REGISTRATION NO. 333-14927
REGISTRATION NO. 811-7883
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PROSPECTUS
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ICON FUNDS
PROSPECTUS
January 7, 1997
U.S. EQUITY FUNDS INTERNATIONAL EQUITY FUNDS
ICON Basic Materials Fund ICON Asia Region Fund
ICON Capital Goods Fund ICON South Pacific Region Fund
ICON Consumer Cyclicals Fund ICON North Europe Region Fund
ICON Consumer Staples Fund ICON South Europe Region Fund
ICON Energy Fund ICON Western Hemisphere Fund
ICON Financial Services Fund
ICON Healthcare Fund
ICON Leisure Fund FIXED INCOME FUND
ICON Technology Fund ICON Short-Term Fixed Income Fund
ICON Telecommunication & Utilities Fund
ICON Transportation Fund
C/O MERIDIAN INVESTMENT MANAGEMENT CORPORATION
12835 EAST ARAPAHOE ROAD, TOWER II
ENGLEWOOD, COLORADO 80112
FOR INFORMATION, SHAREHOLDER SERVICES AND REQUESTS:
1-800-764-0442
This prospectus presents information that a prospective investor should know
about the various series of the ICON Funds (the "Trust"). Each Fund is a
portfolio of the Trust, a non-diversified, open-end management investment
company ("Fund" or collectively the "Funds"). The Funds are designed for use by
institutional money managers who have discretionary authority to direct
investments on behalf of the beneficial owners of fund shares. The Short-Term
Fixed Income Fund objective is to attain high current income consistent with
preservation of capital. The other Funds are designed to provide long-term
capital appreciation with respect to the sectors selected by the money managers;
and, a Fund may not contain significant assets at times when money managers
place client funds in other sectors. The Trust will report performance of each
Fund. Investors should consider the performance of their investment adviser
independent of fund performance.
Shares of the Funds are offered on a "no-load" basis which means there are no
sales charges or commissions. The Funds are distributed by AmeriPrime Financial
Securities, Inc.
A Statement of Additional Information dated January 7, 1997 has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
This Statement is available free from ICON Funds upon written request at the
address set forth above or by calling 1-800-764-0442.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR, HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................3
SUMMARY OF FUND EXPENSES.......................................................6
INVESTMENT OBJECTIVE AND STRATEGIES............................................7
U.S. Equity Funds.....................................................7
ICON Basic Materials Fund....................................8
ICON Capital Goods Fund......................................8
ICON Consumer Cyclicals Fund.................................8
ICON Consumer Staples Fund...................................8
ICON Energy Fund.............................................8
ICON Financial Services Fund.................................9
ICON Healthcare Fund.........................................9
ICON Leisure Fund............................................9
ICON Technology Fund........................................10
ICON Telecommunication & Utilities Fund.....................10
ICON Transportation Fund....................................10
International Equity Funds...........................................10
ICON Asia Region Fund.......................................11
ICON South Pacific Region Fund.............................12
ICON North Europe Region Fund...............................14
ICON South Europe Region Fund...............................16
ICON Western Hemisphere Fund................................18
Fixed Income Fund....................................................19
ICON Short-Term Fixed Income Fund...........................20
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS....................20
TYPES OF INVESTMENT RISK......................................................23
RISKS OF INTERNATIONAL INVESTING..............................................24
SPECIAL CONSIDERATIONS........................................................25
HOW TO INVEST IN THE FUND.....................................................26
HOW TO REDEEM SHARES..........................................................27
HOW TO MAKE EXCHANGES.........................................................28
SHARE PRICE CALCULATION.......................................................28
DIVIDENDS AND TAXES...........................................................29
THE TRUST.....................................................................32
MANAGEMENT OF THE FUNDS.......................................................32
PERFORMANCE INFORMATION.......................................................34
<PAGE>
PROSPECTUS SUMMARY
The information summarized below is qualified in its entirety by the more
detailed information set forth below in this Prospectus.
The Trust.................................. ICON Funds (the "Trust") is an
open-end management investment
company. It is registered as an
investment company under the
Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust
consists of, and on a continuous
basis issues, redeemable shares of
numerous separate, non-diversified
portfolios each of which has its
own investment objectives and
policies (commonly referred to as
"mutual funds"). The portfolios are
designed to serve a wide range of
investor needs.
The Funds.................................. The following Funds are offered
through this Prospectus:
U.S. EQUITY FUNDS
ICON Basic Materials Fund
ICON Capital Goods Fund
ICON Consumer Cyclicals Fund
ICON Consumer Staples Fund
ICON Energy Fund
ICON Financial Services Fund
ICON Healthcare Fund
ICON Leisure Fund
ICON Technology Fund
ICON Telecommunication & Utilities
Fund
ICON Transportation Fund
INTERNATIONAL EQUITY FUNDS
ICON Asia Region Fund
ICON South Pacific Region Fund
ICON North Europe Region Fund
ICON South Europe Region Fund
ICON Western Hemisphere Fund
FIXED INCOME FUND
ICON Short-Term Fixed Income Fund
U.S. Equity Funds -- Investment............. The investment objective of the
Objective U.S. Equity Funds is to provide
long-term capital appreciation.
Each Fund seeks to achieve its
objective by investing primarily in
equity securities, including common
stock and securities convertible
into common stock of U.S. issuers.
International Equity Funds -- Investment.... The investment objective of the
Objective International Equity Funds is to
provide long-term capital
appreciation. Each Fund seeks to
achieve its objective by investing
primarily in equity securities
including common stocks and
securities convertible into common
stocks of foreign issuers.
Fixed Income Fund -- Investment............. The investment objective of the
Objective Fixed Income Fund is to provide
high current income consistent with
the preservation of capital.
<PAGE>
The Investment Advisor..................... Meridian Investment Management
Corporation, 12835 East Arapahoe
Road, Tower II, Englewood,
Colorado, ("Meridian" or the
"Advisor") has been selected to
serve as the investment advisor to
carry out the investment and
reinvestment of the Funds' assets.
The Investment Sub-Advisor................. Wellington Management Company, LLP,
75 State Street, Boston,
Massachusetts ("Wellington
Management" or the "Sub-Advisor")
has been retained to serve as the
Sub-Advisor to the Short-Term Fixed
Income Fund.
The Administrator.......................... The Fund has retained AmeriPrime
Financial Services, Incorporated,
1793 Kingswood Drive, Suite 200,
Southlake, Texas, ("AmeriPrime" or
the "Administrator") as the
administrator to manage the Funds'
business affairs.
Purpose of theTrust...................... Meridian is a sponsor of the Funds
offered by this prospectus. The
Funds were created so that
investment advisory clients of
Meridian and other similarly
situated investment advisers would
have available to them no load
sector funds focusing on selected
industries or countries; so that
the investment advisers may move
money freely from sector to sector
on behalf of their clients without
the limitations imposed by many
fund groups where large movements
of money in and out of a fund could
disrupt portfolio management and
performance; and to provide
Meridian investment advisory
clients portfolio management
services with lower aggregate
costs.
Who May Purchase Fund Shares............... The Funds were established to
provide broadly based investment
opportunities in various domestic
sectors and in the main security
markets of the world for investment
portfolios managed by professional
fiduciaries such as trustees,
investment advisers and other
persons and institutions acting in
a fiduciary capacity. The Funds are
designed to enable fiduciaries to
comply with the rule that
investments made by fiduciaries
should be selected with the care,
skill and caution that would be
exercised by a prudent person based
on their clients investment
objectives.
Special Consideration...................... Shares of the Funds are not
directly available to the public,
only through these professional
advisers/fiduciaries. In this
regard, investors should be aware
that a Fund may not contain
significant assets at times when
money managers place their client
funds in other sectors. To the
extent an investor remains in a
Fund without significant assets,
that investor's holding would be
exposed to bearing a
proportionately greater portion of
the Fund's expenses and/or
distributions, potentially eroding
the investment and/or exposing the
investor to additional taxes in
respect to the distributions.
The Distributor............................ AmeriPrime Financial Securities,
Inc. 1793 Kingswood Drive, Suite
200, Southlake , Texas ("AFSI" or
the "Distributor") has agreed to
act as Distributor as an
accommodation for the Trust in
connection with acting as agent in
the various states and with
clearing promotional materials with
appropriate regulatory authorities.
<PAGE>
How to Purchase Funds Shares............... There is no sales charge on the
purchase of Fund shares. Shares may
be purchased by contacting the
Trust's Transfer Agent at
1-800-764-0442. Shares of any
Funds may be purchased at the net
asset value per share next
determined after receipt of the
purchase order. The minimum initial
investment in each Fund is $50,000
and the subsequent minimum
investment amount is $100. Subject
to the minimum investment amount,
shares may also be purchased by
exchange.
Redemptions................................ Shares may be redeemed directly
from a Fund at the net asset value
per share next determined after
receipt of the redemption request
in good order.
Exchange Privilege......................... Shares of the Funds may be
exchanged for shares of certain
other funds managed by the Advisor
at the net asset value next
determined after receipt of the
exchange request.
Shareholder Communication.................. Each shareholder will receive
annual and semi-annual reports
containing financial statements,
and a statement confirming each
share transaction. Financial
statements included in annual
reports will be audited by the
Trust's independent accountants.
Where possible, shareholder
confirmations and account
statements will consolidate all
ICON Funds holdings of the
shareholder.
Special Risk Considerations................ International investments pose
additional risks including currency
exchange rate fluctuation, currency
revaluation and political risks.
Transfer Agent and Custodian............... Firstar Trust Company, Incorporated
is located at 615 East Michigan
Street, Milwaukee, Wisconsin 53202.
THE PROSPECTUSES OF THE FUNDS ARE COMBINED IN THIS PROSPECTUS. EACH FUND OFFERS
ONLY ITS OWN SHARES, YET IT IS POSSIBLE THAT A FUND MIGHT BECOME LIABLE FOR A
MISSTATEMENT IN THE PROSPECTUS OF ANOTHER FUND. THE TRUSTEES OF THE TRUST HAVE
CONSIDERED THIS IN APPROVING THE USE OF A COMBINED PROSPECTUS.
<PAGE>
SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding the direct
and indirect expenses that an investor may incur as a shareholder in a Fund. The
expense information is based on estimated amounts for the current fiscal year.
The expenses are expressed as a percentage of average net assets. The example
should not be considered a representation of future Fund performance or
expenses, both of which may vary from the example.
Shareholders should be aware that each Fund is a no-load fund and, accordingly,
a shareholder does not pay any sales charge or commission upon purchase or
redemption of shares of the Fund.
THE TABLES DO NOT REFLECT THE PAYMENT OF ANY ADDITIONAL FEES AN INVESTOR WILL
PAY TO THE PROFESSIONAL ADVISER/FIDUCIARY RESPONSIBLE FOR THE INVESTORS PURCHASE
OF FUND SHARES. SUCH FEES SHOULD BE CONSIDERED ALONG WITH FUND AND OTHER
EXPENSES INCURRED BY THE INVESTOR.
<TABLE>
ICON
ICON International ICON
U.S. Equity Equity Fixed Income
Shareholder Transaction Expenses Funds Funds Fund
- -------------------------------- ----- ----- ----
<S> <C> <C> <C>
Sales Load Imposed on Purchases None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fees None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 1.00% 1.00% 0.65%
Other Expenses 0.45% 0.65% 0.45%
Total Fund Operating Expenses 1.45% 1.65% 1.10%
</TABLE>
The tables above are provided to assist an investor in understanding the direct
and indirect expenses that an investor may incur as a shareholder in the Funds.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and redemption at the end of each time period:
Fund 1 Year 3 Years
---- ------ -------
ICON U.S. Equity Funds $ 15 $ 47
ICON International Equity Funds $ 17 $ 54
ICON Fixed Income Fund $ 12 $ 36
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
U.S. EQUITY FUNDS
The investment objective of each U.S. Equity Fund is to provide long-term
capital appreciation. Each Fund seeks to achieve its objective by investing
primarily in equity securities, including common stock and securities
convertible into common stock of U.S. issuers.
Each U.S. Equity Fund focuses on a particular investment area. Under normal
circumstances, at least 65% of the total assets of each Fund will be invested in
securities of companies principally engaged in its particular named industry
sector. For the purposes of these policies, a company is considered to be
"principally engaged" in business activities in a specific sector if at least
50% of its assets, gross income or net sales are derived from activities in such
sector, or at least 50% of its assets are dedicated to the production of
revenues from such sector. In circumstances where, based on available financial
information, a question exists as to whether or not a company meets one of these
standards, the Fund may invest in the securities of such a company only if
Meridian determines, after review of information describing the company and its
business activities, that the company's primary business is within the sector.
The remainder of the Fund's assets may be invested in debt securities of
companies in the sector and/or equity and debt securities of companies outside
of the sector if, in the opinion of Meridian, such securities stand to benefit
from developments in the sector.
Each U.S. Equity Fund is comprised of industry-specific "baskets" of securities
which are subsets of such sector, examples of which are provided below under
each fund's description. Each industry basket will encompass a sample of stocks
from Meridian's approved list for such industry. In selecting and weighting
companies for inclusion in each basket, Meridian ordinarily looks for several of
the following characteristics: high growth; healthy balance sheet; pricing
flexibility; strong management; liquidity; and generally operating
characteristics which will enable the companies to compete successfully in their
respective markets. Based on its proprietary research and investment methods,
Meridian may, from time to time, add, delete, or replace a company within a
basket.
Investment selection and weighting of baskets within each Fund are based on
industry attractiveness. In attempting to determine industry attractiveness,
Meridian uses its proprietary valuation model to analyze its universe of
individual stocks based on the following factors: historical and estimated
future earnings; long-term earnings growth projections; risk; current and future
interest rate conditions; and current price. Meridian then groups stocks into
their representative industry classifications in order to determine those
industries Meridian deems to be attractive relative to other industries.
The U.S. Equity Funds are non-diversified, and each may invest up to 25% of its
total assets in the securities of one issuer. However, no Fund may invest more
than 5% of its total assets in securities of any company that derives more than
15% of its revenues from brokerage or investment management activities. As a
result, investments in the equity funds may involve greater risks than
investments in other types of mutual funds.
ICON BASIC MATERIALS FUND - Industry baskets include, but are not limited to:
Construction; Containers; Gold; Mining; Metal/Aluminum; Paper & Forest Products;
and Steel. Based on Meridian's proprietary research and methodology and under
normal market conditions, Meridian will actively invest and weight the Fund's
assets in those industry baskets within the Basic Materials Fund that are deemed
to be attractive relative to other industries in the sector.
Many companies in the basic materials sector are significantly affected by the
level and volatility of commodity prices, the exchange value of the dollar,
import controls, and worldwide competition. At times, worldwide production of
these materials has exceeded demand as a result of over-building or economic
downturns, leading to poor investment returns or losses. Other risks may include
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control. In addition, the environment
services industry can be impacted by legislation, government regulations, and
enforcement policies. As regulations are developed and enforced, companies may
be required to alter or cease production of a product or service.
The price of precious metals is affected by broad economic and political
conditions. For example, the price of gold and other precious metal mining
securities can face substantial short-term volatility caused by international
monetary and political
<PAGE>
developments such as currency devaluations or revaluations, economic and social
conditions within a country, or trade restrictions between countries. Since much
of the world's gold reserves are located in South Africa, the social and
economic conditions there can affect gold and gold-related companies located
elsewhere. The price of precious metals is closely tied to broad economic and
political conditions.
ICON CAPITAL GOODS FUND - Industry baskets include, but are not limited to:
Chemicals; Building Materials; Conglomerates; Electrical Equipment; Engineering
& Construction; Heavy Duty Truck & Parts; Machine Tools; Machinery
(Diversified); Manufacturing; and Pollution Control/Environment. Based on
Meridian's proprietary research and methodology and under normal market
conditions, Meridian will actively invest and weight the Fund's assets in those
industry baskets within the Capital Goods Fund that are deemed to be attractive
relative to other industries in the sector.
Companies in the chemical processing field are subject to intense competition,
product obsolescence, and significant government regulation. As regulations are
developed and enforced, such companies may be required to alter or cease
production of a product, to pay fines, or to pay for cleaning up a disposal
site. In addition, chemical companies face unique risks associated with handling
hazardous products.
The success of equipment manufacturing and distribution companies is closely
tied to overall capital spending levels, which is influenced by an individual
company's profitability, and broader issues such as interest rates and foreign
competition. The industry may also be affected by economic cycles, technical
progress, labor relations, and government regulations.
ICON CONSUMER CYCLICALS FUND - Industry baskets include, but are not limited to:
Hardware & Tools; Home-building/Manufactured Housing; Household Furnishings &
Appliances; Photograph/Imaging; Retail-General/Department Stores;
Retail-Specialty; retail-Specialty Apparel; Shoes; Textile-Apparel
Manufacturers; and Toys. Based on Meridian's proprietary research and
methodology and under normal market conditions, Meridian will actively invest
and weight the Fund's assets in those industry baskets within the Consumer
Cyclicals Fund that are deemed to be attractive relative to other
industries in the sector.
The success of consumer product manufacturers and retailers is closely tied to
the performance of the overall economy, interest rates, competition, and
consumer confidence. Success depends heavily on disposable household income and
consumer spending. Changes in demographics and consumer tastes can affect the
demand for, and success of, consumer products in the marketplace.
ICON CONSUMER STAPLES FUND - Industry baskets include, but are not limited to:
Beverages; Cosmetics; Distributors-Consumer Products; Foods;
Household/Housewares; Retail-Drug; Retail-Food Chains; and Tobacco. Based on
Meridian's proprietary research and methodology and under normal market
conditions, Meridian will actively invest and weight the Fund's assets in those
industry baskets within the Consumer Staples Fund that are deemed to be
attractive relative to other industries in the sector.
The success of retailing companies is closely tied to consumer spending, which
is affected by general economic conditions and consumer confidence levels. The
retailing industry is highly competitive, and a company's success is often tied
to its ability to anticipate changing consumer tastes. In addition, the
agriculture/food industry is impacted by supply and demand, which may be
affected by demographic and product trends, and by food fads, marketing
campaigns, and environmental factors. In the U.S., the agricultural products
industry is subject to regulation by numerous government agencies.
