As filed with the Securities and Exchange Commission on June 22, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
Registration No. 333-20177
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. _____ [ ]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Registration No. 811-08021
Amendment No. 2 [ ]
ISLAMIA GROUP OF FUNDS
(Exact Name of Registrant as Specified in Declaration of Trust)
1553 Bloomingdale Road, Suite #1000
Glendale Heights, Illinois 60139
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (630) 653-2666
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<PAGE>
Copies to:
Qamaruddin Ali Yar Khan Eric F. Fess, Esq.
1553 Bloomingdale Road, Suite #1000 Chapman and Cutler
Glendale Heights, Illinois 60139 111 W. Monroe
(Name and Address of Agent for Service) Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to [ ] on (date) pursuant to
paragraph (b) paragraph (a)(1)
[ ] on (date) pursuant to paragraph (b) [ ] 75 days after filing pursuant
to paragraph (a)(2)
[ ] 60 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(1) paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
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Pursuant to Rule 24f-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite
number of shares of the Trust are being registered under the
Securities Act of 1933.
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CONTENTS
OF
REGISTRATION STATEMENT
The Registration Statement comprises the following papers and contents:
The Facing Sheet
Part A - Prospectus for Islamia Group of Funds
Part B-The Statement of Additional Information
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
PROSPECTUS
- -------------, 1999
ISLAMIA
GROUP OF
FUNDS
ISLAMIA INCOME FUND
1553 Bloomingdale Road, Suite #1000
Glendale Heights, IL 60139
The Islamia Group of Funds is an open-end diversified management company
designed to meet the needs of various investors, and the particular needs of
Muslims by investing in accordance with Islamic principles. The Islamia Group of
Funds currently offers one series to investors: the Islamia Income Fund. The
Islamia Income Fund seeks to provide current income and capital appreciation by
investing in a portfolio of equity securities.
This Prospectus, which should be retained for future reference, sets forth
information that you should know before you invest. A Statement of Additional
Information dated -----------, has been filed with the Securities and Exchange
Commission and is
incorporated by reference into this Prospectus. For a free copy of the Statement
of Additional Information, write to Income Achievers, Inc., 1553 Bloomingdale
Road, Suite #1000, Glendale Heights, IL 60139 or call toll-free at 888-786-9200.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEES OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. SHARES OF
THE FUND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
SUMMARY OF FUND EXPENSES......................................................1
ABOUT THE FUND................................................................2
RISKS AND SPECIAL CONSIDERATIONS..............................................2
INVESTMENT POLICIES...........................................................4
PORTFOLIO TURNOVER............................................................7
INVESTMENT RESTRICTIONS.......................................................7
INVESTMENT RESULTS............................................................8
HOW TO BUY FUND SHARES........................................................8
HOW TO REDEEM FUND SHARES.....................................................9
MANAGEMENT OF THE FUND.......................................................11
PORTFOLIO TRANSACTIONS.......................................................12
NET ASSET VALUE..............................................................12
HOW THE
FUND SHOWS PERFORMANCE.......................................................13
DISTRIBUTIONS AND TAXES......................................................13
GENERAL INFORMATION..........................................................14
<PAGE>
SUMMARY OF FUND EXPENSES
The purpose of the table below is to help you understand all expenses and
fees that you would bear directly or indirectly as a Fund shareholder. The
percentages shown are estimated for the current fiscal year. Actual fees and
expenses may be greater or less than those shown. An example of how the expenses
work follows the table.
ISLAMIA
INCOME
SHAREHOLDER TRANSACTION EXPENSES(1) FUND
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................................3%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)............................................NONE
Deferred Sales Loads ......................................................NONE
Redemption Fees ...........................................................NONE
Exchange Fee...............................................................NONE
ISLAMIA
ANNUAL FUND OPERATING EXPENSES INCOME
(as a percentage of average net assets) FUND
Management and Administrative Fees.........................................0.80%
12b-1 Expenses..............................................................NONE
Other Expenses(2)..........................................................0.56%
Total Fund Operating Expenses..............................................1.36%
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(1) Authorized Dealers and other firms may charge additional fees for
shareholder transactions or for advisory services. Please see their
materials for details.
(2) Other Expenses are based on estimated amounts for the current fiscal year
ending ______________.
<PAGE>
Example*
You would pay the following expenses on a $1,000 investment in the Fund
assuming: (1) 5% annual rate of return; and (2) redemption at the end of each
period:
1 YEAR 3 YEARS
Islamia Income Fund $43.43 $71.78
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* This example does not represent past or future expenses, which may be
greater or less than those shown. Moreover, the Fund's actual rate of
return may be greater or less than the hypothetical 5% return shown in the
example. This example assumes that the percentage amounts listed under
Annual Operating Expenses remain the same in each of the periods. For
additional information about the Fund's fees and expenses, see Management
of the Fund.
ABOUT THE FUND
Islamia Group of Funds (the "TRUST") is designed to meet the needs of
various investors, and the particular needs of Muslims by investing in
accordance with Islamic principles. The Islamia Group of Funds was organized as
a Massachusetts business trust on December 23, 1996. The Trust is an open-end
diversified management investment company. The Trust is designed as a series
trust that may offer several separate funds to investors. Currently, the Trust
offers one series: the Islamia Income Fund (the "FUND"). The objective of the
Islamia Income Fund is to provide current income and appreciation of capital,
consistent with Islamic principles. The provision of current income is the
Islamia Income Fund's primary objective and the appreciation of capital is a
secondary objective. The Fund's investment adviser will apply Islamic principles
when making investment decisions for the Fund. See "Investment Policies" for a
description of the Islamic principles. The investment objective of the Fund
cannot be changed without shareholder approval. There can be no assurance that
the Fund will achieve its investment objective.
RISKS AND SPECIAL CONSIDERATIONS
PRICE VOLATILITY. The Fund pursues its investment objective by
investing in equity securities, including foreign securities. The value of Fund
shares will fluctuate as the value of the securities in which the Fund invests
fluctuate. Accordingly, an investment in Fund shares should be made with an
understanding of the risks which an investment in common stock entails,
including the risk that the financial condition of the issuers of the underlying
securities or the general condition of the common stock market may worsen, and
the value of the underlying securities and therefore the value of Fund shares
may decline. In addition, to the extent the Fund invests primarily in common
stocks, the Fund does not necessarily represent a complete investment program
and the Fund may be more susceptible to volatility than a fund investing in
equity securities and non-equity securities, such as fixed income securities.
