator are
officers of the Fund.
The Fund also intends to enter into a custody agreement with Investors Bank
and Trust Company (the "Custodian") pursuant to which the Custodian will provide
the Fund with custody services for the Fund's assets. The custody agreement
provides for an annual fee of $50,000 for accounting services plus a fee for
custodial services computed and paid monthly at an annual rate based on the
amount of assets under custody, plus transactional fees.
NOTE 3. RELATED PARTY TRANSACTIONS:
As of May 23, 1997, all of the Fund's issued and outstanding shares are
owned by Dessauer and Guinness Flight.
Certain officers of Dessauer and Guinness Flight are also officers and/or
trustees of the Fund.
Certain costs of the offering and organizational expenses were paid by the
Investment Advisers on behalf of the Fund. These amounts are reflected on the
Statement of Assets and Liabilities as Due to investment advisers.
37
<PAGE> 38
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 6
Summary of the Fund's Expenses...... 8
Investment Rationale................ 9
The Fund and Its Objective and
Policies ......................... 9
Risk Factors........................ 11
Management of the Fund.............. 15
Prior Performance of the Investment
Advisers.......................... 19
Use of Proceeds..................... 22
Portfolio Transactions and
Brokerage......................... 22
Allocation of Investments........... 22
Automatic Dividend Reinvestment and
Cash Purchase Plan................ 23
Automatic Conversion to an Open-End
Investment Company................ 25
Shares of Beneficial Interest in the
Fund ............................. 26
Taxes............................... 26
Underwriting........................ 33
Net Asset Value..................... 33
General Information................. 34
Additional Information.............. 34
Financial Statements................ 34
Report of Independent Auditors...... 35
Statement of Assets and
Liabilities....................... 36
</TABLE>
------------------------
Until June 24, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions
in the Shares, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as Underwriter and with respect to
their unsold allotments or subscriptions.
5,250,000 SHARES
THE DESSAUER
GLOBAL EQUITY FUND
SHARES OF
BENEFICIAL INTEREST
------------------------
PROSPECTUS
------------------------
WHEAT FIRST BUTCHER SINGER
May 30, 1997