ICON ENERGY FUND - Industry baskets include, but are not limited to:
Oil-Domestic and International Integrated; Oil-Equipment & Drilling;
Oil-Exploration & Production; and Natural Gas. Based on Meridian's proprietary
research and methodology and under normal market conditions, Meridian will
actively invest and weight the Fund's assets in those industry baskets within
the Energy Fund that are deemed to be attractive relative to other industries in
the sector.
Securities of companies in the energy field are subject to changes in value and
dividend yield which depend largely on the price and supply of both conventional
and alternative energy sources. Swift price and supply fluctuations may be
caused by events relating to international politics, energy conservation, the
success of energy source exploration projects, and tax and other regulatory
policies of domestic and foreign governments.
<PAGE>
ICON FINANCIAL SERVICES FUND - Industry baskets include, but are not limited to:
Banks; Financial Services; Insurance Property Casualty;
Insurance-Life/Multi-line; Investment Banks/Brokerage Firms; Personal Loans;
Real Estate Investment Trusts; and Savings & Loan Companies. Based on Meridian's
proprietary research and methodology and under normal market conditions,
Meridian will actively invest and weight the Fund's assets in those industry
baskets within the Financial Services Fund that are deemed to be attractive
relative to other industries in the sector.
Financial services companies are subject to extensive governmental regulation
which may limit both the amounts and types of services offered, loans and other
financial commitments permitted, and the interest rates and fees they can
charge. Profitability is largely dependent on the availability and cost of
capital funds, and can fluctuate significantly when interest rates change.
Credit losses resulting from financial difficulties of borrowers can negatively
impact the industry. Company profits are affected by interest rate levels,
general economic conditions, and price and marketing competition. Insurance
companies are subject to severe price competition and may be impacted by events
or trends such as natural catastrophes, mortality rates, or recessions.
Similarly, as the services offered by banks expand, banks are becoming more
exposed to well-established competitors. This exposure has also increased due to
the erosion of historical distinctions between regional banks and other
financial institutions. With respect to brokerage firms, changes in regulations,
brokerage commission structure, stock and bond market activity, and the
competitive environment, combined with the operating leverage inherent in
companies in these industries, can produce erratic returns over time. (Under the
1940 Act and SEC regulations, the Fund may not invest more than 5% of its total
assets in the equity securities of any company that derives more than 15% of its
revenues from brokerage or investment management activities.) Legislation is
currently being considered which would reduce the separation between commercial
and investment banking businesses. If enacted, this could significantly impact
the industry and the Fund.
Companies in the real estate industry are subject to a variety of factors such
as government spending on housing subsidies, public works, and transportation
facilities, as well as changes in interest rates, consumer confidence and
spending, taxation, demographic patterns, the level of new and existing home
sales, and other economic activity.
ICON HEALTHCARE FUND - Industry baskets include, but are not limited to:
Biotechnology; Healthcare Delivery; Healthcare Drugs (Pharmaceuticals); and
Medical Equipment & Devices. Based on Meridian's proprietary research and
methodology and under normal market conditions, Meridian will actively invest
and weight the Fund's assets in those industry baskets within the Healthcare
Fund that are deemed to be attractive relative to other industries in the
sector.
The demand for health care services should increase as the population ages.
However, studies have shown the ability of health care providers to curtail
unnecessary hospital stays and reduce costs. These changes could alter the
health care industry, focusing it more on home care, and placing less emphasis
on inpatient revenues as a source of profit. The health care industry is subject
to government regulation and approval of products and services, which could have
a significant effect on price and availability. Moreover, federal and state
governments provide a substantial percentage of revenues to health are service
providers. These sources are subject to extensive governmental regulation, and
appropriations are a continued source of debate. The types of products or
services produced or provided by a particular company may quickly become
obsolete. Similarly, biotechnology companies are affected by patent
considerations, intense competition, rapid technological change and
obsolescence, and regulatory requirements. In addition, many of these companies
may not offer products yet and may have persistent losses or erratic review
patterns.
ICON LEISURE FUND - Industry baskets include, but are not limited to:
Broadcasting/Cable; Hotel-Motel; Leisure Time/Recreation/Gaming;
Publishing-Newspapers; Publishing/Printing; and Restaurants. Based on Meridian's
proprietary research and methodology and under normal market conditions,
Meridian will actively invest and weight the Fund's assets in those industry
baskets within the Leisure Fund that are deemed to be attractive relative to
other industries in the sector.
Securities of the companies in the leisure industry may be considered
speculative and generally exhibit greater volatility than the overall market.
Many companies have unpredictable earnings due, in part, to changing consumer
tastes and intense competition. The industry has reacted strongly to
technological developments and to the threat of government regulations. Some of
the companies in these industries are undergoing significant change because of
federal deregulation of cable and broadcasting. As a result, competitive
pressures are intense and the stocks are subject to increased price volatility.
<PAGE>
ICON TECHNOLOGY FUND - Industry baskets include, but are not limited to:
Communication-Equipment/Manufacturing; Computer Software & Services; Computer
Systems; Electronics-Defense/Instrumentation; Electronics-Semiconductors; and
Office Equipment & Supplies. Based on Meridian's proprietary research and
methodology and under normal market conditions, Meridian will actively invest
and weight the Fund's assets in those industry baskets within the Technology
Fund that are deemed to be attractive relative to other industries in the
sector.
Competitive pressures and changing domestic and international demand may have a
significant effect on the financial condition of companies in the computer
industry. Companies in the industry spend heavily on research and development
and are sensitive to the risk of product obsolescence. Competitive pressures may
have a significant effect on the financial condition of companies in the
technology industry. For example, if technology continues to advance at an
accelerated rate, and the number of companies and product offerings continues to
expand, these companies could become increasingly sensitive to short product
cycles and aggressive pricing. Products or services provided by these industries
may be in the development stage and can face risks such as failure to obtain
financing or regulatory approval, intense competition, product incompatibility,
consumer preference, and rapid obsolescence.
ICON TELECOMMUNICATION & UTILITIES FUND - Industry baskets include, but are not
limited to: Cellular; Electric, Gas and Water Utilities; and Telecommunications.
Based on Meridian's proprietary research and methodology and under normal market
conditions, Meridian will actively invest and weight the Fund's assets in those
industry baskets within the Telecommunication & Utilities Fund that are deemed
to be attractive relative to other industries in the sector.
Energy service firms are affected by supply and demand both for their specific
product or service, and for energy products in general. The price of oil and
gas, exploration and production spending, governmental regulation, world events
and economic conditions will likewise affect the performance of these companies.
Public utility stocks have traditionally produced above-average dividend income,
but the Fund's investments are based on growth potential. The gas and electric
public utilities industries may be subject to broad risks resulting from
governmental regulation, financing difficulties, supply and demand of services
or fuel, and special risks associated with energy and atmosphere conservation.
The Fund may not own more than 5% of the outstanding voting securities of more
than one public utility company as defined by the Public Utility Holding Company
Act of 1935.
Companies in the telecommunications field may range from traditional local and
long-distance telephone service or equipment providers, to companies involved in
new technologies such as cellular telephone or paging services. Telephone
operating companies are subject to both federal and state regulations governing
rates of return and services that may be offered. Many companies in the industry
fiercely compete for market share. Although telephone companies usually pay an
above average dividend, the Fund's investment decisions are primarily based on
growth potential and not on income.
ICON TRANSPORTATION FUND - Industry baskets include, but are not limited to:
Aerospace/Defense; Automobiles; Airlines; Railroads; and Truckers. Based on
Meridian's proprietary research and methodology and under normal market
conditions, Meridian will actively invest and weight the Fund's assets in those
industry baskets within the Transportation Fund that are deemed to be attractive
relative to other industries in the sector.
Profitability in these industries is substantially influenced by competition
within the industry, domestic and foreign economies and government regulation,
and the price of fuel. The airline industry is still feeling the effects of
deregulation. In addition, the automotive industry is highly cyclical and
companies in the industry may suffer periodic operating losses. While most of
the major participants in the transportation sector are large, financially
strong companies, some are smaller with a non-diversified product line or
customer base.
INTERNATIONAL EQUITY FUNDS
The investment objective of each International Equity Fund is to provide
long-term capital appreciation. Each Fund seeks to achieve its objective by
investing primarily in equity securities including common stocks and securities
convertible into common stocks of foreign issuers.
<PAGE>
Each International Equity Fund focuses on a particular geographic region of the
world. Under normal circumstances, at least 65% of the total assets of each Fund
will be invested in securities of companies principally engaged in the business
activities in its particular named geographic region. For the purposes of these
policies, a company is considered to be "principally engaged" in business
activities in a specific region if, in the opinion of Meridian, it has one or
more of the following characteristics: (i) its principal securities trading
market is in that region; (ii) the company derives at least 50% of its annual
revenue from either goods produced, sales made, or services performed in that
region; or (iii) the company is operating in and is organized under the laws of,
or has its principal offices in, a country in that region. In circumstances
where, based on available financial information, a question exists whether a
company meets one of these standards, the Fund may invest in the securities of
such a company only if Meridian determines, after review of information
describing the company and its business activities, that the company's primary
business is within the region. The remainder of the Fund's assets may be
invested in debt securities of companies in the region and/or equity and debt
securities of companies outside of the region if, in the opinion of Meridian,
such securities stand to benefit from developments in the region. The
International Equity Funds do not have a policy to concentrate in a particular
industry or group of industries.
Each International Equity Fund is comprised of country-specific "baskets" of
securities which are subsets of such region, examples of which are provided in
each Fund's description. Each of these country baskets will encompass a sample
of stocks from Meridian's approved list for its respective country. In selecting
and weighting companies for inclusion in each basket, Meridian ordinarily looks
for several of the following characteristics: high growth; healthy balance
sheet; pricing flexibility; strong management; liquidity; and acceptable
operating characteristics which will enable the countries to compete
successfully in their respective markets. Based on its proprietary research and
investment methods, Meridian may, from time to time, add, delete, or replace a
company within a basket.
Investment selection and weighting of baskets within each Fund are based on
country attractiveness. In attempting to determine country attractiveness,
Meridian uses its proprietary valuation model to analyze its universe of
individual stocks based on the following factors: historical and estimated
future earnings; long-term earnings growth projections; risk; current and future
interest rate conditions; and current price. Meridian then groups stocks into
their representative country classifications in order to determine those
countries Meridian deems to be attractive relative to other countries.
The International Equity Funds are non-diversified, and each Fund may invest up
to 25% of its total assets in the securities of one issuer. As a result,
investments in these Equity Funds may involve greater risks than investments in
other types of mutual funds.
ICON ASIA REGION FUND - May include, but is not limited to, baskets of
securities from the following countries: Japan; Korea; China; Hong Kong; and
Taiwan. Based on Meridian's proprietary research and methodology and under
normal market conditions, Meridian will actively invest and weight the Fund's
assets in those country baskets within the Asia Region Fund that are deemed to
be attractive relative to other countries in the region.
China is a nation in Eastern Asia bordering the South China Sea. Based on 1995
estimates, China has a population of 1.2 billion. Gross domestic product for
1995 has been reported to be US$502.1 billion according to "U.S.-China trade and
investment data" by the office of the Chinese Economic Area. China's main
trading partners are Hong Kong, Japan, Taiwan, United States, Germany and South
Korea. Primary industries include iron and steel, coal, machine building,
armaments, chemical fertilizers, consumer durables, automobiles, consumer
electronics and telecommunications. Growth expectations for gross domestic
product reach 11.8%. The currency is the Chinese Yuan with an exchange rate as
of 1995 measuring Y8.44=US$1. The Chinese government continues its move to a
more open economy under Communist rule. State approval is required for projects
over $30 million. The 1995 current account surplus has been measured at $16.5
billion according to the Economist Intelligence Unit.
The standard rate of withholding for dividends is 10%. However, there is
currently no withholding tax in China. The tax has been suspended indefinitely
since October, 1993. Capital gains may be taxed at a 10% rate; however, capital
gains taxes have also been suspended indefinitely since October, 1993.
Hong Kong is located off the coast of China bordering the South China Sea. Based
on 1995 census data, Hong Kong's population is 6.06 million. Principal exports
to the United States are machinery, precious metals and stones, plastics,
optical
<PAGE>
and surgical instruments, meat and vehicles. Gross domestic product in 1995 was
US$143.74 billion or approximately US$23,700 per capita. Growth expectations for
gross domestic product in 1996 and 1997 are 4.8% and 5.1%, respectively. The
national currency is the Hong Kong Dollar with an exchange rate as of November
1, 1996, measured at HK$7.73=US$1. The value of the Stock Exchange of Hong Kong
Limited is greater than 100% of the Hong Kong gross domestic product.
There are no dividend or capital gains taxes in Hong Kong. However, if profits
arise from trading an investment that was held for speculative reasons, a 17.5%
tax rate may be levied.
Hong Kong will be transferred from the status of British territory to the rule
of The People's Republic of China on July 1, 1997. Hong Kong will then be
considered a special administrative region with its own law for another fifty
years under a government imposed by China.
JAPAN is a country located off the east coast of Asia. Based on 1994 census
data, Japan has a population of 124.96 million. Electrical and electronic
equipment, automobiles, machinery and chemicals are the major industries. Gross
domestic product in 1995 was US$4960.7 billion and is expected to grow by 3.7%
in 1996 and by 2.0% in 1997. The currency is the Japanese Yen with an exchange
rate as of November 1, 1996, measured at (Y)113.74=US$1. There are eight stock
exchanges in Japan along with an over-the-counter market. The market in Japan is
divided into three sections. The First Section trades in the largest and most
active stocks. This section accounts for 95% of total market capitalization. The
Second Section trades in those issues which have lower turnover than the First
Section, which are newly quoted on the exchange or which would otherwise be
traded over-the-counter. The Third Section consists of foreign stocks. These are
traded over-the-counter. The Japanese current account surplus for the 12 months
ended August, 1996, is US$77.2 billion.
Dividends are withheld at a standard rate of 20%. Capital gains are not taxed
unless the holding is at least 25% of a company's shares and at least 5% of the
position is sold. Here, the tax liability is 18%.
SOUTH KOREA, bordering the Sea of Japan and theYellow Sea, lies in Eastern Asia
on the southern half of the Korean peninsula. Based on 1994 census data, South
Korea has a population of 44.45 million. Electronics, auto production,
chemicals, shipbuilding, steel, textiles, clothing, footwear and food processing
are the major industries. Gross domestic product in 1994 is estimated to be
US$508.3 billion according to Central Intelligence Agency Publications. The
currency is the Korean Won with an exchange rate as of 1995 measured at
W790.48=US$1. The export-oriented economy has grown dynamically with the help of
a entrepreneurial society. Korea's main trading partners are the United States,
Japan and the countries of the European Union. The 12 month current account
deficit as of August, 1996, measured US$16.0 billion.
Dividends are withheld at a standard rate of 25%. An additional 10% surtax is
levied. Capital gains realized by a foreign investor from South Korean
securities are taxed at an 11% rate. Where there is an identifiable purchase
price, taxes may be withheld at the lower of 11% of sale proceeds or 27.5% of
the gain.
TAIWAN is an Eastern Asian nation off the southeastern coast of China. Based on
1995 estimates, Taiwan has a population of 21.5 million. Electronics, textiles,
chemicals, clothing, food processing, plywood, sugar milling, cement,
shipbuilding and petroleum refining constitute the major industries. Gross
domestic product is expected to grow at a rate of 6.0% in 1996 and 5.8% in 1997,
according to the Bank of Ireland Treasury Group. The currency is the Taiwan
Dollar with an exchange rate as of November 1, 1996, measured at T$27.54=US$1.
Dividends are withheld at a rate of 20% if invested through an approved foreign
investment company. The full local withholding tax is 25%. Capital gains are
currently not taxable although the government has recently made proposals to
reimpose the tax.
Taiwan's major trading partners are the United States, Hong Kong, Japan and the
European Union countries. The 12 month current account surplus as of the second
quarter of 1996, measured US$7.7 billion.
ICON SOUTH PACIFIC REGION FUND - May include, but is not limited to, baskets of
securities from the following countries: Australia; Indonesia; Malaysia; New
Zealand; and Singapore. Based on Meridian's proprietary research and
<PAGE>
methodology and under normal market conditions, Meridian will actively invest
and weight the Fund's assets in those country baskets within the South Pacific
Region Fund that are deemed to be attractive relative to other countries in the
region.
AUSTRALIA is located in the South Pacific. Based on 1995 census data, Australia
has a population of 18.5 million. Gross domestic product in 1995 was US$347.9
billion or US$18,805 per capita. Growth expectations for gross domestic product
in 1996 and 1997 are 3.8% and 3.2% respectively. Mining, industrial and
transportation equipment, food processing, chemicals and steel are included in
Australia's major industries. The currency is the Australian Dollar which has a
November 1, 1996, exchange rate of AUD$1.26=US$1. Australia houses seven stock
exchanges with the Sydney and Melbourne being the largest regionally. The
Australian Stock Exchange is the national exchange. All seven are subject to the
Securities Industry Act.
Dividends are generally paid semi-annually. Unfranked dividends are subject to
30% tax withholding. Dividends are considered franked if they are paid out of
profits already subject to the corporate income tax of 39%. Capital gains are
not taxed if they result from an equity holding of less than 10% of a public
company. Otherwise, capital gains are taxed at 33%.
Australia is the world's largest producer of wool. Leading trading partners are
the United States, New Zealand and Japan. Principal exports to the United States
from Australia include aircraft and associated equipment, computers (ADP
equipment), computer parts and accessories and measuring instruments. The
trailing 12 month current account deficit measured US$14.5 billion as of August,
1996.
INDONESIA is a nation in Southeastern Asia that sits as an archipelago between
the Indian and Pacific Oceans. Based on 1995 estimates, Indonesia has a
population of 203.5 million. Agriculture accounts for 21% of gross domestic
product. Indonesia was once the world's largest rice importer. The country is
now nearly self-sufficient. Petroleum and natural gas, textiles, mining, cement,
chemical fertilizers, plywood, food and rubber are other important industries to
the Indonesian economy. Gross domestic product in 1995 was US$167 billion as
estimated by the Indonesian Embassy. The currency is the Indonesian Rupiah with
a 1995 exchange rate of Rp2203.6=US$1.
Dividends are withheld at a standard rate of 20%. Capital gains are taxed at a
rate of 0.10%. The 12 month current account deficit as of the first quarter of
1996, measured US$6.9 billion.