OPERATING HISTORY. The Fund has no prior operating history and the Fund's
investment adviser, Income Achievers, Inc. (the "ADVISER"), has no previous
experience advising a mutual fund.
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ISLAMIC RESTRICTIONS. The Fund seeks to invest only in companies whose
activities are consistent with Islamic principles as described in more detail
below. The Fund's investment adviser, subject to review by the Fund's Board of
Trustees, interpret the Islamic principles applicable to the Fund and determines
whether the securities are consistent with Islamic principles. Investors,
however, may disagree with the interpretations of the Islamic teachings adopted
by the Fund and the Adviser's determination that certain companies operate
consistently with Islamic principles. Investors therefore should carefully read
the prospectus to determine if the Fund's policies and interpretations of
Islamic principles are in accordance with their own individual views of Islamic
principles.
Investing in accordance with Islamic principles will also limit the
investment opportunities available to the Fund more than is customary for other
mutual funds. The Fund may have to forego attractive investment opportunities to
remain consistent with Islamic principles. Consequently, the return on
securities chosen by the Fund may be lower than if the Fund considered only
investment criteria when making its investments. Furthermore, if subsequent to
an investment the Adviser or Board of Trustees determines the security is
inconsistent with Islamic principles, the Fund may have to divest the securities
at a disadvantageous time which may have an adverse impact on the Fund's
performance. Finally, to be consistent with Islamic principles, the Fund is
precluded from purchasing any securities which pay interest, including any
securities issued by the United States government or its agencies, certificates
of deposit, commercial paper, or other short-term corporate notes, bonds or
debentures. Unlike other mutual funds, the Fund may also not borrow money from
banks to meet redemptions or expenses. The Fund may therefore have to sell
securities at a disadvantageous time or may have to hold larger amounts in cash
which will not earn interest in order to meet redemptions or pay for expenses.
FOREIGN SECURITIES. The Fund may also invest in foreign securities;
however, the Fund currently limits such investments to 5% of its net assets and
intends to invest primarily in American Depository Receipts ("ADRS") of foreign
companies. Foreign investment presents risks beyond those of securities of U.S.
issuers. Such risks include political or economic instability, changes in
foreign currency exchange rates, and less publicly available information.
YEAR 2000 PROBLEM. Income Achievers and the Fund's service providers
each rely on computer systems to manage the Fund's investments, process
transactions and provide account maintenance. Because of the way computers
historically have stored dates, some of these systems currently may not be able
to correctly process activity occurring in the year 2000. This is commonly known
as the "Year 2000 Problem." Although there can be no assurance, Income Achievers
does not expect that any of the computer system changes necessary to prepare for
January 1, 2000 will cause any major operational difficulties for the Fund.
Income Achievers, however, is unable to predict what impact the Year 2000
Problem will have on any of the issuers in the Fund's portfolio.
<PAGE>
INVESTMENT POLICIES
The Trust is designed to provide investment alternatives that are
consistent with the following Islamic principles. Islamic principles generally
require that investors share in profit and loss, that they receive no usury or
interest, and that they do not invest in a business that is not permitted by
Islamic principles. More specifically, one of the most important teachings of
Islam is the prohibition against all sources of unjustified enrichment in
business transactions. This prohibition is designed to establish justice and
eliminate exploitation in such transactions. One source of unjustified
enrichment is receiving any monetary advantage in a business transaction without
giving a just countervalue. The receipt of interest (I.E., the fixing in advance
of a positive return on a loan) has been construed as an unjustified monetary
reward. Islamic principles therefore do not permit the payment of interest on
loans regardless of whether the return on the loan is a fixed or variable
percentage of the principle, paid in advance or at maturity, or gifts or
services are received as a condition for the loan. Due to the prohibition on the
use of interest, the Fund will not invest its assets in any securities that pay
interest.
Islamic principles, however, do permit returns on investments which
vary depending on the outcome of the business. Substantially all business
financing in an economy operating under Islamic principles is therefore equity
based with the investor sharing in the profits or losses of the business. Such
financing transfers a fair share of the risk of the investment to the investor
as well as the potential return. In light of these principles, the Fund may
invest in the common stock of companies. As noted, investments in common stock
are subject to market risk and the risk of price fluctuations and thus there is
no guaranteed rate of return. As such, an investment in the common stock of
companies is a permitted investment under Islamic principles. The Fund's
Adviser, however, believes that few companies will have obtained their financing
solely from issuing equity securities and therefore the Fund may invest in
companies that have issued debt securities subject to certain limitations. The
Fund will consider investments in the common stock of companies that have issued
debt securities or borrowed money from banks to be consistent with Islamic
principles provided the company's debt represents no more than 33% of its total
capital. The Fund only invests in a company's common stock and will not invest
in any of the bonds or other debt securities issued by the company. In addition,
the Adviser recognizes that companies may have made bank deposits or OTHER
investments which pay interest. Although the Fund does not invest in debt
securities, the Fund may purchase the common stock of companies that have bank
deposits or other investments that pay interest, provided no more than 5% of the
company's total revenues are derived from interest income.
Islamic teachings also consider some activities as "haram" or
prohibited including the consumption of alcohol or drugs, the eating of pork,
gambling, pornography, abortion (except when performed based on medical advice
to save the life of the mother), and, as noted above, interest-based lending.
The Fund will not invest in companies formed to operate a business that is not
consistent with Islamic principles including businesses involving liquor, wine,
casinos, pornography, gambling, the production or distribution of pork products,
the production or distribution of contraceptives or birth control products
(except for hospitals or pharmacies which may distribute such products as an
incidental service to their general business), the performance of
abortion-related services (except for hospitals or other medical facilities
which perform abortion-related services based on medical advice to save the
mother's life), credit unions, mortgage companies, banks and loan associations
(that are not based on Islamic principles). The investment adviser to the Fund
is not aware of any Islamic banks or loan associations whose securities are
traded domestically. You should note that Islamic principles do not preclude the
Fund from investing in companies in the tobacco industry or companies in the
munitions and armament industry and, therefore, the Fund may invest in such
industries. The Fund will also not invest in insurance companies.