MALAYSIA is located in Southeastern Asia as a peninsula and the northern
one-third of the island of Borneo. Based on 1994 census data, Malaysia has a
population of 19.65 million. Singapore, the United States and Japan are major
trading partners. Commodity exports of the nation include electronic equipment,
petroleum, palm oil, wood, rubber and textiles. Gross domestic product is
expected to grow by 8.3% in 1996 and by 8.1% in 1997. The currency is the
Malaysian Ringitt with an exchange rate as of November 1, 1996, measured at
M$2.53=US$1. Malaysia has experienced rapid development with the help of foreign
investment. The potential for damaging inflation is present but fiscal and
monetary policies are closely monitored by the government. The 12 month current
account deficit as of 1995, measured US$6.8 billion.
Markets have been regulated under the Securities Industry Act as of 1983. The
main board of the Kuala Lumpur Stock Exchange houses large issues. A second
board was established in 1988 to handle smaller companies. There is no dividend
withholding tax in Malaysia. However, Malaysian residents receive a corporate
tax credit attached to dividends at a rate of 30%. Non-resident Malaysians may
see a 30% charge on gross dividends. This is not a withholding tax, it is a
deduction of tax credits. Capital gains may be levied on a disposal of real
estate company shares up to 20%. Otherwise, capital gains are not taxable in
Malaysia.
NEW ZEALAND consists of two islands located in the South Pacific. Based on 1995
census data, New Zealand has a population of 3.54 million. Major exports to the
United States are: aircraft, data processing equipment, fertilizers,
telecommunications equipment, scientific instruments, polymers, petroleum
products, books and sound recordings. Gross domestic product in 1995 was US$59.2
billion or approximately US$16,700 per capita. The currency is the New Zealand
Dollar with an exchange rate as of November 1, 1996, measured at NZ$1.41=US$1.
The current account deficit for New Zealand in 1995 measured US$994 million.
<PAGE>
Dividends are withheld at a standard rate of 30%. Investors holding a voting
interest of less than 10% in a dividend paying company are entitled to a partial
refund of the imputed tax credit. Imputed tax credits are given on dividends
made out of income that has suffered corporate tax at a 33% rate. The credit
allowed is 35.82% of the imputed credits on the dividend.
Capital gains are not taxed.
SINGAPORE is a nation in Southeastern Asia. The country's islands fall between
Malaysia and Indonesia. Based on 1995 census data, Singapore has a population of
2.99 million. Major industries include petroleum refining, electronics, oil
drilling equipment, rubber processing and rubber products, processed food and
beverages, ship repair, financial services, and biotechnology. Singapore acts as
a center for trade. Gross domestic product in 1995 was US$120 billion according
to the Singapore Department of Statistics. The currency is the Singapore Dollar
with an exchange rate as of November 1, 1996, measured at S$1.41=US$1. The Stock
Exchange of Singapore separated from the Kuala Lumpur Stock Exchange in 1973 but
the two remained closely tied until 1989 when dual listings were terminated. The
Singapore market has a strong international orientation.
There is no dividend withholding tax in Singapore. Tax credits are attached to
dividends and non-Singaporean residents are not entitled to the credit.
Therefore, non-residents may see a 27% tax charge on gross dividends. Capital
gains are not taxable in Singapore. The 12 month capital account surplus as of
the first quarter of 1996 is US$13.6 billion.
ICON NORTH EUROPE REGION FUND - May include, but is not limited to, baskets of
securities from the following countries: Belgium; Denmark; Finland; Germany;
Ireland; Netherlands; Norway; Sweden; and United Kingdom. Based on Meridian's
proprietary research and methodology and under normal market conditions,
Meridian will actively invest and weight the Fund's assets in those country
baskets within the North Europe Region Fund that are deemed to be attractive
relative to other countries in the region.
BELGIUM is a European nation located northeast of the English Channel and
southeast of the North Sea. Based on 1993 census data, Belgium has a population
of 10.05 million. Gross domestic product in 1995 was US$269.2 billion. Growth
expectations for gross domestic product in 1996 and 1997 are 1.2% and 2.1%
respectively. Engineering and metal products, auto assembly, processed food and
beverages, chemicals, basic metals, textiles, glass, petroleum and coal are the
major industries.
The currency is the Belgian Franc with an exchange rate as of November 1, 1996,
measured at BFr31.19=US$1. The Brussels Stock Exchange is organized as the
Societe de la Bourse de Valeurs Mobileres de Bruxelles (SBVM). The Banking and
Finance Commission controls the power to approve securities houses. Belgium is a
multi-lingual country with Dutch and French the two official languages in
Brussels. English and German are spoken often in business. Dividends are
withheld at a standard rate of 25%. A sign off by the tax office is necessary in
cases where reclamation is available. Capital gains are not taxed in Belgium.
Belgium is a member of the European Union and Brussels houses the main offices
of the European Parliament. The 12 month current account surplus as of the first
quarter, 1996 is measured at US$14.9 billion.
DENMARK is located in Northern Europe. Based on 1995 census data, Denmark has a
population of 5.23 million. Chief industries of the nation include food
processing, machinery and equipment, textiles and clothing, chemicals,
electronics, construction, furniture and other wood products and shipbuilding.
Denmark is a member of the European Union. The Danish Krona is valued at an
exchange rate of DKr$5.81=US$1 as of November 1, 1996. The central bank attempts
to maintain a stable krona against the core European currencies. Gross domestic
product in 1995 was US$175.2 billion or US$33,500 per capita. Growth
expectations for gross domestic product in 1996 and 1997 are 1.6% and 2.6%
respectively. The 12 month current account surplus as of July, 1996, is measured
at US$1.8 billion.
Dividends are withheld at a rate of 25%. A sign off by the tax office is
necessary in cases where reclamation is available. Capital gains are not taxed
in Denmark.
FINLAND, bordered by Norway, Sweden and Russia, is located in Northern Europe.
Based on 1995 census data, Austria has a population of 5.11 million. Gross
domestic product in 1995 was US$125.5 billion or approximately US$24,500 per
<PAGE>
capita. Growth expectations for gross domestic product in 1996 and 1997 are 3.2%
and 3.1% respectively. Metal products, shipbuilding, forestry and wood
processing, copper refining, foodstuffs, chemicals, textiles and clothing are
the major industries. The currency is the Finnish Markka with an exchange rate
as of November 1, 1996, measured at FM4.53=US$1.
The major industries are machinery, metals, ship building, textiles and
clothing.
The only stock exchange in Finland is the Helsinki exchange. Dividends are
withheld at a standard rate of 28%. Capital gains are not taxed.
Finland is a member of the European Union. The current account surplus for 1996
is expected to fall to 2.7% of gross domestic product.
GERMANY is a Western European nation bordered by Denmark, Poland, the Czech
Republic, Austria, Switzerland, France, the Netherlands, Belgium and Luxembourg.
Based on 1995 census data, Germany has a population of 81.64 million. Iron,
steel, coal, cement, machinery, chemicals, coal, steel, ships and automobiles
constitute the major industries. Gross domestic product in 1995 was US$2420.5
billion or approximately US$29,645 per capita. Growth expectations for gross
domestic product in 1996 and 1997 are 1.2% and 2.4%, respectively. The currency
is the German Mark with an exchange rate as of November 1, 1996, measured at
DM1.51=US$1. Germany houses eight stock exchanges with the Frankfurt exchange
being the largest. The need for financing is primarily filled by banking
institutions. The equity market is relegated to a lesser role. There are,
however, three levels of equity trading. The first is the official market where
there is trading in shares of the official listings. The "semi-official" market
controls trading in shares not in the official listing. Finally, there is the
unofficial, over-the-counter market.
Dividends are withheld at a standard rate of 26.875%. A sign off by the tax
office is necessary in cases where reclamation is available. Capital gains are
not taxed if they result from an equity holding of less than 25% of a public
company. Otherwise, capital gains are taxed at a maximum of 45%. Germany is one
of the original members of the European Common Market which eventually became
the European Union. The 12 month current account deficit as of July, 1996,
measured US$18.9 billion. Economic unification of East and West Germany occurred
in July of 1990, with political unification following suit in October of the
same year.
The REPUBLIC OF IRELAND is a European nation that occupies five-sixths of the
island of Ireland, located just west of England. Based on 1995 census data,
Ireland has a population of 3.58 million. Food products, textiles, chemicals,
clothing, pharmaceuticals, transportation equipment, glass and crystal, brewing
and machinery are the major industries of Ireland. The economy is trade
dependent. Gross domestic product in 1995 was US$60.1 billion or approximately
US$16,800 per capita. The currency is the Irish Pound with an exchange rate as
of November 1, 1996, measured at I(pound)1.63=US$1. Ireland is a member of the
European Union.
Dividends are taxed at the corporate level before distribution. The advance
payment of corporation tax is currently 29.87%. There is no capital gains tax.
NETHERLANDS is located in Western Europe on the North Sea. Based on 1995 census
data, Netherlands has a population of 15.45 million. Agroindustries, metal and
engineering products, electrical machinery and equipment, chemicals, petroleum,
fishing, construction and microelectronics constitute the major industries.
Gross domestic product in 1995 was US$396.9 billion or approximately US$25,700
per capita. Growth expectations for gross domestic product in 1996 and 1997 are
2.4% and 2.6%, respectively. The currency is the Dutch Guilder with an exchange
rate as of November 1, 1996, measured at NLG1.7=US$1. Trading occurs on the
Amsterdam Stock Exchange although there is not a significant amount of activity.
Bank financing is used extensively to fulfill capital requirements.
Dividends are withheld at a standard rate of 25%. A sign off by the tax office
is necessary in cases where reclamation is available. Capital gains are not
taxed.
The 12 month current account deficit as of the first quarter, 1996, measured
US$15.1 billion.
<PAGE>
NORWAY is the western most country in Scandinavia, located in Northern Europe.
Based on 1995 census data, Norway has a population of 4.36 million. Fishing,
engineering, metals, chemicals, food processing, paper, shipbuilding and oil and
gas constitute the major industries. Gross domestic product in 1995 was US$147.7
billion or approximately US$33,900 per capita. Growth expectations for gross
domestic product in 1996 and 1997 are 3.0% and 2.5%, respectively. The currency
is the Norwegian Krone with an exchange rate as of November 1, 1996, measured at
NKr6.38=US$1.
Dividends are withheld at a standard rate of 25%. Capital gains are not taxable
in Norway. The Norwegian population has opted out of the European Union. The 12
month current account surplus is expected to be at 4.25% of gross domestic
product in 1996 and at 6.0% of gross domestic product in 1997 as estimated by
the Bank of Ireland Group Treasury.
SWEDEN is a nation located in Northern Europe between Norway and Finland. Based
on 1995 census data, Sweden has a population of 8.83 million. Iron and steel,
precision equipment, wood pulp and paper products, processed food and
automobiles constitute the major industries. Gross domestic product in 1995 was
US$228.5 billion or approximately US$25,900 per capita. Growth expectations for
gross domestic product in 1996 and 1997 are 1.4% and 2.2%, respectively. The
Swedish Krona is the country's currency and, as of November 1, 1996, the
exchange rate with the US Dollar measured at SKr6.56=US$1.
The Stockholm Stock Exchange is the largest exchange in Sweden. There are three
markets for trading shares. The A1 list consists of the largest and most heavily
traded companies. The over-the-counter market caters to small and medium sized
companies. Finally, there is the unofficial parallel market which trades in
unlisted shares.
Dividends are withheld at a standard rate of 30%. Capital gains are not taxable
in Sweden.
Sweden is a member of the European Union(EU). Countries within the EU are
Sweden's main trading partners. The 12 month current account deficit as of July,
1996, measured US$6.7 billion.
The UNITED KINGDOM is a group of islands located to the northwest of the
European mainland, across the English Channel. It is comprised of England,
Scotland, Wales and northern Ireland. Based on 1994 census data, the United
Kingdom has a population of 58.39 million. Steel, metals, ship building,
shipping, banking and insurance are some of the major industries. Gross domestic
product in 1995 was US$1099.7 billion or approximately US$18,800 per capita.
Growth expectations for gross domestic product in 1996 and 1997 are 2.2% and
3.4%, respectively. The currency is the British Pound with an exchange rate as
of November 1, 1996, measured at (pound)1.63=US$1. The United Kingdom is the
largest equity market in Europe in terms of market capitalization. There are
fourteen stock exchanges in the United Kingdom which make up the International
Stock Exchange. The largest is the London Stock Exchange which has the largest
volume of trading in international equities in the world.
Corporations are taxed on any dividend before it is distributed. A credit is
available for a refund less a 15% tax on the total distribution plus tax credit.
Capital gains are not taxed in the United Kingdom.
The United Kingdom is a member of the European Union. The 12 month trailing
current account deficit as of the second quarter, 1996, is measured at US$4.1
billion.
ICON SOUTH EUROPE REGION FUND - May include, but is not limited to, baskets of
securities from the following countries: Austria; France; Greece; Italy;
Portugal; Spain; and Switzerland. Based on Meridian's proprietary research and
methodology and under normal market conditions, Meridian will actively invest
and weight the Fund's assets in those country baskets within the South Europe
Region Fund that are deemed to be attractive relative to other countries in the
region.
AUSTRIA is a Central European nation with Germany, the Czech Republic, Hungary,
Italy, Slovenia and Croatia as its neighbors. Based on 1995 census data, Austria
has a population of 8.05 million. Major industries include foods, iron and
steel, machines, textiles, chemicals, paper and pulp, tourism, mining and autos.
Gross domestic product in 1995 was US$234.2 billion or US$29,165 per capita.
Growth expectations for gross domestic product in 1996 and 1997 are 1.0% and
2.0%, respectively. The currency is the Austrian Schilling with an exchange rate
as of November 1, 1996, measured
<PAGE>
at ATS10.65=US$1. The Vienna Stock Exchange was established in 1771 and declared
an autonomous institution by the Stock Exchange Act of 1875.
Dividends are withheld at a standard rate of 22%. A sign off by the tax office
is necessary in cases where reclamation is available. Capital gains are not
taxed if they result from an equity holding of less than 10% of a public
company. Otherwise, capital gains are taxed at a maximum of 34%.
Austria has been a member of the European Union since the beginning of 1995, and
Austria's monetary policy closely tracks that of Germany. The 12 month current
account deficit as of July, 1996, measured US$5.2 billion.
FRANCE is a Western European nation bordered by Belgium, Luxembourg, Germany,
Switzerland, Italy and Spain. Based on 1995 census data, France has a population
of 58.03 million. Steel, chemicals, textiles, automobiles, wine, perfume,
aircraft and electronic equipment are the major industries. Gross domestic
product in 1995 was US$1549.2 billion or approximately US$26,700 per capita.
Growth expectations for gross domestic product in 1996 and 1997 are 1.1% and
2.3%, respectively. The currency is the French Franc with an exchange rate as of
November 1, 1996, measured at FFr5.11=US$1. France houses seven stock exchanges
but the Paris Stock Exchange handles more than 95 % of the transactions of the
country.
Dividends are withheld at a rate of 25%. A tax credit is available for refund
equal to 50% of the dividend. There is a further 15% tax on the total of the
dividend and refund. Capital gains are not taxed if they result from an equity
holding of less than 25% of a public company. Otherwise, capital gains are taxed
at 16%.
France is a member of the European Union. The 12 month trailing current account
surplus as of July, 1996, measured US$15.8 billion.
GREECE, bordered by the Mediterranean Sea to the south, is a nation in Southern
Europe. Based on 1994 census data, Greece has a population of 10.43 million.
Tourism, food and tobacco processing, textiles, chemicals, metal products,
mining and petroleum constitute the major industries. Gross domestic product in
1995 was US$111.8 billion. Growth expectations for gross domestic product in
1996 and 1997 are 2.2% and 2.4%, respectively. The currency is the Greek Drachma
with an exchange rate as of November 1, 1996, measured at Dr237.70=US$1. Greece
is a member of the European Union. The level of the current account deficit is
expected to be at 2.7% of gross domestic product in 1996 and at 3.3% of gross
domestic product in 1997 according to the Bankof Ireland Group Treasury.
There is no withholding tax on dividends from profits that have been subject to
the 35% corporate tax. Capital gains are not taxed in Greece.
ITALY is a nation in Southern Europe with Austria, Switzerland and France to its
north. Based on 1994 census data, Italy has a population of 57.19 million.
Steel, food processing, clothing, machinery, autos, textiles, shoes, machine
tools and chemicals are the major industries. Gross domestic product in 1995 was
US$1091.1 billion or US$18,900 per capita. Growth expectations for gross
domestic product in 1996 and 1997 are .9% and 2.0%, respectively. The currency
is the Italian Lira with an exchange rate as of November 1, 1996, measured at
L1516.35=US$1. Italy houses nine stock exchanges with the Milan Exchange being
the largest. Societa di intermediazone mobiliare (SIMs) were created in 1991 to
regulate brokerage activity in the securities market. Italy's government
securities market is the third largest in the world after the United States and
Japan.
Dividends are withheld at a standard rate of 30%. There is an 8% surtax making
the effective rate 32.4%. Capital gains are currently not taxed.
Italy is a member of the European Union. The 12 month current account surplus as
of July, 1996, measured US$27.1 billion.
PORTUGAL is a Western European nation situated between Spain and the Atlantic
Ocean. Based on 1995 census data, Portugal has a population of 10.8 million.
Textiles and footwear, wood pulp and paper, cork, metalworking, oil refining,
chemicals, fish canning, wine and tourism constitute the major industries. Gross
domestic product in 1995 was US$103.2 billion or
<PAGE>
approximately US$9,500 per capita. Growth expectations for gross domestic
product in 1996 and 1997 are 2.9% and 3.0%, respectively. The currency is the
Portuguese Escudo with an exchange rate as of November 1, 1996, measured at
Es152.97=US$1. Portugal follows a policy of keeping the Escudo stable against
the Deutsche Mark and against the currencies of its other major trading
partners. The countries of the European Union are the primary trading partners
of Portugal. The current account deficit is expected to be 2.0% of gross
domestic product in 1996 and 1.5% of gross domestic product in 1997 according to
the Bank of Ireland Group Treasury. Portugal is a member of the European Union.
Dividends are withheld at a standard rate of 25%. This is reduced to 12.5% if
the dividends are distributed by listed companies and any other privatized
company within the first five years after share issuance. Capital gains are not
taxable in Portugal.
SPAIN is a Southern European nation located southwest of France. Based on 1995
census data, Spain has a population of 39.19 million. Textiles and apparel, food
and beverages, metals and metal manufactures, chemicals, shipbuilding, autos,
machine tools and tourism are the major industries. Gross domestic product in
1995 was US$557.4 billion or approximately US$14,223 per capita. Growth
expectations for gross domestic product in 1996 and 1997 are 2.1% and 2.8%,
respectively. The currency is the Spanish Peseta with an exchange rate as of
November 1, 1996, measured at Pta127.65=US$1. There are four stock exchanges in
Spain with the Madrid Stock Exchange being the largest. Membership at all
exchanges in Spain is restricted to stockbrokers nominated by the Ministry of
Finance. Brokers must belong to the Association of Brokers in order to practice.
Dividends are withheld at a standard rate of 25%. A sign off by the tax office
is necessary in cases where reclamation is available. Capital gains can be taxed
at 35%. This is not current market practice.
Spain is a member of the European Union(EU). The countries of the EU are Spain's
main trading partners. The 12 month current account surplus as of July, 1996,
measured US$9.0 billion.
SWITZERLAND, bordered by France, Italy, Germany and Austria, is a nation located
in Central Europe. Based on 1995 census data, Switzerland has a population of
7.04 million. Primary trading is conducted with the countries of Western Europe.
Major commodity exports are machinery and equipment, precision instruments,
metal products, foodstuffs, textiles and clothing. Gross domestic product in
1995 was US$306 billion or approximately US$43,400 per capita. Growth
expectations for gross domestic product in 1996 and 1997 at -0.1% and 1.4%,
respectively. The Swiss Franc is the country's currency and, as of November 1,
1996, the exchange rate with the US Dollar measured at SFr1.26=US$1. The 12
month current account surplus as of the second quarter, 1996, measured US$21.4
billion.
There are three principal exchanges in Switzerland. Under public law, the Geneva
Exchange is a corporation and the Zurich and Basle exchanges are institutions.
Zurich is the largest of the three. There are official, semi-official and an
unofficial markets.
Dividends are withheld at a standard rate of 35%. A tax office sign off is
necessary where reclamation is available. Capital gains are not taxable in
Switzerland.
ICON WESTERN HEMISPHERE FUND - May include, but is not limited to, baskets of
securities from the following countries: Argentina; Brazil; Canada; Chile; and
Mexico. Based on Meridian's proprietary research and methodology and under
normal market conditions, Meridian will actively invest and weight the Fund's
assets in those country baskets within the Western Hemisphere Fund that are
deemed to be attractive relative to other countries in the region.
ARGENTINA is a nation located in Southern South America between Chile and
Uruguay. Based on 1995 census data, Argentina has a population of 34.59 million.
Major industries include food processing, automobiles, consumer durables,
textiles, chemicals, printing, metallurgy and steel. Gross domestic product in
1995 was estimated at US$295 billion. Agriculture accounts for 8% of gross
domestic product. The currency is the Argentinean Peso with an exchange rate
ending 1995 of P1=US$1.
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Argentina benefits from an abundance of natural resources. After experiencing
growing external debt and hyperinflation in the 1980's, Argentina elected
President Menem who, in 1989, implemented an economic restructuring program.
Argentines have reacted to this program with a repatriation of capital.
Argentina appears to be on a path of stable, sustainable growth. The 12 month
current account deficit as of the first quarter of 1996 measures US$2.0 billion.
There is no withholding of dividends in Argentina. Capital gains are also not
taxable.
BRAZIL is a South American nation bordering the Atlantic Ocean. Based on 1994
estimates, Brazil has a population of 156 million. Major industries include
textiles, shoes, chemicals, cement, lumber, mining, steel making and machine
building. Gross domestic product estimates for 1995 measured US$584 billion. The
currency is the Brazilian Real with an exchange rate as of November 1, 1996,
measured at R$1.03=US$1. The Real was introduced as a new currency on 1 July
1994 to help stabilize the economy. Inflation subsequently dropped from a rate
of 50% a month to a rate of 3% a month through the end of 1994. The nation's
natural resources are a substantial economic strength.
There is no withholding tax on dividends. Capital gains are also not taxable in
Brazil. The 12 month current account deficit as of the second quarter of 1996 is
US$13.4 billion.
CANADA is the second largest country in the world after Russia. The official
languages are English and French. Based on 1995 census data, Canada has a
population of 29.61 million. Processed and unprocessed minerals, food products,
wood and paper products, transportation equipment, chemicals, fish products,
petroleum and natural gas constitute the major industries. Gross domestic
product in 1995 was US$564.6 billion or US$19,068 per capita. Growth
expectations for gross domestic product in 1996 and 1997 are 1.7% and 3.1%,
respectively. The currency is the Canadian Dollar with an exchange rate as of
November 1, 1996, measured at C$1.34=US$1. Canada houses five stock exchanges
across the country with the Toronto Stock Exchange being the largest.
Dividends are generally paid quarterly and withheld at a rate of 25%. A sign off
by the tax office is necessary in cases where reclamation is available. Capital
gains are not taxed unless they result from the liquidation of greater than 25%
of the issued shares of the company. In this case, gains can be taxed up to 36%.
Canada is a member of the North American Free Trade Agreement (NAFTA) with the
United States and Mexico. The 12 month trailing current account deficit as of
the second quarter, 1996, measured US$2.3 billion.
CHILE is located in South America, bordering the South Atlantic and the South
Pacific Oceans, between Argentina and Peru. Based on 1995 census data, Chile has
a population of 14.2 million. Major industries include copper, foodstuffs, fish
processing, iron and steel, wood and wood products, transport equipment, cement
and textiles. Copper is vital to the health of the economy. Gross domestic
product in 1994 was estimated to be US$97.7 billion. The currency is the Chilean
peso with an exchange rate as of September 30, 1996, measured at Ch$413.15=US$1.
Dividends are withheld at a rate of 35% plus a tax credit of 15%. Capital gains
are not taxable in Chile. The 12 month current account deficit as of the second
quarter, 1996, measured US$1.0 billion.
MEXICO is a nation in North America located south of the United States. Based on
1995 census data, Mexico has a population of 94.78 million. Food and beverages,
tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing,
autos, consumer durables and tourism are the major industries. Gross domestic
product in 1995 was US$234.8 billion and is expected to grow by 2.0% in 1996 and
by 3.5% in 1997. The currency is the Mexican Peso with an exchange rate as of
November 1, 1996, measured at New Peso8.06=US$1. There is one stock exchange in
Mexico. The Bolsa Mexicana de Valores (BMV) is located in Mexico City. Mexico is
a member of the North American Free Trade Agreement (NAFTA). The Mexican current
account surplus for the 12 months ended August, 1996, is US$600 million.
Dividends are not subject to withholding tax where the underlying profits have
been subject to corporate tax. Otherwise the dividends are taxed at 34%. Capital
gains are not taxed. Property transfers however, are taxed at a rate of 20% on
the gross transfer value.
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FIXED INCOME FUND
ICON SHORT-TERM FIXED INCOME FUND - The objective of the Short-Term Fixed Income
Fund is to attain high current income consistent with preservation of capital.
The Short-Term Fixed Income Fund seeks to provide higher current income than
that typically offered by a money market fund while maintaining a high degree of
liquidity and a correspondingly higher risk of principal volatility. Under
normal market conditions, the Fund invests exclusively in (i) U.S. Treasury
obligations; (ii) obligations issued or guaranteed as to principal and interest
by the agencies and instrumentalities of the U.S. Government; and (iii)
repurchase agreements involving such obligations. Under normal conditions, the
Fund's duration (a measure of the Fund's sensitivity to changes in interest
rates) will range from half a year to one and a half years. Maximum remaining
maturity of any single issue will be two years, with the exception of floating
rate securities that reset at least annually.
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions, and
other factors, and because of their narrow industry focus, each Fund's
performance is closely tied to and affected by its industry or foreign region.
In addition, you should be aware that the Funds have no operating history. This
section contains general information about various types of securities and
investment techniques that the Fund may purchase or employ.
EQUITY SECURITIES. Except for the Short-Term Fixed Income Fund, each Fund may
invest in equity securities, including common stocks, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities. Equity securities may be issued by either
established, well capitalized companies or newly-formed, small-cap companies,
and may trade on regional or national stock exchanges or in the over-the counter
market.
DEBT SECURITIES. Each Fund may temporarily invest in short-term debt securities.
Each Fund will limit its investment in fixed income securities to corporate debt
securities and U.S. government securities. Debt securities are generally
considered to be interest rate sensitive, which means that their value will
generally decrease when interest rates rise and increase when interest rates
fall. Securities with shorter maturities, while offering lower yields, generally
provide greater price stability than longer term securities and are less
affected by changes in interest rates.
CORPORATE DEBT SECURITIES: Corporate debt securities are long and short-term
debt obligations issued by companies (such as publicly issued and privately
placed bonds, notes and commercial paper). The Fund will only invest in
corporate debt securities rated A or higher by Standard & Poor's Corporation or
Moody's Investors Services, Inc.
U.S. TREASURY OBLIGATIONS: U.S. Treasury obligations consist of bills, notes,
and bonds issued by the U.S. Treasury as well as separately traded interest and
principal components parts of such obligations, known as Separately Traded
Registered Interest and Principal Securities ("STRIPS"), that are transferable
through the federal book-entry system.
U.S. TREASURY STRIPS: U.S. Treasury STRIPS are sold as zero coupon securities,
which means that they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal.
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This discount is accreted over the life of the security for both accounting and
tax purposes. Because of these features, such securities may be subject to
greater interest rate volatility than interest-paying investments.
U.S. GOVERNMENT OBLIGATIONS: U.S. government obligations may be backed by the
credit of the government as a whole or only by the issuing agency. U.S. Treasury
bonds, notes, and bills and some agency securities, such as those issued by the
Federal Housing Administration and the Government National Mortgage Association
(GNMA), are backed by the full faith and credit of the U.S. government as to
payment of principal and interest and are the highest quality government
securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
FOREIGN SECURITIES: Each Fund may invest in foreign securities. Foreign
investments can involve significant risks in addition to the risks inherent in
U.S. investments. The value of securities denominated in or indexed to foreign
currencies, and of dividends and interest from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial costs, generally are
higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may invoke increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It also may be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that an Advisor will be able to anticipate
or counter these potential events and their impacts on the Fund's share price.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The Fund may invest in foreign securities that impose restrictions on transfer
within the U.S. or to U.S. persons. Although securities subject to transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
FORWARD FOREIGN CURRENCY CONTRACTS: Each Fund may enter into contracts to
purchase or sell foreign currencies at a future date ("forward contract") as a
hedge against fluctuations in foreign exchange rates pending the settlement of
transactions in foreign securities or during the time the Fund holds foreign
securities. A forward contract is an agreement between contracting parties to
exchange an amount of currency at some future time at an agreed upon rate. A
Fund will not enter into a forward contract for a term of more than one year or
for purposes of speculation. Investors should be aware that hedging against a
decline in the value of a currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions
preclude the opportunity for gain if the value of the hedging currency should
rise. Forward contracts may, from time to time, be considered illiquid, in which
case they would be subject to a Fund's limitation on investing in illiquid
securities.
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INDEX FUTURES CONTRACTS AND RELATED OPTIONS: In order to remain fully invested,
and to reduce transaction costs, each Fund may purchase and sell index futures
contracts or purchase and sell options thereon as a hedge against changes in
market conditions. An index futures contract is an agreement pursuant to which
two parties agree to take or make delivery of an amount of cash equal to a
specified dollar or other currency amount times the difference between the index
value at the close of the last trading day of the contract and the price at
which the futures contract is originally struck. No physical delivery of the
underlying securities are made.
PUT AND CALL OPTIONS: Each Fund may purchase and sell futures contracts and
options (i) to hedge against changes in market conditions; and (ii) to provide
market exposure while attempting to reduce transaction costs.
Selling (or Writing) Covered Call Options. Each Fund may sell (or write) covered
call options on portfolio securities to hedge against adverse movements in the
prices of these securities. A call option gives the buyer of the option, upon
payment of a premium, the right to call upon the writer to deliver a security on
or before a fixed date at a predetermined price, referred to as the strike
price. If the price of the hedged security should fall or remain below the
strike price, the Fund will not be called upon to deliver the security, and the
Fund will retain the premium received for the option as additional income,
offsetting all or part of any decline in the value of the security. The hedge
provided by writing covered call options is limited to a price decline in the
security of no more than the option premium received by the Fund for writing the
option. If the security owned by the Fund appreciates above the option's strike
price, the Fund will generally be called upon to deliver the security, which
will prevent the Fund from receiving the benefit of any price appreciation above
the strike price.
BUYING CALL OPTIONS. Each Fund may purchase call options on securities which
each Fund intends to purchase to take advantage of anticipated positive
movements in the prices of these securities. Each Fund will realize a gain from
the exercise of a call option if, during the option period, the price of the
underlying security to be purchased increases by more than the amount of the
premium paid. A Fund will realize a loss equal to all or a portion of the
premium paid for the option if the price of the underlying security decreases or
does not increase by more than the premium.
BUYING PUT OPTIONS. Each Fund may purchase put options on portfolio securities
to hedge against adverse movements in the prices of these securities. A put
option gives the buyer of the option, upon payment of a premium, the right to
sell a security to the writer of the option on or before a fixed date at a
predetermined price. A Fund will realize a gain from the exercise of a put
option if, during the option period, the price of the security declines by an
amount in excess of the premium paid. A Fund will realize a loss equal to all or
a portion of the premium paid for the option if the price of the security
increases or does not decrease by more than the premium.
CLOSING TRANSACTIONS. Each Fund may dispose of an option written by the Fund by
entering into a "closing purchase transaction" for an identical option and may
dispose of an option purchased by the Fund by entering into a "closing sale
transaction" for an identical option. In each case, the closing transaction will
have the effect of terminating the rights of the option holder and the
obligations of the option purchaser and will result in a gain or loss to the
Fund based upon the relative amount of the premiums paid or received for the
original option and the closing transaction. A Fund may sell (or write) put
options solely for the purpose of entering into closing sale transactions.
INDEX FUTURES CONTRACTS AND RELATED OPTIONS. Each Fund may purchase and sell
call options and purchase put options on stock indices in order to manage cash
flow, reduce equity exposure, or to remain fully invested in equity securities.
Options on securities indices are similar to options on a security except that,
upon the exercise of an option on a securities index, settlement is made in cash
rather than in specific securities. An index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar or other currency amount times the difference
between the index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. No physical
delivery of the underlying securities are made.
LIMITATIONS. Each Fund will purchase and sell only options that are listed on a
securities exchange or quoted on NASDAQ. A Fund will not purchase any option if,
immediately thereafter, the aggregate market value of all outstanding options
purchased and written by the Fund would exceed 5% of the Fund's total assets. A
Fund will not effect a futures or option transaction, if immediately thereafter,
the aggregate value of the Fund's securities subject to outstanding call options
would exceed 100% of the value of the Fund's total assets.
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SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS: Each Fund may
purchase securities on a "when-issued" basis, that is, delivery of and payment
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (often a month or more later). Each Fund also may purchase
or sell securities on a delayed delivery basis. The payment obligation and
interest rate that will be received on the delayed delivery securities are fixed
at the time the buyer enters into the commitment. A Fund will only make
commitments to purchase when-issued or delayed delivery securities with the
intention of actually acquiring such securities, but the Fund may sell these
securities before the settlement date if is deemed advisable. During the period
between purchase and settlement, no payment is made by the Fund and no interest
accrues to the Fund. At the time of settlement, the market value of the security
may be more or less than the purchase price, and Fund bears the risk of such
market value fluctuations. Each Fund maintains, in a segregated account, cash,
U.S. Government securities, or other high-grade portfolio securities readily
convertible into cash having an aggregate value at least equal to the amount of
such purchase commitments.
REPURCHASE AGREEMENTS: Each Fund may invest in repurchase agreement. In a
repurchase agreement, the Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon price on an agreed upon
date within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is, in effect, secured by the
value (at least equal to the amount of the agreed upon resale price and marked
to market daily) of the underlying security. The Fund may engage in a repurchase
agreement with respect to any security in which it is authorized to invest. Any
repurchase transaction in which the Fund engages will require collateralization
equal to at least 102% of the Seller's obligation during the entire term of the
repurchase agreement. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs to
the Fund in connection with bankruptcy proceedings), it is the Fund's current
policy to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and deemed satisfactory by the Advisor or
Sub-Advisor.
ILLIQUID AND RULE 144A SECURITIES: Each Fund may invest up to 15% of its net
assets in securities that are illiquid. Illiquid securities include securities
that have no readily available market quotations and cannot be disposed of
promptly (within seven days) in the normal course of business at a price at
which they are valued. Certain restricted securities that are not registered for
sale to the general public, but that can be resold to dealers or institutional
investors ("Rule 144A Securities"), may be purchased without regard to the
foregoing limitation f a liquid institutional trading market exists. The
liquidity of a Fund's investments in Rule 144A Securities could be impaired if
dealers or institutional investors become uninterested in purchasing these
securities. The Trust's Board of Trustees has delegated to Meridian, the
authority to determine the liquidity of Rule 144A Securities pursuant to
guidelines approved by the Board.
LOANS OF PORTFOLIO SECURITIES: Each Fund may make short and long term loans of
its portfolio securities. Under the lending policy authorized by the Board of
Trustees and implemented by Meridian in response to requests of broker-dealers
or institutional investors which Meridian deems qualified, the borrower must
agree to maintain collateral, in the form of cash or U.S. government
obligations, with the Fund on a daily mark-to-market basis in an amount at least
equal to 100% of the value of the loaned securities. The Fund will continue to
receive dividends or interest on the loaned securities and will require that
proxies and other materials be provided in time to vote on any matter which the
Board of Trustees determines to be serious. With respect to loans of securities,
there is the risk that the borrower may fail to return the loaned securities or
that the borrower may not be able to provide additional collateral. A Fund will
not lend securities with an aggregate market value of more than one-third of the
Fund's net assets.
TYPES OF INVESTMENT RISK
CONCENTRATION RISK: The risk associated withportfolios concentrated in a
particular sector or country that the entire sector or country will be
negatively affected, resulting in losses greater than a portfolio not so
narrowly invested would have experienced.
CORRELATION RISK: The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment).