<PAGE>
Although the Fund seeks to invest in companies operating businesses
that are consistent with Islamic principles, the investment adviser recognizes
that some companies or conglomerates may be involved in a variety of businesses
and while their primary source of revenue is derived from a business consistent
with Islamic principles, a small source of their revenues may be derived from an
activity the Adviser considers prohibited under Islamic teachings. In these
cases, companies which are primarily engaged in businesses consistent with
Islamic principles but receive a de minimis amount (up to 5%) of their total
revenues from any of the activities considered inconsistent with such principles
shall be construed as consistent with Islamic teachings and permissible
investments for the Fund.
Income Achievers, Inc., the Fund's Adviser, is responsible for the
selection of investments to meet the investment objectives of the Fund. The
Adviser will also determine whether the securities are consistent with Islamic
principles, subject to review by the Board of Trustees. The portfolio manager of
the Fund and President of the Adviser, Qamaruddin Ali Yar Khan, is Muslim and is
familiar with the basic tenets and core teachings of the Islamic faith. In
selecting the potential investments, the Adviser may review, among other things,
reports the issuers of the securities have filed with Securities and Exchange
Commission, research reports prepared on the respective companies, financial
publications, and any other publicly available information the Adviser deems
necessary to determine whether the issuer's activities are consistent with
Islamic principles. These materials, however, may not reflect that the company
is engaged in a prohibited activity if the activity constitutes only a small
portion of the company's operations. In such cases, the Adviser will not know or
be expected to know the company is engaged in a prohibited activity.
The Adviser will make a good faith effort, using publicly available
information obtainable by it, to identify those companies and other issuers of
securities whose products, services and/or activities are substantially
consistent with core Islamic teachings. To resolve any questions regarding the
interpretation of Islamic principles, the Adviser may also from time to time as
it deems necessary consult with Islamic religious organizations and scholars
that specialize in the teachings and requirements of the Islamic faith. If the
Adviser cannot resolve an issue, the Adviser will rely on the Board of Trustees
for a final determination. To further help insure the issuers are consistent
with Islamic principles, the Adviser will prepare a list of the Fund's holdings
semi-annually for review by the Board of Trustees, together with a report
regarding the business activities of the issuers of the portfolio securities.
Each member of the Board of Trustees is Muslim and is familiar with the
teachings of the Islamic religion. The members of the Board of Trustees will
then make a good faith effort to determine whether the business of the issuers
of the securities on the investment list is consistent with Islamic principles.
If the Board of Trustees determines that the investment is inconsistent with
Islamic principles, the Trustees will determine whether the securities should be
divested. The Adviser will also review periodically, but at least quarterly, the
information available on the portfolio securities to determine the securities
continued consistency with the Fund's religious criteria. If information becomes
available indicating that a portfolio security may no longer be consistent with
the Islamic principles, the Adviser will notify the Board of Trustees. The
Trustees will re-evaluate the issuer's activities with respect to compliance
with Islamic principles and will determine whether the stock of that company
should be divested by the Fund. Immediate divesting may have an adverse impact
on the investment performance of the Fund.
<PAGE>
The policy of the Islamia Income Fund is to invest at least 80% of its
assets in income-producing equity securities, such as dividend-paying common
stocks. Some assets may be held as cash to cover short-term needs such as
redemptions. The Islamia Income Fund may invest up to 20% of its assets in
non-income producing securities, including cash for short-term needs, for use in
covered option writing to earn premium income. Investments in common stocks
involve greater risk, and commensurately greater opportunity for reward, than
some other investments, such as investments in short-term bonds and money market
instruments. The value of investments in common stocks fluctuates and may be
greater than or less than the investment made.
In addition, while the Fund may engage in covered option writing, it
currently does not do so. The Fund also currently does not invest in preferred
stock or warrants.
Unless otherwise noted, the policies outlined in this section can be
changed if deemed appropriate by a majority of the Board of Trustees without
shareholder approval.
<PAGE>
SHORT TERM INVESTMENTS
The Fund may use short-term income producing investments to the extent
the Board of Trustees and the Adviser agree that those investments are
consistent with Islamic principles. Short-term investments are securities which
mature or have a remaining maturity of twelve months or less from the date of
purchase. The Adviser does not know of any short-term investments which meet
Islamic principles that are currently available in the United States. Most
ordinary mutual funds use a variety of investments which produce interest for
short-term needs. Islamic principles prohibit the use of these
interest-producing investments. If short-term investments that are consistent
with Islamic principles become available in the future, the Fund has the
authority to use them.
FOREIGN SECURITIES
The Fund may invest up to 10% of its net assets in equity securities
issued by foreign companies, but currently limits such investments to 5% of its
net assets. The Fund currently intends to invest only in dollar-denominated
foreign securities available for trading and settlement in the U.S., primarily
in American Depository Receipts (ADRs) for foreign securities. ADRs are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying foreign security and denominated in U.S. dollars. ADRs do not
eliminate all the risk inherent in investing in foreign issuers, such as changes
in foreign currency exchange rates. However, by investing in ADRs rather than
directly in foreign issuers stock, the Fund avoids currency risks during the
settlement period. The above investment policy may be changed by the Fund's
Board of Trustees, without a shareholder vote.
TEMPORARY INVESTMENTS
During uncertain market or economic conditions, the Fund may adopt a
temporary, defensive position. The Fund cannot invest in interest-paying
instruments frequently used by mutual funds for this purpose, such as U.S.
government securities, certificates of deposits, commercial paper or short-term
corporate notes, bonds or debentures. When markets are unattractive, the Adviser
chooses between continuing to follow the Fund's investment policy or converting
securities to cash for temporary, defensive purposes. This choice is based on
the Adviser's evaluation of market conditions and the Fund's portfolio holdings.
Accordingly, as a temporary defensive measure, the Fund may hold up to 100% of
its assets in cash.
PORTFOLIO TURNOVER
The Fund anticipates that its annual portfolio turnover will not exceed
100% under normal market conditions. A turnover rate of 100% would occur, for
example, if the Fund sold and replaced securities valued at 100% of its net
assets within one year. In the event the Fund were to have a turnover rate of
100% or more in any year, it would result in the payment by the Fund of
increased brokerage costs and could result in the payment by shareholders of
increased taxes on realized investment gains.
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INVESTMENT RESTRICTIONS
In accordance with Islamic principles, the Fund shall not purchase
bonds, debentures, or other interest-paying obligations of indebtedness. The
Fund also may not make loans, lend portfolio securities, make short sales, or
borrow money. The Fund is diversified, and does not invest more than 5% of total
assets in the securities of any one issuer. In addition, the Fund will not
invest more than 25% of its assets in any particular industry.
The above restrictions are fundamental policies and may not be changed
without prior approval by a majority of the outstanding shares of the Fund. For
additional information regarding the investment policies and restrictions of the
Fund, see "Investment Objectives and Policies of the Fund" in the Statement of
Additional Information.
INVESTMENT RESULTS
Shareholders receive a financial report showing the investments, income
and expenses of the Fund every six months. You may obtain current share values
any time by calling the Adviser at 888-786-9200.
HOW TO BUY FUND SHARES
Purchase Price
You may purchase shares of the Fund at a public offering price equal to
the applicable net asset value per share plus an up-front sales load imposed at
the time of purchase of 3% of the public offering price (3.093% of net amount
invested). Authorized dealer commissions as a percentage of the public offering
price is 2.00%. The Fund receives the entire net asset value of all of its
shares that are sold. Income Achievers is the Fund's distributor and it retains
the full sales charge.
The price at which you purchase shares of the Fund is based on the next
calculation of the net asset value for shares of the Fund after the order is
placed. The net asset value per share for the Fund is determined as of the close
of trading (generally 4:00 p.m. Eastern Time) on each day the New York Stock
Exchange is open for business. See "Net Asset Value," below for a description of
how net asset value is calculated.
Minimum Investment
Your first purchase of the Fund's shares needs to be for $2,000 or
more. Additional purchases may be in the amounts of $100 or more. These minimums
may be changed at any time by the Fund.
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Opening an Account and Purchasing Shares
To open an account, complete and sign the Account Application. Make
your check payable to the Islamia Income Fund. Mail your completed Account
Application, together with your check to: Income Achievers, Inc., 1553
Bloomingdale Road, Suite #1000, Glendale Heights, IL 60139. After your initial
purchase, you may purchase additional shares by mailing to Income Achievers at
the above address a check in the amount of your purchase made payable to the
Islamia Income Fund and indicating your account number on the check.
All purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks. Cash will not be accepted for the purchase of shares. If a check
fails to clear, the purchase to which the check relates will be canceled and the
prospective investor will be liable for any losses or fees incurred by the Fund
and its transfer agent or administrator, including without limitation a $20 fee
to cover bank handling charges for returning checks due to insufficient funds.
When purchases are made by check, the Fund can hold payment on redemption of
shares so purchased until it is reasonably satisfied that the check has cleared.
The Fund will not issue certificates to represent Shares. If you choose
to invest in the Fund, an account will be opened and maintained for you by
American Data Services, Inc., the Fund's transfer agent and administrator (the
"Administrator"). With each purchase, you will receive a statement showing the
details of the transaction and the current number and value of shares owned. You
may purchase full and fractional shares, expressed to three decimal places. A
change in registration or transfer of shares held in the name of your financial
adviser's firm can only be made by an order in good form from the financial
adviser acting on your behalf. The Fund reserves the right to reject any
purchase order and to waive or increase minimum investment requirements. Subject
to the rules and regulations of the Securities and Exchange Commission, the Fund
reserves the right to suspend the continuous offering of its shares at any time,
but no suspension shall affect your right of redemption as described below.
TAX-SHELTERED RETIREMENT PLANS.
Shares of the Fund are available for purchase in connection with
certain types of tax-sheltered retirement plans, including Individual Retirement
Accounts for individuals and in connection with Simplified Employee Pension
Plans for employees. In order to receive the necessary materials to create an
IRA account, please write to the Fund, c/o Income Achievers, 1553 Bloomingdale
Road, Suite #1000, Glendale Heights, IL 60139 or call 1-888-786-9200.
HOW TO REDEEM FUND SHARES
You may redeem your Fund shares at any time for cash at the net asset
value next computed after the redemption instructions and any required documents
are received in proper form, as described below. There is no charge for the
redemption of any Fund's shares.
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<PAGE>
Written Request
You may redeem shares by sending a written request for redemption
directly to Income Achievers, Inc., 1553 Bloomingdale Road, Suite #1000,
Glendale Heights, IL 60139. Requests for redemption must be signed by each
shareholder and, if the redemption proceeds exceed $50,000 or are payable other
than to the shareholder of record at the address of record (which address may
not have changed in the preceding 60 days), the signature must be guaranteed by
a national bank or trust company, brokerage firm or other financial intermediary
that is a member of an approved Medallion Guarantee Program or that is otherwise
approved by the Fund. You will receive payment based on the net asset value per
share next determined after receipt by the Fund of a properly executed
redemption request in proper form. A check for the redemption proceeds will be
mailed to you within seven days after receipt of your redemption request. For
accounts registered in the name of a broker-dealer, payment will be forwarded
within three business days. However, if any shares to be redeemed were purchased
by check within 15 days prior to the date the redemption request is received,
the Fund will not mail the redemption proceeds until the check received for the
purchase of shares has cleared, which may take up to 15 days.
Telephone Request
If you have authorized telephone redemption and your account address
has not changed within the last 60 days, you can redeem shares that are worth
$50,000 or less by calling Income Achievers at 888-786-9200. While you or anyone
authorized by you may make telephone redemption requests, redemption checks will
be issued only in the name of the shareholder of record and will be mailed to
the address of record. If your telephone request is received prior to 4:00 p.m.
eastern time, the redemption check will normally be mailed the next business
day. For requests received after 4:00 p.m. eastern time, the redemption will be
effected at 4:00 p.m. eastern time the following business day and the check will
normally be mailed on the second business day after the request.