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CREDIT RISK: The risk that the issuer of a security, or the counter party to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK: The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
INFORMATION RISK: The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK: The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates typically
causes a fall in values, while a fall in rates typically causes a rise in
values.
LEVERAGE RISK: Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
- --HEDGED: When a derivative (a security whose value is based on another security
or index) is used as a hedge against an opposite position which the Fund also
holds, any loss generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging can reduce or
eliminate losses, it can also reduce or eliminate gains.
- --SPECULATIVE: To the extent that a derivative is not used as a hedge, the fund
is directly exposed to the risks of that derivative. Gains or losses from
speculative positions in a derivative may be substantially greater than the
derivative's original cost.
LIQUIDITY RISK: The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like.
MANAGEMENT RISK: The risk that a strategy used by a Fund's management may fail
to produce the intended result. Common to all mutual funds.
MARKET RISK: The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole. Common
to all stocks and bonds and the mutual funds that invest in them.
NATURAL EVENT RISK: The risk of losses attributable to natural disasters, crop
failures and similar events.
NON-DIVERSIFICATION RISK: The risk associated with non-diversified portfolios
that there may be a limited number of companies each representing a larger
percentage of the portfolio and, if adversely effected by some event, each would
have a greater adverse effect on the portfolio than on a portfolio where assets
are diversified among a larger number of companies.
OPPORTUNITY RISK: The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in other investments.
POLITICAL RISK: The risk of losses directly attributable to government or
political actions of any sort. These actions may range from changes in tax or
trade statutes to expropriation, governmental collapse and war.
VALUATION RISK: The risk that a Fund has valued certain of its securities at a
higher price than it can sell them for.
RISKS OF INTERNATIONAL INVESTING
There can be no assurance that each Fund's investment objective will be
attained. In addition, investing in securities of foreign companies generally
involves greater risks than investing in securities of domestic companies.
Investors should consider carefully the following special factors before
investing in a Fund.
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CURRENCY RISK: The value of a Fund's foreign investments may be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
generally decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and tends to increase when the
value of the U.S. dollar falls against such currency.
POLITICAL AND ECONOMIC RISK: The economies of many of the countries in which a
Fund may invest are not as developed as the United States economy and may be
subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation, and limitations on the removal of funds
or other assets could also adversely affect the value of a Fund's investments.
REGULATORY RISK: Foreign companies are generally not subject to the regulatory
controls imposed on United States issuers and, as a consequence, there is
generally less public information available about foreign securities than is
available about domestic securities. Foreign companies are not subject to
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by a Fund may be reduced by withholding tax at the
source which would reduce dividend income payable to the Fund's shareholders.
MARKET RISK: The securities markets in many of the countries in which a Fund
invests will have substantially less trading volume than the major United States
markets. As a result, the securities of some foreign companies may be less
liquid and experience more price volatility than comparable domestic securities.
There is generally less government regulation and supervision of foreign stock
exchanges, brokers and issuers which may make it difficult to enforce
contractual obligations. Transaction costs in foreign securities markets are
likely to be higher, since brokerage commission rates in foreign countries are
likely to be higher than in the United States. Further, the settlement period of
securities transactions in foreign markets may be longer than in domestic
markets. These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Funds seeks to mitigate the risks associated
with these considerations through diversification and active professional
management.
EMERGING MARKETS AND DEVELOPING COUNTRIES: Investors should also be aware that
the Funds may invest in companies located within emerging or developing
countries. Investments in emerging markets or developing countries involve
exposure to economic structures that are generally less diverse and mature and
to political systems which can be expected to have less stability than those of
more developed countries. Such countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
which trade only a small number of securities. Historical experience indicates
that emerging markets have been more volatile than the markets of more mature
economies; such markets have also from time to time provided higher rates of
return and greater risks to investors. The Advisor believes that these
characteristics of emerging markets can be expected to continue in the future.
In addition, throughout the countries commonly referred to as the Eastern Bloc,
the lack of a capital market structure or market-oriented economy and the
possible reversal of recent favorable economic, political and social events in
some of those countries present greater risks than those associated with more
developed, market-oriented Western European countries and markets.
SPECIAL CONSIDERATIONS
NON-DIVERSIFIED PORTFOLIO: The Funds are non-diversified portfolios, which means
that, with respect to 50% of its total assets, they may invest more than 5% of
its assets in obligations of one issuer. (A diversified portfolio may not invest
more than 5% of its assets in obligations of one issuer, with respect to 75% of
its total assets.) Since the Funds may invest a greater percentage of their
assets in securities of fewer issuers than a diversified portfolio, they may be
subject to greater investment and credit risks than a diversified portfolio.
FUNDAMENTAL POLICIES: The investment objectives of the Funds, including the
concentration percentages set forth along with the objectives of the U.S. Equity
Funds and the policy not to concentrate in a particular industry of the
International Equity Funds, and certain of the limitations set forth in the
Statement of Additional Information ("SAI") as fundamental policies may not be
changed without the affirmative vote of the majority of the outstanding shares
of the Fund. Fundamental limitations set forth in the SAI include, among other
things, limiting borrowing to 33 1/3% for temporary, extraordinary purposes;
restricting short sales to situations where the security is owned by the Fund;
restricting the acquisition of more than 10% of the voting securities of any one
issuer; and limiting lending of Fund assets.
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PORTFOLIO TURNOVER AND FUND ASSETS: Each Fund does not intend to purchase or
sell securities for short-term trading purposes. A Fund will, however, sell any
portfolio security (without regard to the length of time it has been held) when
Meridian believes that market conditions, creditworthiness factors or general
economic conditions warrant such action. The portfolio turnover rate of each
Fund will generally not exceed 100%. However, investment advisers will be using
the various funds to accommodate their clients' needs. If the asset allocation
or timing models dictate, they may move significant funds in or out of a
particular fund, increasing the portfolio turnover rate. In this regard
investors should be aware that a Fund may not have significant assets at a time
when money managers place their client funds in other sectors which may expose
remaining shareholders to higher expense ratios.
SHAREHOLDER RIGHTS: The Trust does not hold an annual meeting of shareholders.
When matters are submitted to shareholders for a vote, each shareholder is
entitled to one vote for each whole share he owns and fractional votes for
fractional shares he owns. All shares of the Fund have equal voting rights and
liquidation rights.
HOW TO INVEST IN THE FUND
Shares of the Fund are not directly available to the public, only through
professional advisers/fiduciaries. Shares of each Fund are sold on a continuous
basis, and you may invest any amount you choose as often as you wish, subject to
a minimum initial investment of $50,000 and minimum subsequent investments of
$100. Shares may also be purchased through a broker- dealer or other financial
institution authorized by the Fund's distributor, and investors may be charged a
fee for this service by said broker-dealer or institution.
INITIAL PURCHASE BY MAIL: You may purchase shares of the Fund by completing and
signing the investment application form which accompanies this Prospectus and
mailing it in proper form, together with a check (subject to the above minimum
amounts) made payable to ICON Funds and sent to the address listed below. If you
prefer overnight delivery, use the overnight street address listed below.
<TABLE>
<S> <C>
U.S. MAIL: ICON Funds OVERNIGHT: ICON Funds
Mutual Fund Services Mutual Fund Services - Third Floor
Post Office Box 701 615 East Michigan Street
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
</TABLE>
Your purchase of shares of the Fund will be effected at the next share price
calculated after receipt of your investment. The beneficial owners custodians
will agree to provide the Trust with the states in which the beneficial owners
reside at the time of purchasing shares so that the Trust will be able to comply
with applicable state laws.
INITIAL PURCHASE BY WIRE: You may also purchase shares of each Fund by wiring
federal funds from your bank, which may charge you a fee for doing so. If the
money is to be wired, you must call the Transfer Agent at 1-800-764-0442 for
wiring instructions. You should be prepared to provide the information on the
application to the Transfer Agent.
You are required to mail a signed application to the Custodian at the above
address in order to complete your initial wire purchase. Wire orders will be
accepted only on a day on which the Fund and the Custodian and Transfer Agent
are open for business. A wire purchase will not be considered made until the
wired money is received and the purchase is accepted by the Funds. Any delays
which may occur in wiring money, including delays which may occur in processing
by the banks, are
<PAGE>
not the responsibility of the Fund or the Transfer Agent. There is presently no
fee for the receipt of wired funds, but the right to charge shareholders for
this service is reserved by the Funds.
ADDITIONAL INVESTMENTS: Shareholders may add to their account at any time by
purchasing shares by mail or by wire according to the aforementioned wiring
instructions. Shareholders should notify the Transfer Agent at 1-800-764-0442
prior to sending their wire. The remittance form which is attached to a
shareholder's individual account statement should, if possible, accompany any
investment made through the mail. Every purchase request must include a
shareholder's account registration number in order to assure that funds are
credited properly.
AUTOMATIC INVESTMENT PLAN: You may make regular investments in the Funds with
the Automatic Investment Plan by completing the appropriate section of the
account application and attaching a voided personal check. Investments may be
made monthly to allow dollar-cost averaging by automatically deducting $50 or
more from your bank checking account. You may change the amount of your monthly
purchase at any time.
TAX SHELTERED RETIREMENT PLANS: Since the Funds are oriented to longer term
investments, shares of the Funds may be an appropriate investment medium for tax
sheltered retirement plans, including: individual retirement plans (IRAs);
simplified employee pensions (SEPs); 401(k) plans; qualified corporate pension
and profit sharing plans (for employees); tax deferred investment plans (for
employees of public school systems and certain types of charitable
organizations); and other qualified retirement plans. You should contact your
adviser for the procedure to open an IRA or SEP plan, as well as more specific
information regarding these retirement plan options. Consultation with an
attorney or tax adviser regarding these plans is advisable.
OTHER PURCHASE INFORMATION: Dividends begin to accrue after you become a
shareholder. The Funds do not issue share certificates. All shares are held in
non-certificate form registered on the books of the Funds and the Fund's
Transfer Agent for the account of the shareholder. The rights to limit the
amount of purchases and to refuse to sell to any person are reserved by the
Fund. If your check or wire does not clear, you will be responsible for any loss
incurred by the Fund, and a fee of $20 will be charged . If you are already a
shareholder, the Fund can redeem shares from any identically registered account
in the Fund as reimbursement for any loss incurred. You may be prohibited or
restricted from making future purchases in the Fund.
HOW TO REDEEM SHARES
All redemptions will be made at the net asset value determined after the
redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption may be more or less than the
purchase price of your shares, depending on the market value of the Fund's
securities at the time of your redemption. A broker may charge a transaction fee
for the redemption. There is no charge for wire redemptions; however, the Fund
reserves the right to charge for this service. Any charges for wire redemptions
will be deducted from the shareholder's Fund account by redemption of shares.
REDEMPTIONS BY MAIL: You may redeem any part of your account in the Fund at no
charge by mail. Your request should be addressed to:
ICON Funds
c/o Firstar Trust Company
Post Office Box 701
Milwaukee, Wisconsin 53201
"Proper order" means your request for a redemption must include your letter of
instruction, including the Fund name, account number, account name(s), the
address and the dollar amount or number of shares you wish to redeem. This
request must be signed by all registered share owner(s) in the exact name(s) and
any special capacity in which they are registered. For all redemptions in excess
of $25,000, the Fund requires that signatures be guaranteed by a bank or member
firm of a national securities exchange. Signature guarantees are for the
protection of shareholders. At the discretion of the Fund or Firstar Trust
Company, a shareholder, prior to redemption, may be required to furnish
additional legal documents to insure proper authorization.
<PAGE>
REDEMPTIONS BY TELEPHONE: If an election is made on the investment application
(or subsequently in writing), you may redeem any part of your account in any
Fund by calling the Transfer Agent at 1-800-764-0442. The Fund, the Transfer
Agent and the Custodian are not liable for following redemption or exchange
instructions communicated by telephone that they reasonably believe to be
genuine. However, if they do not employ reasonable procedures to confirm that
telephone instructions are genuine, they may be liable for any losses due to
unauthorized or fraudulent instructions. Procedures employed may include
recording telephone instructions and requiring a form of personal identification
from the caller.
The telephone redemption and exchange procedures may be terminated at any time
by the Fund or the Transfer Agent. During periods of extreme market activity it
is possible that shareholders may encounter some difficulty in telephoning the
Fund, although neither the Fund nor the Transfer Agent has ever experienced
difficulties in receiving and in a timely fashion responding to telephone
requests for redemptions or exchanges. If you are unable to reach the Fund by
telephone, you may request a redemption or exchange by mail.
SPECIAL REDEMPTION ARRANGEMENTS: Special arrangements may be made by
institutional investors or on behalf of accounts established by brokers,
advisers, banks or similar institutions to have redemption proceeds transferred
by wire to pre-established accounts upon telephone instructions. For further
information call the Trust at 1-800-764-0442.
ADDITIONAL INFORMATION: If you are not certain of the requirements for a
redemption please call the Transfer Agent at 1-800-764-0442. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has been collected, which
normally may take up to fifteen days. Also, when the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than its customary
weekend or holiday closing or under any emergency circumstances, as determined
by the Securities and Exchange Commission, the Fund may suspend redemptions or
postpone payment dates.
Because the Fund incurs certain fixed costs in maintaining shareholder accounts,
the Fund reserves the right to require any shareholder to redeem all of his or
her shares in the Fund on 30 days' written notice if the value of his or her
shares in the Fund is less than $5,000 due to redemption, or such other minimum
amount as the Fund may determine from time to time. An involuntary redemption
constitutes a sale. You should consult your tax adviser concerning the tax
consequences of involuntary redemptions. A shareholder may increase the value of
his or her shares in the Fund to the minimum amount within the 30 day period.
Each share of the Fund is subject to redemption at any time if the Board of
Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Fund.
The Trust has the authority to redeem existing accounts and to refuse a
potential account the privilege of having an account in the Trust if the Trust
reasonably determines that the failure to so redeem, or to so prohibit, would
have a material adverse consequence to the Trust and its shareholders.
Excessive short-term trading has an adverse impact on effective portfolio
management as well as upon Fund expenses. The Trust has reserved the right to
refuse investments from shareholders who engage in short-term trading.
HOW TO MAKE EXCHANGES
Shares of a Fund may be exchanged for shares of any other Fund based on the
respective net asset values of each Fund involved. An exchange may be made by
following the redemption procedure described above under "How to Redeem Shares"
or if a telephone redemption has been elected, by calling the transfer agent at
1-800-764-0442. An exchange order is treated the same as a redemption followed
by a purchase and may result in a capital gain or loss for tax purposes.
SHARE PRICE CALCULATION
The value of an individual share in each Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New
<PAGE>
York Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is
open for business, and on any other day on which there is sufficient trading in
the Fund's securities to materially affect the net asset value. The net asset
value per share of each Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price except when, in Meridian's opinion, the
last bid price does not accurately reflect the current value of the security.
All other securities for which over-the-counter market quotations are readily
available are valued at their last bid price. When market quotations are not
readily available, when Meridian determines the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by Meridian,
subject to review of the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotations, but may
be valued on the basis of prices furnished by a pricing service when Meridian
believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by Meridian,
subject to review of the Board of Trustees. Short-term investments in fixed
income securities with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued by using the amortized
cost method of valuation, which the Board has determined will represent fair
value.
DIVIDENDS AND TAXES
UNITED STATES TAXES
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
complying with the applicable provisions of the Code, a Fund will not be subject
to Federal income tax on its net investment income and capital gain net income
that are distributed to shareholders.
All income dividends and capital gain distributions are normally reinvested,
without charge, in additional full and fractional shares of the Fund. The share
price of the reinvestment will be the net asset value of the Fund shares
computed at the close of business on the date the dividend or distribution is
paid.
At the time of purchase, the share price of the Fund may reflect undistributed
income, capital gains or unrealized appreciation of securities. Any dividend or
capital gain distribution paid to a shareholder shortly after a purchase of
shares will reduce the per share net asset value by the amount of the
distribution. Although in effect a return of capital to the shareholder, these
distributions are fully taxable.
The Fund expects to distribute substantially all of its net investment income,
if any, and any net realized capital gains at least once each year.
<PAGE>
The Fund is subject to a nondeductible 4 percent excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gains net of capital losses. The Fund intends to make such distributions
as may be necessary to avoid this excise tax.
Dividends from taxable net investment income and distributions of net short-term
capital gains paid by the Fund are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. A
portion of these dividends may qualify for the 70 percent dividends received
deduction available to corporations. Distributions of net capital gains will be
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of the length of time the
investor has held his shares.
Each January, the Fund will report to its shareholders the Federal tax status of
dividends and distributions paid or declared by the Fund during the preceding
calendar year. This statement will also indicate whether and to what extent
distributions qualify for the 70 percent dividends received deduction available
to corporations.
There is a possibility that a foreign country (e.g. China with exchange control
regulations) may restrict or limit the ability of the Fund to distribute net
investment income or the proceeds from the sale of its investments to its
shareholders. Any such restrictions or limitations could impact the Fund's
ability to meet the distribution requirements described above.
If the Fund owns shares in a foreign corporation that constitutes a "passive
foreign investment company" for U.S. Federal income tax purposes and the Fund
does not elect to treat the foreign corporation as a "qualified electing fund"
within the meaning of the Code, the Fund may be subject to U.S. Federal income
tax on a portion of any "excess distribution" it receives from the foreign
corporation or any gain it derives from the disposition of such shares, even if
such income is distributed as a taxable dividend by the Fund to its U.S.
shareholders. The Fund may also be subject to additional tax in the nature of an
interest charge with respect to deferred taxes arising from such distributions
or gains. Any tax paid by the Fund as a result of its ownership of shares in a
"passive foreign investment company" will not give rise to any deduction or
credit to the Fund or any shareholder. If the Fund owns shares in a "passive
foreign investment company" and the Fund does elect to treat the foreign
corporation as a "qualified electing fund" under the Code, the Fund may be
required to include in its income each year a portion of the ordinary income and
net capital gains of the foreign corporation, even if this income is not
distributed to the Fund. Any such income would be subject to the distribution
requirements described above even if the Fund did not receive any income to
distribute.
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivables, or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies or from the disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the currency or security
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's net investment income (which
includes, among other things, dividends, interest and net short-term capital
gains in excess of net long-term capital losses, net of expenses) available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. If section 988 losses
exceed such other net investment income during a taxable year, any distributions
made by the Fund could be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his Fund shares. To the extent that such distributions exceed such
shareholder's basis, they will be treated as a gain from the sale of shares. As
discussed below, certain gains or losses with respect to forward foreign
currency contracts, over-the-counter options or foreign currencies and certain
options graded on foreign exchanges will also be treated as section 988 gains or
losses.