If you have authorized redemption proceeds to be sent by wire, you can
take advantage of the following expedited redemption procedures to redeem shares
that are worth at least $1,000. You may make redemption requests for a wire
transfer by calling Income Achievers at 888-786-9200. If a redemption request is
received by 4:00 p.m. eastern time, the redemption will be made as of 4:00 p.m.
that day. If the redemption request is received after 4:00 p.m. eastern time,
the redemption will be made as of 4:00 p.m. the following business day. Under
this type of request, proceeds will normally be wired on the second business day
following the redemption, but may be delayed one additional business day if the
Federal Reserve Bank of Boston or the Federal Reserve Bank of New York is closed
on the day redemption proceeds would ordinarily be wired. The Fund reserves the
right to charge a fee for this service.
To redeem by telephone, you need to complete the telephone redemption
authorization section of the enclosed Application Form and return it to Income
Achievers. If you did not authorize telephone redemption when you opened your
account, you may obtain a telephone redemption authorization form by writing
Income Achievers or by calling toll-free at 888-786-9200. Proceeds of share
redemptions made by wire will be transferred by Federal Reserve wire only to the
commercial bank account specified by the shareholder on the Application Form.
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<PAGE>
You need to send a written request to Income Achievers in order to establish
multiple accounts, or to change the account or accounts designated to receive
redemption proceeds. These requests must be signed by each account owner with
signatures guaranteed by a national bank or trust company, brokerage firm or
other financial intermediary that is a member of an approved Medallion Guarantee
Program or that is otherwise approved by the Fund. Further documentation may be
required from corporations, executors, trustees or personal representatives.
The Funds reserve the right to refuse telephone redemptions and, at its
option, may limit the timing, amount or frequency of these redemptions.
Telephone or wire redemption procedures may be modified or terminated at any
time, on 30 days' notice, by the Fund. The Fund and American Data Services,
Inc., the Fund's transfer agent and administrator, will not be liable for
following telephone instructions reasonably believed to be genuine. The Fund
employs procedures reasonably designed to confirm that telephone instructions
are genuine. These procedures may include recording all telephone instructions
and requiring up to three forms of identification prior to acting upon a
caller's instructions. If the Fund does not follow reasonable procedures for
protecting shareholders against loss on telephone transactions, it may be liable
for any losses due to unauthorized or fraudulent telephone instructions.
General
The Fund may suspend the right of redemption of their shares or delay
payment more than seven days (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund normally utilizes is restricted, or an emergency
exists as determined by the Securities and Exchange Commission so that trading
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for any other periods that the Securities and
Exchange Commission by order may permit for protection of Fund shareholders.
Except for the minimum investment requirements imposed on initial and
subsequent purchases of Fund shares (as described under "Minimum Investment" in
the "How to Buy Fund Shares" section), the Fund currently does not have a
minimum total investment which must be maintained in the account. The Funds,
however, may in the future from time to time establish a minimum total
investment for its shareholders, and the Fund reserves the right to redeem your
shares if your investment is less than the minimum after giving you at least 30
days' notice. If any minimum total investment is established, and if your
account is below the minimum, you will be allowed 30 days following the notice
in which to purchase sufficient shares to meet the minimum.
-14-
<PAGE>
MANAGEMENT OF THE FUND
The management of the Fund, including general supervision of the duties
performed for the Fund by the Adviser under the Investment Management Agreement,
is the responsibility of the Trust's Board of Trustees.
Investment Adviser
Income Achievers provides the Fund with overall investment advisory and
certain administrative services under an Investment Management Agreement with
the Trust. Subject to any policies established by the Trust's Board of Trustees,
the Adviser makes investment decisions on behalf of the Fund, makes available
any research and statistical data, manages the Fund's business affairs, and
supervises the acquisition and disposition of investments by the Fund. The
Adviser also furnishes to the Trust, among other things, equipment, facilities,
certain personnel to carry out the management of the Trust, and certain
accounting and bookkeeping services as set forth in the Investment Management
Agreement. The Adviser shall pay for all executive and other personnel, office
space and office facilities that it is required to render under the Investment
Management Agreement. The Adviser is also the principal underwriter of the Fund.
The Adviser was founded in 1995 and currently serves as investment
adviser only to the Trust, but may in the future serve as investment adviser to
other investment companies. The Adviser's principal mailing address is 1553
Bloomingdale Road, Suite #1000, Glendale Heights, IL 60139. Qamaruddin Ali Yar
Khan, the Chairman, President and a Trustee of the Trust is a controlling person
of the Adviser through his ownership of all of the common stock of the Adviser.
For its services, the Fund pays the Adviser an annual advisory fee of
.8 of 1% of the Fund's average daily net assets. In addition to the fee paid to
the Adviser, the Fund bears all of its other expenses including, but not limited
to, telephone and other communications facilities, a pro rata portion of salary,
fees and expenses (including legal fees) of those trustees, officers and
employees of the Trust who are not officers, trustees or employees of the
Adviser; taxes and governmental fees; brokerage commissions and other expenses
incurred in acquiring or disposing of portfolio securities; fees and expenses of
the custodian, administrator and transfer and dividend paying agent; expenses of
registering and qualifying shares for sale with the Securities and Exchange
Commission and state securities commissions; accounting and legal costs;
insurance premiums; expenses of maintaining the Fund's legal existence and of
shareholder meetings; expenses of preparation and distribution to existing
shareholders of reports, proxies and prospectuses; and fees and expenses of
membership in industry organizations. For the first few years of operation, the
Adviser may at its discretion bear some of these expenses.
-15-
<PAGE>
Portfolio Manager
Qamaruddin Ali Yar Khan has served as portfolio manager for the Fund since
commencement of their operations. Mr. Khan received his bachelor of science from
Osmania University in Hyderabad, India. Mr. Khan is a certified public
accountant and has been Controller of Sonoscan, Inc. since 1990. From 1989 to
1998, Mr. Khan was President and owner of Glenside Accounting and Tax Service.
Mr. Khan does not have any prior experience managing a mutual fund portfolio.
PORTFOLIO TRANSACTIONS
Subject to the discretion of the Board of Trustees, the Adviser is
responsible for the placement of the portfolio transactions of the Fund with
brokers or dealers selected by the Adviser. It is the policy of the Adviser to
seek the best execution at the best security price available with respect to
each transaction, and with respect to brokered transactions, in light of overall
quality and research services provided. In selecting broker-dealers and
negotiating their commissions, the Adviser may take into account such factors as
the firm's reliability, the quality of its execution services, its financial
condition, and the sale of Fund shares.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. The Fund's net asset value may not be calculated
on days during which the Fund receives no orders to purchase shares and no
shares are tendered for redemption. Net asset value is calculated by taking the
fair value of the Fund's total assets, including dividends accrued but not yet
collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share. In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are available are
valued at market value. Common stocks and other equity-type securities are
valued at the last sales price on the national securities exchange or Nasdaq
Stock Market on which such securities are primarily traded; however, securities
traded on a national securities exchange or Nasdaq Stock Market for which there
were no transactions on a given day or securities not listed on a national
securities exchange or Nasdaq Stock Market are valued at the most recent bid
prices. Any securities or other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Trustees.
HOW THE FUND SHOWS PERFORMANCE
The Fund may quote its respective yield or total return in reports to
shareholders, sales literature and advertisements. The Fund may also from time
to time compare its investment results to various passive indices or other
mutual funds with similar investment objectives. Comparative performance
information may include data from Lipper Analytical Services, Inc., Morningstar,
Inc. and other industry publications. See the Statement of Additional
Information for a more detailed discussion.
-16-
<PAGE>
The yield of the Fund refers to the income generated by an investment
in the Fund over a one-month period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during the month is assumed to be generated each
month over a 12-month period and is shown as a percentage of the investment. All
total return figures assume the reinvestment of all dividends and measure the
net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in the
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over the
specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Yield and total return are based upon the historical results of the
Fund and are not necessarily representative of the future performance of the
Fund.
DISTRIBUTIONS AND TAXES
The Fund intends to operate as a "Regulated Investment Company" under
Subchapter M of the Internal Revenue Code, and therefore will not be liable for
federal income taxes to the extent earnings are distributed on a timely basis.
For federal income tax purposes, unless you are exempt from taxation or
entitled to a tax deferral, all dividends paid by the Fund that are derived from
net investment income and net short-term capital gains are, to the extent of the
Fund's current and accumulated earnings and profits, taxable as ordinary income,
and distributions paid by the Fund from net long-term capital gains are taxable
as long-term capital gains, whether received in cash or reinvested in additional
shares. The capital gain holding period for this purpose is determined by the
length of time the Fund has held the security and not the length of time you
have held shares in the Fund. Long-term capital gain distributions received by
individual shareholders are taxed at a maximum rate of 28%. Investors are
informed annually as to the amount and nature of all dividends and capital gains
paid during the prior year. Such capital gains and dividends may also be subject
to state or local taxes.
Income dividends are usually distributed quarterly, and capital gains,
if any, are usually distributed annually in December. When a dividend or capital
gain is distributed, the Fund's net asset value decreases by the amount of the
payment. Any such distribution will be subject to federal income tax, even if
the distribution occurs shortly after a purchase of Fund shares. All dividends
or capital gains distributions will automatically be reinvested in additional
shares of the Fund at the then prevailing net asset value unless an investor
specifically requests that either dividends or capital gains, or both, be paid
in cash. The election to receive dividends or reinvest them may be changed by
writing to: Income Achievers, Inc., 1553 Bloomingdale Road, Suite #1000,
Glendale Heights, IL 60139. Such notice needs to be received at least 5 days
prior to the record date of any dividend or capital gain distribution.
-17-
<PAGE>
Under certain circumstances, a corporate shareholder may be entitled to
a dividends received deduction with respect to such shareholder's taxable
dividends which are attributable to dividends received by the Fund on its equity
securities.
If you do not furnish the Fund with your correct social security
number, employer identification number, or appropriate certification, the Fund
is required by federal law to withhold federal income tax from your
distributions and redemption proceeds at a rate of 31%.
This section is not intended to be a full discussion of federal income
tax laws and the effect of such laws on you. A more detailed summary appears in
the Statement of Additional Information. There may be other federal, state, or
local tax considerations applicable to a particular investor. You are urged to
consult your own tax adviser.
GENERAL INFORMATION
Custodian, Administrator and Transfer Agent
The custodian of the assets of the Fund is Firstar Trust Company,
located at 615 E. Michigan Street, Milwaukee, Wisconsin 53201. The custodian
also provides certain accounting services to the Fund. The Administrator of the
Fund is American Data Services, Inc., located at Hauppauge Corporate Center, 150
Motor Parkway, Suite 109.
Pursuant to an Administrative Service Agreement with the Fund, American
Data Services provides certain administrative services necessary for the
operations of the Fund, subject to the supervision of the Fund's Board of
Trustees. For the services rendered to the Fund by the Administrator, the Fund
pays the Administrator a monthly fee based on the Fund's average net assets. If
the Fund's average net assets are: less than $5 million, the Administrator's fee
is $____________ per month, between $5 and $10 million, the Administrator's fee
is $____________ per month, between $10 and $20 million, the Administrator's fee
is $____________ per month and in excess of $20 million, the Administrator
receives $__________ per month; or _______% of the Fund's average daily net
assets, whichever is greater. The Fund also pays the Administrator for any
out-of-pocket expenses. In addition, the Administrator serves as the Fund's
transfer and dividend paying agent and performs fund accounting services for
which it is paid separately.
Organization
The Fund is a series of the Islamia Group of Funds (the "TRUST"), an
open-end diversified management investment company under the Investment Company
Act of 1940. The Trust was organized as a Massachusetts business trust on
December 23, 1996. The Board of Trustees of the Trust is authorized to issue an
unlimited number of shares in one or more series or "Funds," which may be
divided into classes of shares. Currently, there is one series authorized and
outstanding, which has only one class of shares. Each share of the Fund has
equal rights as to voting, redemption, dividends, and liquidation as the other
shares of the Fund. There are no conversion, preemptive or other subscription
rights. The Board of Trustees has the right to establish additional series in
the future, to change those series and to determine the preferences, voting
powers, rights and privileges thereof.
In the interest of economy and convenience, certificates representing
shares purchased will not be ordinarily issued. The investor, however, will have
the same rights of ownership with respect to such shares as if certificates had
been issued.
-18-
<PAGE>
The Trust is not required and does not intend to hold annual meetings
of shareholders. Shareholders owning more than 10% of the outstanding shares of
the Fund have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partner for its obligations. However, the Declaration of
Trust of the Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Trust's Declaration of Trust further provides for
indemnification out of the assets and property of the Trust for all loss and
expense 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 both inadequate
insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these
circumstances is remote.