Forward currency contracts and certain options entered into by the Fund may
create "straddles" for U.S. Federal income tax purposes and this may affect the
character of gains or losses realized by the Fund on forward currency contracts
or on the underlying securities and cause losses to be deferred. Transactions in
forward currency contracts may also result in the loss of the holding period of
underlying securities for purposes of the 30% of gross income test. The Fund may
also be required
<PAGE>
to "mark-to-market" certain positions in its portfolio (i.e., treat them as if
they were sold at year end). This could cause the Fund to recognize income
without having the cash to meet the distribution requirements.
FOREIGN TAXES
Income received by the Fund from sources within other countries in which the
issuers of securities purchased by the Fund are located may be subject to
withholding and other taxes imposed by such countries.
If the Fund is liable for foreign income and withholding taxes that can be
treated as income taxes under U.S. Federal income tax principles, the Fund
expects to meet the requirements of the Code for "passing-through" to its
shareholders such foreign taxes paid, but there can be no assurance that the
Fund will be able to do so. Under the Code, if more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of stocks or
securities of foreign corporations, the Fund will be eligible for, and intends
to file, an election with the Internal Revenue Service to "pass-through" to the
Fund's shareholders the amount of such foreign income and withholding taxes paid
by the Fund. Pursuant to this election a shareholder will be required to: (1)
include in gross income (in addition to taxable dividends actually received) his
pro rata share of such foreign taxes paid by the Fund; (2) treat his pro rata
share of such foreign taxes as having been paid by him; and (3) either deduct
his pro rata share of such foreign taxes in computing his taxable income or use
it as a foreign tax credit against his U.S. Federal income taxes. No deduction
for such foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by the Fund will
"pass-through" for that year and, if so, such notification will designate (a)
the shareholder's portion of the foreign taxes paid to each such country; and
(b) the portion of dividends that represents income derived from sources within
each such country.
The amount of foreign taxes for which a shareholder may claim a credit in any
year will be subject to an overall limitation which is applied separately to
"passive income," which includes, among other types of income, dividends and
interest.
The foregoing is only a general description of the foreign tax credit under
current law. Because applicability of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.
The foregoing discussion relates only to generally applicable Federal income tax
provisions in effect as of the date of this Prospectus. Shareholders should
consult their tax advisers about the status of distributions from the Fund in
their own states and localities.
THE TRUST
ICON Funds (the "Trust") is an open-end management investment company,
consisting of numerous separate, non-diversified portfolios each of which has
its own investment objectives and policies. The portfolios are designed to serve
a wide range of investor needs.
The Trust was formed September 19, 1996 as a "business trust" under the laws of
the Commonwealth of Massachusetts. It is a "series" company which is authorized
to issue shares without par value in separate series of the same class. Shares
of numerous series have been authorized. The Board of Trustees of the Trust has
the power to create additional portfolios at any time without a vote of
shareholders of the Trust.
Under the Trust's Master Trust Agreement, no annual or regular meeting of
shareholders is required, although the Trustees may authorize special meetings
from time to time. Under the terms of the Master Trust Agreement, the Trustees
will be a self-perpetuating body and will continue their positions until they
resign, die or are removed by a written instrument signed by a least two-thirds
of the Trustees, by vote of shareholders holding not less than two- thirds of
the shares then outstanding of the Trust cast at any meeting called for that
purpose, or by a written declaration signed by shareholders holding not less
than two-thirds of the shares then outstanding.
On any matter submitted to shareholders, shares of each portfolio entitle their
holder to one vote per share, irrespective of the relative net asset values of
the portfolios' shares. On matters affecting an individual portfolio, a separate
vote of shareholders of the portfolio is required. Each portfolio's shares are
fully paid and non-assessable by the Trust, have no preemptive or subscription
rights, and are fully transferable, with no conversion rights.
<PAGE>
MANAGEMENT OF THE FUNDS
TRUSTEES: The business affairs of each Fund are managed by the Trust's Board of
Trustees. The Trustees establish policies, as well as review and approve
contracts and their continuance. The Trustees also elect the officers and select
the Trustees to serve as executive and audit committee members.
The Investment Advisor: Meridian Investment Management Corporation, 12835 East
Arapahoe Road, Tower II, Englewood, Colorado 80112 under an investment advisory
agreement with the Trust dated October 9, 1996, furnishes investment advice to
the Trust and manages each Fund's investments. Meridian is a wholly-owned
subsidiary of Meridian Management & Research Corporation ("MM&R"). Michael J.
Hart and Dr. Craig T. Callahan each own 50% of MM&R. Meridian's sole business is
the management of growth-oriented portfolio's and related services designed to
meet the investment needs of clients including individuals, pension and profit
sharing plans, foundations, endowments, public retirement systems and insurance
companies. For example, Meridian provides research/recommendations to make asset
allocation and industry/country allocations to Security Benefit Life for use in
managing a variable annuity separate account and related mutual fund. In
addition, it is co-sub-advisor with INVESCO Global Asset Management Limited of
three portfolios of the WRL Series Fund, Inc. Meridian's value-based investment
style utilizes fundamental procedures and quantitative tools developed
internally.
The Advisor provides to the Trust, and to each of the Funds within the Trust,
management and investment advisory services. The Advisor furnishes an investment
program for each of the Funds, determines, subject to the overall supervision
and review of the Board of Trustees of the Trust, what investments should be
purchased, sold and held, and makes changes on behalf of the Trust in the
investments of each of the Funds. With respect to the Short-Term Fixed Income
Fund, investment advisory services have been delegated to the investment
Sub-Advisor discussed below, subject to the general supervision and control of
the Advisor and the Board of Trustees.
The investment decisions for each Fund are made by an investment committee of
Meridian, which is primarily responsible for the day-to-day management of each
Fund's portfolio. Dr. Craig T. Callahan is Chairman of the Investment Management
Committee. He directs Meridian's investment research and analysis. Dr. Callahan
has been Chief Investment Officer for the Advisor and its predecessor since
1986.
For the services provided to ICON Funds, Meridian receives a monthly fee from
each Fund at an annual rate based on the fund's average daily net assets as
follows:
Fund Advisory Fee Rate
---- -----------------
U.S. Equity Funds 1.00%
International Equity Funds 1.00%
Fixed Income Fund 0.65%
The Advisor pays the expense of printing and mailing prospectuses and sales
materials used for promotional purposes.
The Advisor may, from its management fee, pay certain financial institutions
(which may include banks, securities dealers and other industry professionals) a
"servicing fee" for performing certain administrative servicing functions for
Fund shareholders to the extent these institutions are allowed to do so by
applicable statute, rule or regulation.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking best
execution, Meridian may give consideration to sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute portfolio
transactions.
THE INVESTMENT SUB-ADVISOR: Wellington Management Company, LLP ("Wellington
Management"), 75 State Street, Boston, Massachusetts 02109, under an investment
sub-advisory agreement with the Trust and the Advisor dated December 18, 1996,
serves as Sub-Advisor to the Short-Term Fixed Income Fund. Wellington Management
is a Massachusetts limited liability partnership of which the following persons
are managing partners: Robert W. Doran, Duncan M. McFarland and John R. Ryan.
Wellington Management is a professional investment counseling firm which
provides investment services
<PAGE>
to investment companies, employee benefit plans, endowment funds, foundations
and other institutions and individuals. Wellington Management and its
predecessor organizations have provided advisory services to investment
companies since 1933 and to investment counseling clients since 1960. As of
September 30, 1996, Wellington Management had investment management authority
with respect to over $123 billion of assets.
John C. Keogh, Senior Vice President of Wellington Management, serves as the
portfolio manager for the Short-Term Fixed Income Fund. He has been an
investment professional with Wellington Management since 1983. Mr. Keogh is
supported by research and other investment services provided by the professional
staff of Wellington Management.
For the services provided to the Short-Term Fixed Income Fund, Wellington
Management receives a quarterly fee from the Advisor at an annual rate based on
the average month-end net assets of the Fund for each such calendar quarter as
follows:
Average Net Assets Annual Rate
------------------ -----------
On First $250 million 0.20%
On Next $250 million 0.15%
Over $500 million 0.125%
Notwithstanding the foregoing, Wellington Management is entitled to receive from
the Advisor a minimum annual fee of $100,000.
THE ADMINISTRATOR: The Trust retains AmeriPrime Financial Services, Inc. (the
Administrator") to manage the Trust's business affairs and provide the Trust
with administrative services, including all regulatory reporting and necessary
office equipment, personnel and facilities. The Administrator receives a monthly
fee from Meridian equal to an annual average rate of 0.05%, declining to 0.04%
for net assets above $500 million. Employees of the Administrator act as
officers of the Trust and are reimbursed for expenses associated with attending
Board Meetings.
The Trust retains AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive,
Suite 200, Southlake, Texas 76092, an affiliate of the Administrator, to act as
the principal distributor of the Fund's shares. Kenneth D. Trumpfheller is an
officer and principal shareholder of the Distributor and an officer of the
Trust. The Distributor provides its services to the Trust for no additional or
ongoing compensation. The Advisor is responsible for out of pocket expenses
incurred by the Distributor.
The Trust pays all other expenses for its operations and activities. Each of the
Funds of the Trust pays its allocable portion of these expenses. The expenses
borne by the Trust include the charges and expenses of any shareholder servicing
agents, custodian fees, legal and auditors' expenses, brokerage commissions for
portfolio transactions, the advisory fee, extraordinary expenses, expenses of
shareholder and trustee meetings, expenses for preparing, printing and mailing
proxy statements, reports and other communications to shareholders, and expenses
of registering and qualifying shares for sale, among others.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, each of the Funds may compare its performance, either
in terms of its yield, total return or its yield and total return, to that of
other mutual funds with similar investment objectives and to stock or other
indices. For example, a Fund may compare its performance to rankings prepared by
Lipper Analytical Services, Inc. ("Lipper"), a widely recognized independent
service which monitors the performance of mutual funds; to Morningstar's Mutual
Fund Values; to the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"), an index of unmanaged groups of common stock; to the Morgan Stanley
Capital International Index European (Free) Portion; to the FT-SE Eurotrack 200
Index; or to the Consumer Price Index. Performance information and rankings as
reported in Changing Times, Business Week, Institutional Investor, the Wall
Street Journal, Mutual Fund Forecaster, No-Load Investor, Money Magazine,
Forbes, Fortune, Investor's Business Daily and Barron's magazine may also be
used in comparing performance of the Funds. Performance comparisons shall not be
considered as representative of the future performance of any Fund.
<PAGE>
A Fund's average annual total return is computed by determining the average
annual compounded rate of return for a specified period that, if applied to a
hypothetical $1,000 initial investment, would produce the redeemable value of
that investment at the end of the period, assuming reinvestment of all dividends
and distributions and with recognition of all recurring charges. A Fund may also
utilize a total return for differing periods computed in the same manner but
without annualizing the total return.
A Fund's "yield" refers to the income generated by an investment in the Fund
over a 30-day (or one month) period (which period will be stated in the
advertisement). Yield is computed by dividing the net investment income per
share earned during the most recent calendar month or 30-day period by the
maximum offering price per share on the last day of such period. This income is
then "annualized". That is, the amount of income generated by the investment
during that period is assumed to be generated each month over a 12-month period
and is shown as a percentage of the investment.
For purposes of the yield calculation, interest income is computed based on the
yield to maturity of each debt obligation and dividend income is computed based
upon the stated dividend rate of each security in the Fund's portfolio, and all
recurring charges are recognized.
<PAGE>
ICON FUNDS
SHARES OF ELEVEN U.S. EQUITY FUNDS,
FIVE FOREIGN EQUITY FUNDS
AND A FIXED INCOME FUND
ARE SOLD AT NET ASSET VALUE
WITHOUT SALES COMMISSIONS, 12b-1 FEES OR REDEMPTIONS FEES
Investment Advisor
AmeriPrime Financial Services, Inc.
1793 Kingswood Drive, Suite 200
Southlake, Texas 76092
Distributor
AmeriPrime Financial Securities, Inc.
1793 Kingswood Drive, Suite 200
Southlake, Texas 76092
Custodian and Transfer Agent
Firstar Trust Company, Inc
615 E. Michigan Street
Milwaukee, Wisconsin 53202
Administrator
AmeriPrime Financial Services, Inc.
1793 Kingswood Drive, Suite 200
Southlake, Texas 76092
Independent Accountants
Price Waterhouse, LLP
9500 Seventeenth Street, Suite 2500
Denver, Colorado 80202
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS BEING AUTHORIZED BY
THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND TO SELL ITS
SHARES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH STATE.
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PART B
STATEMENT OF ADDITIONAL INFORMATION
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ICON FUNDS
STATEMENT OF ADDITIONAL INFORMATION
ICON Basic Materials Fund
ICON Capital Goods Fund
ICON Consumer Cyclicals Fund
ICON Consumer Staples Fund
ICON Energy Fund
ICON Financial Services Fund
ICON Healthcare Fund
ICON Leisure Fund
ICON Technology Fund
ICON Telecommunication & Utilities Fund
ICON Transportation Fund
ICON Asia Region Fund
ICON South Pacific Region Fund
ICON North Europe Region Fund
ICON South Europe Region Fund
ICON Western Hemisphere Fund
ICON Short-Term Fixed Income Fund
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the appropriate Fund prospectus dated January 7, 1997, (the
"prospectus"), which may be obtained by writing the Transfer Agent at Mutual
Funds Services, P.O. Box 701, Milwaukee, WI 53201-0701, or by calling
1-800-764-0442.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST.......................................................3
INVESTMENT RESTRICTIONS........................................................4
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS..........5
RISKS OF FOREIGN INVESTING....................................................10
PORTFOLIO TRANSACTIONS........................................................12
PORTFOLIO TURNOVER............................................................13
THE INVESTMENT ADVISOR........................................................13
TRUSTEES AND OFFICERS.........................................................15
DETERMINATION OF SHARE PRICE..................................................16
CALCULATION OF PERFORMANCE DATA...............................................16
Total Return.........................................................16
Yield ............................................................17
Nonstandardized Total Return.........................................17
TAX STATUS....................................................................17
Taxation of the Funds -- In General..................................17
Taxation of the Funds' Investments...................................18
Taxation of the Shareholder..........................................18
Other Tax Considerations.............................................19
ADMINISTRATIVE SERVICES.......................................................19
CUSTODIAN.....................................................................20
TRANSFER AGENT................................................................20
INDEPENDENT ACCOUNTANTS AND COUNSEL...........................................20
DISTRIBUTOR...................................................................20
FINANCIAL STATEMENTS..........................................................20
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DESCRIPTION OF THE TRUST
ICON Funds (the "Trust") is an open-end management investment company
and is a voluntary association of the type known as a "business trust" organized
under the laws of the Commonwealth of Massachusetts. There are numerous series
within the Trust, each of which represents a separate non-diversified portfolio
of securities (collectively referred to herein as the "Portfolios" or "Funds"
and individually as a "Portfolio" or "Fund").
The assets received by the Trust from the issue or sale of shares of
each of the Funds, and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are separately allocated to such Fund.
They constitute the underlying assets of each Fund, are required to be
segregated on the books of accounts, and are to be charged with the expenses
with respect to such Fund. Any general expenses of the Trust, not readily
identifiable as belonging to a particular Fund, shall be allocated by or under
the direction of the Board of Trustees in such manner as the Board determines to
be fair and equitable.
Each share of each of the Funds represents an equal proportionate
interest in that Fund with each other share and is entitled to such dividends
and distributions, out of the income belonging to that Fund, as are declared by
the Board. Upon liquidation of the Trust, shareholders of each Fund are entitled
to share pro rata in the net assets belonging to the Fund available for
distribution.
The Trustees have exclusive power, without the requirement of
shareholder approval, to issue series of shares without par value, each series
representing interests in a separate portfolio, or divide the shares of any
portfolio into classes, each class having such different dividend, liquidation,
voting and other rights as the Trustees may determine, and may establish and
designate the specific classes of shares of each portfolio. Before establishing
a new class of shares in an existing portfolio, the Trustees must determine that
the establishment and designation of separate classes would not adversely affect
the rights of the holders of the initial or previously established and
designated class or classes.
As described under "The Trust" in the prospectus, under the Trust's
Master Trust Agreement, no annual or regular meeting of shareholders is
required. In addition, after the Trustees were initially elected by the
shareholders, the Trustees became a self-perpetuating body. Thus, there will
ordinarily be no shareholder meetings unless otherwise required by the
Investment Company Act of 1940 (the "1940 Act").
On any matter submitted to shareholders, the holder of each share is
entitled to one vote per share (with proportionate voting for fractional
shares). On matters affecting any individual Fund, a separate vote of that Fund
would be required. Shareholders of any Fund are not entitled to vote on any
matter which does not affect their Fund but which requires a separate vote of
another Fund.
Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully
transferable. There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations of the
Trust. However, the Master Trust Agreement disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Master Trust Agreement provides for
indemnification out of the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations.
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INVESTMENT RESTRICTIONS
A Fund will not change any of the following investment restrictions
without the affirmative vote of a majority of the outstanding voting securities
of the Fund, which, as used herein, means the lesser of (i) 67% of the Fund's
outstanding shares present at a meeting at which more than 50% of the
outstanding shares of the Fund are represented either in person or by proxy, or
(ii) more than 50% of the Fund's outstanding shares.
A Fund may not
(1) Issue senior securities.
(2) Borrow money, except that the Fund may borrow not in excess of 33
1/3% of the total assets of the Fund from banks as a temporary
measure for extraordinary purposes.
(3) Underwrite the securities of other issuers.
(4) Purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real
estate investment trusts or readily marketable securities or
companies which invest in real estate).
(5) Engage in the purchase or sale of commodities or commodity
contracts, except that the Funds may invest in financial and
currency futures contracts and related options for bona fide
hedging purposes and to provide exposure while attempting to
reduce transaction costs..
(6) Lend its assets, except that purchases of debt securities in
furtherance of the Fund's investment objectives will not
constitute lending of assets and except that the Fund may lend
portfolio securities with an aggregate market value of not more
than one-third of the Fund's net assets.
(7) Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions. This restriction does not apply to bona fide
hedging activity utilizing financial futures and related options.