-19-
<PAGE>
Statement of Additional Information
________________, 1999
Islamia Group of Funds
1553 Bloomingdale Road
Suite #1000
Glendale Heights, IL 60137
ISLAMIA GROUP OF FUNDS
ISLAMIA INCOME FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained from Income Achievers, Inc. at 1553 Bloomingdale Road, Suite #1000,
Glendale Heights, IL 60137. This Statement of Additional Information relates to,
and should be read in conjunction with the prospectus for the Fund, dated
[__________].
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION........................................................B-1
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND..............................B-1
PORTFOLIO TURNOVER.........................................................B-3
PERFORMANCE DATA...........................................................B-3
MANAGEMENT OF THE FUND.....................................................B-5
PRINCIPAL HOLDERS OF SECURITIES............................................B-7
INVESTMENT ADVISORY AND OTHER SERVICES.....................................B-7
BROKERAGE ALLOCATION......................................................B-10
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED..............B-11
DISTRIBUTION OF SHARES....................................................B-11
TAX STATUS................................................................B-12
INDEPENDENT PUBLIC ACCOUNTANTS AND
Custodian.................................................................B-16
FINANCIAL STATEMENTS......................................................B-16
B-ii
<PAGE>
GENERAL INFORMATION
Islamia Income Fund (the "FUND") is a series of the Islamia Group of
Funds (the "TRUST"), an open-end diversified series investment company.
Currently, there is only one series of the Trust outstanding. The Trust was
organized on December 23, 1996 and the Fund has no prior operating history.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The investment objective and certain investment policies of the Fund
are described in the Prospectus. All investments are subject to the overall
policy of making investment decisions according to Islamic principles, as
described in the Fund's Prospectus. The investment objective of the Fund, as
well as certain other policies and restrictions described in the Prospectus and
herein are fundamental and may not be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the Investment
Company Act of 1940, this means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if the holders of more than 50% of the Fund's shares are
present or represented by proxy, or (ii) more than 50% of the Fund's shares,
whichever is less.
Fundamental investment restrictions limiting investments of the Fund
provide that the Fund may not:
(1) issue senior securities, except the Fund may engage in certain
trading practices which are permitted under the Investment Company Act of 1940
and are consistent with Islamic principles;
(2) purchase securities on margin or effect short sales of securities;
(3) invest in oil, gas, or other mineral exploration leases and
programs;
(4) purchase or sell real estate, real estate limited partnerships
(except master limited partnerships that are publicly traded on a national
securities exchange or Nasdaq Stock Market);
(5) purchase or sell commodities or commodity contracts including
futures contracts;
(6) make loans of cash or portfolio securities or borrow money or
property;
B-1
<PAGE>
(7) underwrite the securities of other issuers except that the Fund
might be deemed to be an underwriter for purposes of the Securities Act of 1933
in connection with the purchase and sale of certain securities;
(8) purchase more than 10% of the outstanding voting securities of an
issuer, or invest in a company to get control or manage it;
(9) invest more than 5% of the Fund's total assets in securities of an
issuer;
(10) purchase the securities of any issuer if, as a result, more than
25% of the Fund's total assets would be invested in the securities of issuers
whose principal business activities are in the same industry;
(11) purchase or retain the securities of any issuer if the officers,
directors, advisers, or managers of the Fund owning beneficially more than one
and one-half of one percent of the securities of such issuer together own
beneficially 5% of such securities; provided no officer or director shall be
deemed to own beneficially securities held in other accounts managed by such
person or held in employee or similar plans for which such person acts as
trustee;
(12) purchase securities of other investment companies unless (a) such
securities are consistent with the investment objective of the Fund and the
investment companies operate in a manner consistent with Islamic principles and
(b) such purchase is in compliance with the Investment Company Act of 1940 and
applicable state law. However, no such restriction shall apply to a purchase of
investment company securities in connection with a merger, consolidation,
acquisition or reorganization; and
(13) purchase the securities of any issuer if, as a result, more than
10% of its total assets would be invested in the securities of issuers that,
including predecessors or unconditional guarantors, have a record of less than
three years of continuous operation. This policy does not apply to securities of
pooled investment vehicles.
In addition to the foregoing fundamental restrictions, the Fund has
adopted the following non-fundamental policies which may be changed by the Board
of Trustees:
(1) the Fund has authority to invest up to 10% of its net assets in
securities issued by foreign companies, but currently limits such investments to
5% of its net assets. The Fund currently will invest only in dollar-denominated
foreign securities available for trading and settlement in the United States,
primarily in American Depository Receipts ("ADRS") for foreign securities. These
are certificates issued by United States banks, representing the right to
receive securities of the foreign issuer deposited in that bank or a
correspondent bank. The Fund does not intend to invest in foreign securities
that are not traded and settled in the U.S. although the Board of Trustees may
determine to do so in the future;
B-2
<PAGE>
(2) the Fund will not purchase or sell options, except the Fund has the
power to use covered call options as a method to increase the income received
from common stocks owned by the Fund. The Fund may sell (write) covered call
options and purchase call options to close out call options previously written.
The Fund currently does not write covered call options;
(3) the Fund does not invest in preferred stock;
(4) the Fund will not invest their net assets in warrants; and
(5) the Fund will not purchase "restricted securities" (those which are
subject to legal or contractual restrictions on resale, including securities
that may be sold pursuant to Rule 144A under the Securities Act of 1933).
Notwithstanding the foregoing, the Fund may invest up to 10% of its net assets
in illiquid securities (excluding restricted securities) but currently have no
intention to do so.
If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in market value of the
investment or the total assets will not constitute a violation of that
restriction.
In addition to the foregoing, as described in the Fund's prospectus,
the Fund may invest in the common stock of companies that have issued debt
securities or borrowed money from banks, provided the company's debt represents
no more than 33% of its total capital. In addition to the foregoing restriction,
the Fund will also write a letter to the company explaining that it is not in
agreement with the company's debt financing policy.
PORTFOLIO TURNOVER
The Trust places no restrictions on portfolio turnover and will buy or
sell investments according to the Adviser's appraisal of the factors affecting
the market and the economy.