(8) Make short sales in situations where the security is not owned by
a Fund.
(9) Acquire more than 10% of the voting securities of any one issuer.
(10) With respect to 50% of a Fund, invest more than 5% of the value
of its total assets in securities of any one issuer, except such
limitation shall not apply to obligations issued or guaranteed
by the United States Government, its agencies or
instrumentalities.
The following investment restrictions may be changed by the Board of Trustees
without a shareholder vote:
A Fund may not
(11) Invest in companies for the purpose of exercising control or
management.
(12) Hypothecate, pledge, or mortgage any of its assets, except to
secure loans as a temporary measure for extraordinary purposes
and except as may be required to collateralize letters of credit
to secure state surety bonds.
(13) Invest more than 15% of its net assets in illiquid securities.
(14) Invest in oil, gas or other mineral leases.
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(15) In connection with bona fide hedging activities, invest more
than 5% of its assets as initial margin deposits or premiums for
futures contracts and provided that said Funds may enter into
futures contracts and option transactions only to the extent
that obligations under such contracts or transactions represent
not more than 100% of a Fund's assets.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage, resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Funds may make and some of the techniques it may use, as
described in the Prospectus.
FORWARD COMMITMENTS AND REVERSE REPURCHASE AGREEMENTS. A Fund will
direct its Custodian to place cash or U.S. government obligations in a separate
account of the Fund in an amount equal to the commitments of the Funds to
purchase or repurchase securities as a result of its forward commitment or
reverse repurchase agreement obligations. With respect to forward commitments to
sell securities, the Fund will direct its Custodian to place the securities in a
separate account. A Fund will direct its Custodian to segregate such assets for
when, as and if issued commitments only when it determines that issuance of the
security is probable. When a separate account is maintained, the securities
deposited in the separate account will be valued daily at market for the purpose
of determining the adequacy of the securities in the account. To the extent
funds are in a separate account, they will not be available for new investment
or to meet redemptions.
Commitments to purchase securities on a when, as and if issued basis
will not be recognized in the portfolio of a Fund until the Advisor determines
that issuance of the security is probable. At such time, a Fund will record the
transaction and, in determining its net asset value, will reflect the value of
the security daily.
Securities purchased on a forward commitment basis and subject to
reverse repurchase agreements are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way; i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve a higher level of income, a Fund
remains substantially fully invested at the same time that it has purchased on a
forward commitment basis or entered into reverse repurchase transactions, there
will be a possibility that the market value of the Fund's assets will have
greater fluctuation.
LEVERAGING. Leveraging a Fund creates an opportunity for increased net
income but, at the same time, creates special risk considerations. For example,
leveraging may exaggerate changes in the net asset value of Fund shares and in
the yield on the Fund's portfolio. Although the principal of such borrowings
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. Leveraging will create interest expenses for the Fund
which can exceed the income from the assets retained. To the extent the income
derived from securities purchased with borrowed funds exceeds the interest the
Fund will have to pay, the Fund's net income will be greater than if leveraging
were not used. Conversely, if the income from the assets retained with borrowed
funds is not sufficient to cover the cost of leveraging, the net income of the
Fund will be less than if leveraging were not used, and therefore the amount
available for distribution to shareholders will be reduced.
PUT AND CALL OPTIONS. The Funds may purchase put and call options.
PURCHASING OPTIONS. By purchasing a put option, a Fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed "strike" price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. A Fund may terminate its position in a put option
it has purchased by allowing it to expire or by exercising the option. If the
option is allowed to expire, the Fund will lose the
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entire premium it paid. If the Fund exercises the option, it completes the sale
of the underlying instrument at the "strike" price. A Fund also may terminate a
put option position by closing it out in the secondary market at its current
price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's "strike"
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if the underlying prices do not rise sufficiently to offset the cost of
the option.
WRITING OPTIONS. When a Fund writes a put option, it takes the opposite
side of the transaction from the option's purchaser. In return for receipt of
the premium, the Fund assumes the obligation to pay the "strike" price for the
option's underlying instrument if the other party to the option chooses to
exercise it. When writing an option on a futures contract the Fund will be
required to make margin payments for futures contracts. The Fund may seek to
terminate its position in a put option it writes before exercise by closing out
the option in the secondary market at its current price. If the secondary market
is not liquid for a put option the Fund has written, however, the Fund must
continue to be prepared to pay the "strike" price while the option is
outstanding, regardless of price changes, and must continue to segregate assets
to cover its position.
If the underlying prices rise, a put writer would generally expect to
profit. Although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, the writer also may
profit, because it should be able to close out the option at a lower price. If
the underlying prices fall, the put writer would expect to suffer a loss. This
loss should be less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument, in return for the "strike" price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if the underlying prices remain the same or fall. Through receipt of
the option premium, a call writer mitigates the effects of a price decline. At
the same time, because a call writer must be prepared to deliver the underlying
instrument in return for the "strike" price, even if its current value is
greater, a call writer gives up some ability to participate in the underlying
price increases.
COMBINED POSITIONS. A Fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
"strike" price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund's current or anticipated
investments exactly. The Fund may invest in options and futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests.
Options and futures prices also can diverge from the prices of their
underlying instruments or precious metals, even if the underlying instruments or
precious metals match the Fund's investment well. Options and futures prices are
affected by such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying
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instrument or precious metal, and the time remaining until expiration of the
contract, which may not affect the security or the precious metal prices the
same way. Imperfect correlation also may result from: differing levels of demand
in the options and futures markets and the securities or precious metal markets,
structural differences in how options and futures and securities or precious
metal are traded, or imposition of daily price fluctuation limits or trading
halts. The Fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities or precious metal it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities or precious metals, although
this may not be successful in all cases. If price changes in the Fund's options
or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their "strike" prices are not close to the underlying
instrument or precious metal's current price. In addition, exchanges may
establish daily price fluctuation limits for options and futures contracts, and
may halt trading if a contract's price moves upward or downward more than the
limit in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the Fund to
enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
potentially could require the Fund to continue to hold a position until delivery
or expiration regardless of changes in its value. As a result, the Fund's access
to other assets held to cover its options or futures positions also could be
impaired. In addition, one of the requirements for qualification as a regulated
investment company for tax purposes in that less than 30% of the Fund's gross
income be derived from gains from the sale or other disposition of securities
held for less than three months. Accordingly, the Fund may be restricted in
effecting closing transactions within three months after entering into an option
or futures contract.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
"strike" price, the terms of over-the-counter options i.e., options not traded
on exchanges ("OTC options"), generally are established through negotiation with
the other party to the option contract. While this type of arrangement allows a
Fund greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are guaranteed
by the clearing organization of the exchanges where they are traded. The risk of
illiquidity also is greater with OTC options, since these options generally can
be closed out only by negotiation with the other party to the option.
FOREIGN CURRENCY TRANSACTIONS. Investments in foreign companies usually
involve use of currencies of foreign countries. A Fund also may hold cash and
cash-equivalent investments in foreign currencies. The value of the Fund's
assets as measured in U.S. dollars will be affected by changes in currency
exchange rates and exchange control regulations. The Fund may, as appropriate
markets are developed, but is not required to, engage in currency transactions
including cash market purchases at the spot rates, forward currency contracts,
exchange listed currency futures, exchange listed and over-the-counter options
on currencies, and currency swaps for two purposes. One purpose is to settle
investment transactions. The other purpose is to try to minimize currency risks.
All currency transactions involve a cost. Although foreign exchange
dealers generally do not charge a fee, they do realize a profit based on the
difference (spread) between the prices at which they are buying and selling
various currencies. Commissions are paid on futures options and swaps
transactions, and options require the payment of a premium to the seller.
A forward contract involves a privately negotiated obligation to
purchase or sell at a price set at the time of the contract with delivery of the
currency generally required at an established future date. A futures contract is
a standardized contract for delivery of foreign currency traded on an organized
exchange that is generally settled in cash. An option gives the right to enter
into a contract. A swap is an agreement based on a nominal amount of money to
exchange the differences between currencies.
The Fund will generally use spot rates or forward contracts to settle a
security transaction or handle dividend and interest collection. When a Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency or has been notified of a dividend or interest payment, it may
desire to lock in the price of the security
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or the amount of the payment in dollars. By entering into a spot rate or forward
contract, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between different
currencies from the date the security is purchased or sold to the date on which
payment is made or received or when the dividend or interest is actually
received.
A Fund may use forward or futures contracts, options, or swaps when the
investment manager believes the currency of a particular foreign country may
suffer a substantial decline against another currency. For example, it may enter
into a currency transaction to sell, for a fixed amount of dollars, the amount
of foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The precise matching
of the securities transactions and the value of securities involved generally
will not be possible. The projection of short-term currency market movements is
extremely difficult and successful execution of a short-term strategy is highly
uncertain.
A Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies in which a Fund has (or expects to have) portfolio
exposure.
A Fund may engage in proxy hedging. Proxy hedging is often used when
the currency to which a fund's portfolio is exposed is difficult to hedge. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and simultaneously buy U.S. dollars. The amount of
the contract would not exceed the value of the Fund's securities denominated in
linked securities.
A Fund will not enter into a currency transaction or maintain an
exposure as a result of the transaction when it would obligate a Fund to deliver
an amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency. The Fund will designate
cash or securities in an amount equal to the value of the Fund's total assets
committed to consummating the transaction. If the value of the securities
declines, additional cash or securities will be designated on a daily basis so
that the value of the cash or securities will equal the amount of the Fund's
commitment.
On the settlement date of the currency transaction, a Fund may either
sell portfolio securities and make delivery of the foreign currency or retain
the securities and terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting position. It is impossible to forecast what
the market value of portfolio securities will be on the settlement date of a
currency transaction. Accordingly, it may be necessary for the Fund to buy
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the securities are less than the amount of
foreign currency the Fund is obligated to deliver and a decision is made to sell
the securities and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio securities if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver. The Fund will realize gains
or losses on currency transactions.
The Fund may also buy put options and write covered call options on
foreign currencies to try to minimize currency risks. The risk of buying an
option is the loss of premium. The risk of selling (writing) an option is that
the currency option will minimize the currency risk only up to the amount of the
premium, and then only if rates move in the expected direction. If this does not
occur, the option may be exercised and a Fund would be required to buy the
underlying currency at the loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the Fund may also
be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements on exchange rates. All options
written on foreign currencies will be covered; that is, the Fund will own
securities denominated in the foreign currency, hold cash equal to its
obligations or have contracts that offset the options.
The Fund may construct a synthetic foreign currency investment,
sometimes called a structured note, by (a) purchasing a money market instrument
which is a note denominated in one currency, generally U.S. dollars, and (b)
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concurrently entering into a forward contract to deliver a corresponding amount
of that currency in exchange for a different currency on a future date and at a
specified rate of exchange. Because the availability of a variety of highly
liquid short-term U.S. dollar market instruments, or notes, a synthetic money
market position utilizing such U.S. dollar instruments may offer greater
liquidity than direct investment in foreign currency.
SEGREGATED ASSETS AND COVERED POSITIONS. When purchasing a stock index
futures contract, selling an uncovered call option, or purchasing securities on
a when-issued or delayed delivery basis, a Fund will restrict cash, which may be
invested in repurchase obligations or liquid securities. When purchasing a stock
index futures contract, the amount of restricted cash or liquid securities, when
added to the amount deposited with the broker as margin, will be at least equal
to the market value of the futures contract and not less than the market price
at which the futures contract was established. When selling an uncovered call
option, the amount of restricted cash or liquid securities, when added to the
amount deposited with the broker as margin, will be at least equal to the value
of securities underlying the call option and not less than the strike price of
the call option. When purchasing securities on a when-issued or delayed delivery
basis, the amount of restricted cash or liquid securities will be at least equal
to the Fund's when-issued or delayed delivery commitments.
The restricted cash or liquid securities will either be identified as
being restricted in a Fund's accounting records or physically segregated in a
separate account at Firstar Trust Company, the Fund's custodian. For the purpose
of determining the adequacy of the liquid securities which have been restricted,
the securities will be valued at market or fair value. If the market or fair
value of such securities declines, additional cash or liquid securities will be
restricted on a daily basis so that the value of the restricted cash or liquid
securities, when added to the amount deposited with the broker as margin, equals
the amount of such commitments by a Fund.
Fund assets need not be segregated if a Fund "covers" the futures
contract or call option sold. For example, the Fund could cover a futures or
forward contract which it has sold short by owning the securities or currency
underlying the contract. A Fund may also cover this position by holding a call
option permitting the Fund to purchase the same futures or forward contract at a
price no higher than the price at which the sell position was established.
A Fund could cover a call option which it has sold by holding the same
currency or security (or, in the case of a stock index, a portfolio of stock
substantially replicating the movement of the index) underlying the call option.
The Fund may also cover by holding a separate call option of the same security
or stock index with a strike price no higher than the strike price of the call
option sold by the Fund. The Fund could cover a call option which it has sold on
a futures contract by entering into a long position in the same futures contract
at a price no higher than the strike price of the call option or by owning the
securities or currency underlying the futures contract. The Fund could also
cover a call option which it has sold by holding a separate call option
permitting it to purchase the same futures contract at a price no higher than
the strike price of the call option sold by the Fund.
ILLIQUID INVESTMENTS. Illiquid investments are investments that cannot
be sold or disposed of in the ordinary course of business at approximately the
prices at which they are valued. Under the supervision of the Board of Trustees,
the Advisor determines the liquidity of a Fund's investments and, through
reports from the Advisor, the Board monitors trading activity in illiquid
investments. In determining the liquidity of the Fund's investments, the Advisor
may consider various factors, including (i) the frequency of trades and
quotations, (ii) the number of dealers and prospective purchasers in the
marketplace, (iii) dealer undertakings to make a market, (iv) the nature of the
security (including any demand or tender features), and (v) the nature of the
marketplace for trades (including the ability to assign or offset the Fund's
rights and obligations relating to the investment). Investments currently
considered by the Trust to be illiquid include repurchase agreements not
entitling the holder to payments of principal and interest within seven days,
over-the-counter options, and restricted securities. However, with respect to
OTC options which the Fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement the Fund may have to close out
the option before expiration. In the absence of market quotations, illiquid
investments are priced at fair value as determined in good faith by the Advisor,
subject to review of the Board of Trustees. If, through a change in values, net
assets or other circumstances, the Fund were in a position where more than 15%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
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RESTRICTED SECURITIES. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering. Where the
registration is required, a Fund holding restricted securities may be obligated
to pay all or part of the registration expense and a considerable period may
elapse between the time it decides to seek registration and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to seek
registration of the security.
RISKS OF INTERNATIONAL INVESTING
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of
non-U.S. companies may entail additional risks due to the potential political,
social and economic instability of certain countries and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, a Fund could lose its
entire investment in any such country.
RELIGIOUS, POLITICAL, AND ETHNIC INSTABILITY. Certain countries in
which a Fund may invest may have groups that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for widespread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's investment in
those countries. Instability may also result from, among other things: (i)
authoritarian governments or military involvement in political and economic
decision-making, including changes in government through extra-constitutional
means; (ii) popular unrest associated with demands for improved political,
economic and social conditions; and (iii) hostile relations with neighboring or
other countries. Such political, social and economic instability could disrupt
the principal financial markets in which the Fund invests and adversely affect
the value of the Fund's assets.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Fund. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund. For example, certain countries
require prior governmental approval before investments by foreign persons may be
made, or may limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. In addition, if there
is a deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign capital remittances abroad. A Fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities, and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by a Foreign Region Fund will
not be registered with the SEC or regulators of any foreign country, nor will
the issuers thereof be subject to the SEC's reporting requirements. Thus, there
will be less available information concerning most foreign issuers of securities
held by the Fund than is available concerning U.S. issuers. In instances where
the financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Advisor will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less
<PAGE>
reliable than such information regarding U.S. issuers. Issuers of securities in
foreign jurisdictions are generally not subject to the same degree of regulation
as are U.S. issuers with respect to such matters as restrictions on market
manipulation, insider trading rules, shareholder proxy requirements and timely
disclosure of information.
CURRENCY FLUCTUATIONS. Because each international equity Fund under
normal circumstances will invest a substantial portion of its total assets in
the securities of foreign issuers which are denominated in foreign currencies,
the strength or weakness of the U.S. dollar against such foreign currencies will
account for a significant part of a Fund's investment performance. A decline in
the value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of a Fund's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and any net investment income and capital gains
derived from such securities to be distributed in U.S. dollars to shareholders
of the Fund. Moreover, if the value of the foreign currencies in which the Fund
receives its income declines relative to the U.S. dollar between the receipt of
the income and the making of Fund distributions, 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 rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and pace of business activity in the other countries
and the United States, and other economic and financial conditions affecting the
world economy.
Although each Fund values its assets daily in terms of U.S. dollars,
the Funds do not intend to convert their holdings of foreign currencies into
U.S. dollars on a daily basis. Each Fund will do so, from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference ("spread") between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may
be less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities exchange transactions usually are subject to
fixed commissions, which generally are higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. The Advisor will consider such difficulties when
determining the allocation of each Fund's assets, although the Advisor does not
believe that such difficulties will have a material adverse effect on the Funds'
portfolio trading activities.
The Funds may use foreign custodians, which may involve risks in
addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' investments, and (iii) obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. A Fund's net investment income from foreign issuers
may be subject to non-U.S. withholding taxes by the foreign issuer's country,
thereby reducing the Fund's net investment income or delaying the receipt of
income where those taxes may be recaptured.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of issuers domiciled in emerging markets, including the markets of
Latin America and certain Asian markets such as Taiwan, Malaysia and Indonesia,
may entail special risks relating to the potential political and economic
instability and the risks of
<PAGE>
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, a Fund could lose its
entire investment in any such country.
Emerging securities markets are substantially smaller, less developed,
less liquid and more volatile than the major securities markets. The limited
size of emerging securities markets and limited trading volume in issuers
compared to the volume of trading in U.S. securities could cause prices to be
erratic for reasons apart from factors that affect the quality of the
securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities in these markets. In
addition, securities traded in certain emerging markets may be subject to risks
due to the inexperience of financial intermediaries, a lack of modern
technology, the lack of a sufficient capital base to expand business operations,
and the possibility of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less
efficient and less reliable than in more developed markets. In such emerging
securities markets there may be share registration and delivery delays or
failures.
Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Trust and the Advisor requires that
the Advisor, in executing portfolio transactions and selecting brokers or
dealers, seek the best overall terms available. In assessing the terms of a
transaction, consideration may be given to various factors, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer (for a specified
transaction and on a continuing basis), the reasonableness of the commission, if
any, and the brokerage and research services provided to the Trust and/or other
accounts over which the Advisor or an affiliate of the Advisor exercises
investment discretion. Under the Advisory Agreement, the Advisor is permitted,
in certain circumstances, to pay a higher commission than might otherwise be
obtained in order to acquire brokerage and research services. The Advisor must
determine in good faith, however, that such commission is reasonable in relation
to the value of the brokerage and research services provided -- viewed in terms
of that particular transaction or in terms of all the accounts over which
investment discretion is exercised. In such case, the Board of Trustees will
review the commissions paid by each Fund of the Trust to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits obtained. The advisory fee of the Advisor would not be reduced
by reason of its receipt of such brokerage and research services. To the extent
that research services of value are provided by broker/dealers through or with
whom the Trust places portfolio transactions the Advisor may be relieved of
expenses which it might otherwise bear.
The Trust may, in some instances, purchase securities that are not
listed on a national securities exchange or quoted on NASDAQ, but rather are
traded in the over-the-counter market. When the transactions are executed in the
over-the-counter market, it is intended generally to seek first to deal with the
primary market makers. However, the services of brokers will be utilized if it
is anticipated that the best overall terms can thereby be obtained. Purchases of
newly issued securities usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Those dealers may be
acting as either agents or principals.
Brokerage fees paid by the Funds for the most recent fiscal years will,
in future periods, be included in the Trust's Statement of Additional
Information.
In seeking its primary investment objective of capital appreciation, a
Fund may expect that it generally will hold investments for at least six months.
However, if the Advisor concludes that economic, market or industry conditions
warrant major adjustments in any Fund's investment positions or if unusual
market conditions or
<PAGE>
developments dictate the taking of a temporary defensive position in short-term
money market instruments, changes may be made without regard to the length of
time an investment has been held, or whether a sale results in profit or loss,
or a purchase results in the reacquisition of an investment which may have only
recently been sold by the Fund.
PORTFOLIO TURNOVER
The Advisor buys and sells securities for the Funds to accomplish its
investment objectives. The Funds' investment policies may lead to frequent
changes in investments, particularly in periods of rapidly fluctuating interest
rates. The Funds' investments may also be traded to take advantage of perceived
short-term disparities in market values or yields among securities of comparable
quality and maturity. A change in the securities held by a Fund is known as
"portfolio turnover." It is anticipated that portfolio turnover for each fund
will be equal to or less than 100%. However, the Funds are to be used by
investment advisers allocating client assets between various sectors or
countries. If said advisers move client assets in and out of a Fund, that Fund's
portfolio turnover rate could be significantly greater.
THE INVESTMENT ADVISORTHE INVESTMENT ADVISOR
The Trust retains Meridian Investment Management Corporation, 12835
East Arapahoe Road, Tower II, Englewood, Colorado 80112 (the "Advisor") to
manage each Fund's investments. Meridian is a wholly-owned subsidiary of
Meridian Management & Research Corporation ("MM&R"). Michael J. Hart and Dr.
Craig T. Callahan each own 50% of MM&R, and may be deemed to control the Advisor
due to his ownership of its shares and their positions as officer and directors
of the Advisor. The Advisor is providing the minimum regulatory capital to the
Trust and will be its controlling shareholder until the number of shares sold to
others exceeds the number issued to the Advisor, which is anticipated shortly
after effective registration.
Under the terms of the Advisory Agreement, the Advisor manages the
Funds' investments subject to approval of the Board of Trustees. As compensation
for its management services, a Fund is obligated to pay the Advisor a fee
computed and accrued daily and paid monthly at an annual rate of 1.00% for the
ICON U.S. Equity Funds of the average daily net assets; 1.00% for the Icon
Foreign Equity Funds; 0.65% for the ICON Fixed Income Fund. The Advisor may
waive all or part of its fee, at any time, and at its sole discretion, but such
action shall not obligate the Advisor to waive any fees in the future. The Fund
is responsible for the payment of all expenses incurred in connection with the
organization and initial registration of shares of a Fund.
The Trust and the Advisor, in connection with the Short-Term Fixed
Income Fund, have entered into an Investment Sub-Advisory Agreement with
Wellington Management Company LLP (the "Sub-Advisor") as discussed in the
prospectus. The Sub-Advisor's compensation is set forth in the prospectus and is
paid by the Advisor. The Fund will not be responsible for the Sub-Advisor's fee.
The Advisor retains the right to use the name "ICON" in connection with
another investment company or business enterprise with which the Advisor is or
may become associated. The Trust's right to use the name "ICON" automatically
ceases ninety days after termination of the Agreement and may be withdrawn by
the Advisor on ninety days written notice.
The Advisor may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of a Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Funds believes that there would be no material impact on the Funds or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders
<PAGE>
who do not. The Fund may from time to time purchase securities issued by banks
which provide such services; however, in selecting investments for the Funds, no
preference will be shown for such securities.
The Board of Trustees (including a majority of the "disinterested
Trustees") and shareholder approval was recently given for the Advisory
Agreement and the Investment Sub-Advisory Agreement through to and including
October 1998 and December 1998, respectively. The Agreements provide that they
will continue initially for two years, and from year to year thereafter, with
respect to each Fund, as long as it is approved at least annually both (i) by a
vote of a majority of the outstanding voting securities of such Fund (as defined
in the 1940 Act) or by the Board of Trustees of the Trust, and (ii) by a vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Agreements may be terminated on
60 days' written notice by either party and will terminate automatically if
assigned.
<PAGE>
TRUSTEES AND OFFICERSTRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, a defined in the
Investment Company Act of 1940, is indicated by an asterisk.
NAME, AGE AND ADDRESS POSITION PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------------------------ ------------ -----------------------------------------
MICHAEL J. HART * President President of Meridian Management &
Age: 49 and Trustee Research Corporation ("MM&R"), President
7 Sedgwick Drive of the Advisor, a wholly-owned subsidiary
Englewood, CO 80110 of MM&R, and President of Meridian
Clearing Corp.("MCC") a wholly-owned
subsidiary of the Advisor.
CRAIG T. CALLAHAN * Trustee Secretary and Treasurer of MM&R, Chief
Age: 45 Investment Officer of the Advisor, and
52 Glenmoor Way Vice President of MCC.
Englewood, CO 80110
R. MICHAEL SENTEL Trustee Attorney for U.S. Department of Education
Age: 48 since October 1996; owner of Sentel &
15663 Wedge Way Company, P.C. 1994 to present; Counsel
Morrison, CO 80465 (Section Chief) of Professional Liability
Section of FDIC's Litigation Division
from 1991 to 1994.
JAMES W. HIRE Trustee Principal of Hire & Associates since
Age: 48 1988.
1383 Solitude Lane
Evergreen, CO 80439
KENNETH D. TRUMPFHELLER Vice President of AmeriPrime Financial
Age: 38 President Services, Inc., the Administrator,
1793 Kingswood Drive and President of AmeriPrime Financial
Suite 200 Secretary Securities, Inc., the Distributor, and
Southlake, Texas 76092 President & Trustee of AmeriPrime Funds
since 1995; Senior Client Executive of
SEI Financial Services from 1984 to 1994.
KELLI D. SHOMAKER, CPA Treasurer Manager of Compliance of AmeriPrime
Age: 34 and Chief Financial Services, Inc., and Secretary
1793 Kingswood Drive Accounting and Treasurer of AmeriPrime Funds since
Suite 200 Officer 1995; Vice President, Chief Accounting
Southlake, Texas 76092 Officer, Treasurer and Controller of
United Services Advisers, Inc. and United
Services Insurance Funds from 1994 to
1995; Vice President, Chief Accounting
Officer, Treasurer, and Controller of
Accolade Funds and Pauze/Swanson United
Services Funds from 1993 to 1995;
Controller from 1987 to 1995 and Vice
President, Chief Accounting Officer and
Treasurer from 1990 to 1995 of United
Services Funds; Director of Security
Trust & Financial Company from 1993 to
1995.
ERIK L. JONSON, CPA Vice Chief Financial Officer of MM&R, owner of
Age: 47 President Erik L. Jonson, CPA from 1986 to 1996.
9465 W. Geddes Pl. and Chief
Littleton, CO 80112 Financial
Officer
<PAGE>
The compensation to be paid to the Trustees of the Trust is set forth
in the following table:
<TABLE>
Pension or Estimated Total Compensation
Aggregate Retirement Annual Benefits from Trust (the
Compensation from Accrued As Part Upon Trust is not in a
Name Trust(1) of Fund Expenses Retirement Fund Complex)(1)
- ----------------- ----------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
Michael J. Hart 0 0 0 0
Craig T. Callahan 0 0 0 0
R. Michael Sentel $8,000 0 0 $8,000
James W. Hire $8,000 0 0 $8,000
======= ======= ======= =======
$16,000 0 0 $16,000
(1) Trustee fees are Trust expenses and each fund of the Trust pays a portion of
the Trustee fees. The compensation is estimated for the first full year of the
Trust ending September 30, 1997.
</TABLE>
DETERMINATION OF SHARE PRICEDETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of a Fund is determined as of
4:00 p.m., Eastern time on each day the Funds are open for business and on any
other day on which there is sufficient trading in the Funds' securities to
materially affect the net asset value. The Funds are open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. For a description of the methods used to determine
the net asset value (share price), see "Share Price Calculation" in the
Prospectus.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
A Fund may advertise performance in terms of average annual total
return for 1, 5 and 10 year periods, or for such lesser periods as the Fund has
been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
n
P(1+T) =ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The calculation assumes all charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by the Fund are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
A Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's
<PAGE>
investment objective, policies and techniques should also be considered. At any
time in the future, investment performance may be higher or lower than past
performance, and there can be no assurance that any performance will continue.
Yield
A Fund may also advertise performance in terms of a 30 day yield
quotation. The 30 day yield quotation is computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period according to the following formula:
6
YIELD = 2 [ (A - B + 1) - 1]
-----
CD
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during the
period that were entitled to receive dividends
D = the maximum offering price per share on the last day of
the period
NONSTANDARDIZED TOTAL RETURN
A Fund may provide the above described standard total return results
for a period which ends as of not earlier than the most recent calendar quarter
end and which begins either twelve months before or at the time of commencement
of the Fund's operations. In addition, the Fund may provide nonstandardized
total return results for differing periods, such as for the most recent six
months. Such nonstandardized total return is computed as otherwise described
under "Total Return" except that no analyzation is made.
TAX STATUS
TAXATION OF THE FUNDS -- IN GENERAL
As stated in its prospectus, each Fund intends to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, each Fund will not be liable for
federal income taxes on its taxable net investment income and capital gain net
income that are distributed to shareholders, provided that the Fund distributes
at least 90% of its net investment income and net short-term capital gain for
the taxable year.
To qualify as a regulated investment company, each Fund must, among
other things, (a) derive in each taxable year at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock or
securities held less than three months (the "30% test"), and (c) satisfy certain
diversification requirements at the close of each quarter of the Fund's taxable
year.
The Code imposes a non-deductible 4% excise tax on a regulated
investment company that fails to distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income for the calendar
year, (2) at least 98% of its net capital gains for the twelve-month period
ending on October 31 of the calendar year and (3) any portion (not taxable to
the Fund) of the respective balance from the preceding calendar year. The Funds
intend to make such distributions as are necessary to avoid imposition of this
excise tax.
<PAGE>
TAXATION OF THE FUNDS' INVESTMENTS
The Fund's ability to make certain investments may be limited by
provisions of the Code that require inclusion of certain unrealized gains or
losses in the Fund's income for purposes of the 90% test, the 30% test and the
distribution requirements of the Code, and by provisions of the Code that
characterize certain income or loss as ordinary income or loss rather than
capital gain or loss. Such recognition, characterization and time rules
generally apply to investments in certain forward currency contracts, foreign
currencies and debt securities denominated in foreign currencies.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November or December and made payable to shareholders of
record in such a month will be deemed to have been received on December 31, if a
Fund pays the dividends during the following January. To the extent that a
Fund's net investment income does not arise from dividends on domestic common or
preferred stock, the Funds' distributions will not qualify for the 70% corporate
dividends-received deduction.
Distributions by a Fund will result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless would be
taxable to the shareholder as ordinary income or long-term capital gain, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares of a Fund just prior to a distribution. The price
of such shares purchased at that time includes the
<PAGE>
amount of any forthcoming distribution. Those investors purchasing the Fund's
shares just prior to a distribution may receive a return of investment upon
distribution which will nevertheless be taxable to them.
A shareholder of a Fund should be aware that a redemption of shares
(including any exchange into another Portfolio) is a taxable event and,
accordingly, a capital gain or loss may be recognized. If a shareholder of a
Fund receives a distribution taxable as long-term capital gain with respect to
shares of the Fund and redeems or exchanges shares before he has held them for
more than six months, any loss on the redemption or exchange (not otherwise
disallowed as attributable to an exempt-interest dividend) will be treated as
long-term capital loss to the extent of the long term capital gain recognized.
OTHER TAX CONSIDERATIONS
Distributions to shareholders may be subject to additional state, local
and non-U.S. taxes, depending on each shareholder's particular tax situation.
Shareholders subject to tax in certain states may be exempt from state income
tax on distributions made by a Fund to the extent such distributions are derived
from interest on direct obligations of the United States Government.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in shares of a Fund.
ADMINISTRATIVE SERVICES
AmeriPrime Financial Services, Inc. ("Administrator") provides
day-to-day administrative services to the Trust. It provided the initial moneys
for organization of the Trust, acted as initial sole shareholder, and its
principal was the initial Trustee. As described in the Funds' Prospectus, the
Administrator will provide the Trust with office space, facilities and simple
business equipment, and will generally administer the Trust's business affairs
and provide the services of executive and clerical personnel for administering
the affairs of the Trust. It will compensate all personnel, officers and
Trustees of the Trust if such persons are employees of the Administrator or its
affiliates.
<PAGE>
CUSTODIAN
Firstar Trust Company, Post Office Box 701, Milwaukee, Wisconsin 53201,
is Custodian of the Funds' investments. The Custodian acts as the Funds'
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Funds' request and
maintains records in connection with its duties.
TRANSFER AGENT
Firstar Trust Company, Post Office Box 701, Milwaukee, Wisconsin 53201,
acts as the Funds' transfer agent and, in such capacity, maintains the records
of each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Funds' shares, acts as
dividend and distribution disbursing agent and performs other accounting and
shareholder service functions.
INDEPENDENT ACCOUNTANTS AND COUNSEL
Price Waterhouse LLP, 950 Seventeenth Street, Suite 2500, Denver,
Colorado 80202, has been selected as independent accountants for the Trust for
the fiscal year ending September 30, 1997. Charles W. Lutter, Jr., 103 Canyon
Oaks, San Antonio, Texas 78232, is legal counsel to the Trust.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc., 1793 Kingwood Drive, Suite 200,
Southlake, Texas 76092, is the exclusive agent for distribution of shares of the
Funds. The Distributor is obligated to sell the shares of the Funds on a best
efforts basis only against purchase orders for the shares. Shares of the Funds
are offered on a continuous basis.
FINANCIAL STATEMENTS
Audited initial seed capital financial statements are set forth below.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of ICON Funds
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of ICON Short-Term
Fixed Income Fund (one of the funds constituting ICON Funds, hereafter referred
to as the "Fund") at December 13, 1996, in conformity with generally accepted
accounting principles. 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 of this financial statement
in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
December 13, 1996
<PAGE>
ICON SHORT-TERM FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 13, 1996
ASSETS
Cash $ 100,000
Deferred organization costs 14,875
---------
Total Assets $ 114,875
---------
LIABILITIES
Organization costs payable $ 14,875
---------
Net assets applicable to 10,000 shares issued and $ 100,000
=========
outstanding (no par value, unlimited authorized shares)
Net asset value, offering and redemption price per share $ 10.00
============
See accompanying notes to statement of assets and liabilities.
<PAGE>
ICON SHORT-TERM FIXED INCOME FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 13, 1996
NOTE 1 - ORGANIZATION AND REGISTRATION
ICON Funds (the "Trust"), a Massachusetts business trust, was
established on September 19, 1996 as a non-diversified, open-end
management investment company. The Trust currently has seventeen
series. The Trust has been inactive since inception except for matters
relating to its organization and registration as an investment company
under the Investment Company Act of 1940 and the Securities Act of
1933. The Trust's shares are not offered directly to the public, but
are sold only through professional advisors and fiduciaries.
On December 11, 1996 Meridian Investment Management Corporation
("Meridian"), the Trust's investment advisor purchased 10,000 shares of
the ICON Short-Term Fixed Income Fund (the "Fund") at a net asset value
of $10.00 per share.
Estimated organization costs of $ 14,875, will be amortized on a
straight line basis over 60 months.
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS
Meridian serves as the Trust's investment advisor. As compensation for
its services to the Trust, Meridian receives an investment advisory fee
at an annual rate of 0.65% of the average daily net assets of the Fund
which is accrued daily and paid monthly.
Meridian, in its capacity as advisor to the Fund, has entered into a
sub-advisory agreement with Wellington Management Company, LLP
("Wellington") to assist it in advising the Fund. Meridian will pay
Wellington a fee based upon an annual rate of 0.20% on the Fund's first
$250 million of the average daily net assets, 0.15% on the next $250
million of average daily net assets and 0.125% on average daily net
assets over $500 million. The agreement requires a minimum fee of
$100,000 annually.
The Trust has entered into an administrative services agreement with
AmeriPrime Financial Services, Inc. ("Administrator"). The
administrative services agreement provides for an annual fee of 0.05%
on the Fund's first $500 million average daily net assets and 0.04% on
average daily net assets in excess of $500 million.
The Trust has entered into an agreement with Firstar Trust Company
("Firstar") to provide custodial services, fund accounting and transfer
agent services. The Trust pays a fee at an annual rate of 0.15% on the
Fund's first $500 million average daily net assets, 0.13% on the next
$500 million average daily net assets, and 0.12% on the balance average
daily net assets. The Fund also pays for various out of pocket expenses
that are estimated to be 0.02% of the average daily net assets.
Certain officers and directors of Meridian are also officers and
trustees of the Trust.