PERFORMANCE DATA
The historical investment performance of the Fund may be shown in the
form of "average annual total return," "cumulative total return," and "current
yield." PERFORMANCE FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT PREDICTIVE OF
FUTURE RESULTS.
The average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission ("SEC"). The average annual total return for a specific period is
found by taking a hypothetical, $1,000 investment ("INITIAL INVESTMENT") in Fund
shares on the first day of the period, reducing the amount to reflect the
maximum sales charge, and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains distributions have been reinvested in Fund shares at net asset
value on the reinvestment dates during the period.
B-3
<PAGE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains distributions by the Fund have been reinvested at net
asset value on the reinvestment dates during the period. Cumulative total return
may also be shown as the increased dollar value of the hypothetical investment
over the period. Cumulative total return calculations that do not include the
effect of the sales charge would be reduced if such charge were included.
Current yield is computed in accordance with a formula prescribed by
the SEC. Current yield is computed by dividing the net investment income per
share earned, over a 30 day period for which the yield is presented, by the
maximum offering price per share on the last day of the period, and annualize
the results. The formula used is:
Yield=2{(a-b/cd +1)6 -1}
Where a = dividends accrued during the period
b = expenses accrued for the period (net of reimbursements)
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
The Fund has no interest income. For the purpose of computing yield,
the Fund recognizes dividend income by accruing 1/360 of the stated annual
dividend rate of the security each day in the last 30 days that the security is
in the portfolio.
In computing yield, the Fund follows certain standardized accounting
practices specified by the SEC rules. These practices are not necessarily
consistent with those that the Fund uses to prepare its annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in the Fund's financial statements.
In reports or other communications to shareholders or in advertising
and sales literature, the Fund may compare its performance with that of other
mutual funds as reported by Lipper Analytical Services, Inc. ("Lipper"),
Morningstar, Inc. ("MORNINGSTAR"), Wiesenberger Investment Companies Services
("WIESENBERGER") and CDA Investment Technologies, Inc. ("CDA"), or similar
independent services which monitor the performance of mutual funds, or other
industry or financial publications such as Barron's, Changing Times, Forbes and
Money Magazine. Performance comparisons by these indexes, services or
publications may rank mutual funds over different periods of time by means of
aggregate, average, year by year, or other types of total return and performance
figures. The Fund may use comparative performance as computed in a ranking by
these or other independent services. Any given performance quotation or
performance comparison should not be considered as representative of the
performance of the Fund for any future period.
B-4
<PAGE>
The Fund may also compare themselves to the Consumer Price Index, a
widely recognized measure of inflation, and to other indexes and averages such
as, the Dow Jones Industrials, Standard & Poor's 500 Composite Stock Price
Index, Wilshire 5000, Russell 2000, Dow Jones Utilities, Nasdaq Composite, New
York Stock Exchange Composite and Ibbotson Common Stocks.
The composition of these indexes or averages differs from that of the
Fund. Comparison of the Fund to an alternative investment should be made with
consideration of the differences in features and expected performance of the
investments.
All of the indexes and averages noted above will be obtained from the
indicated sources or reporting services, which the Trust believes to be
generally accurate. The Fund may also note its mention or recognition in other
newspapers, magazines or media from time to time. However, the Trust assumes no
responsibility for the accuracy of such data.
MANAGEMENT OF THE FUND
The management of the Trust, including general supervision of the
duties performed for the Fund under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The number of trustees of the Trust is
fixed at 5, 2 of whom are "interested persons" (as the term "INTERESTED PERSONS"
is defined in the Investment Company Act of 1940) and 3 of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk. In addition, Ms.
Hussain, noted below as an interested person of the Trust, is also the daughter
of Qamaruddin Ali Yar Khan.
B-5
<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
---------------- --- ---------- ----------------------
<S> <C> <C> <C>
Qamaruddin Ali Yar Khan* 55 Chairman, President and President, Director, and
1553 Bloomingdale Road, Trustee shareholder of Income Achievers,
Suite #1000 Inc. (since its inception in 1995
Glendale Heights, IL 60139 to present); Controller of
Sonoscan, Inc. (manufacturer of
ultrasonic testing equipment)
(since 1990 to present) and
manager of Sonoscan's accounting
department (1987-1990); and owner
of Glenside Accounting & Tax
Services (1989-1998).
Sharmeen F. Hussain* 28 Treasurer, Trustee Certified Public Accountant, Data
253 East Delaware Place Base Manager (1993 to 1996);
Suite #21F Consultant for Peoples Soft
Chicago, IL 60611 (software company) (1996 to
present).
B-6
<PAGE>
POSITION AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
---------------- --- ---------- ----------------------
M. A. Rahman Khan 62 Trustee President and Owner of Management
3705 Briar Lane Systems Ltd. (since 1985 to
Hazel Crest, IL 60429 present) (computer consulting
organization); Professor of
Computer Science at City Colleges
of Chicago (since September,
1990 to present).
Syed Shamshad Hussain 64 Trustee Managing Director of IQRA
1046 Longford Road International Education Foundation
Bartlett, IL 60103 (since 1995 to present) (publisher
of Islamic religious books);
Manager at All State Insurance
Company (from 1968 to 1994).
Syed K. Raheemullah 52 Trustee Member of the technical staff for
25 W. 181 Salem Lucent Technologies (since 1986 to
Naperville, IL 60540 present) (manufacturer of
telephone equipment).
</TABLE>
B-7
<PAGE>
Although the Board of Trustees has authority to establish an Executive
Committee with the power to act on behalf of the Board between meetings and to
exercise all powers of the Trustees in the management of the Trust, no Executive
Committee has been established at this time.
The following table sets forth estimated compensation to be paid by the
Trust to each of the trustees who are not designated "interested persons" during
the Trust's first full fiscal year. The Trust has no retirement or pension
plans. The officers and trustees affiliated with the Income Achievers, Inc., the
Fund's adviser (the "ADVISER") serve without any compensation from the Trust.
B-8
<PAGE>
TOTAL**
ESTIMATED* COMPENSATION FROM
AGGREGATE COMPENSATION TRUST AND FUND COMPLEX
NAME OF TRUSTEE FROM THE TRUST PAID TO TRUSTEES
M.A. Rahman Khan $400 $400
Syed Shamshad Hussain $400 $400
Syed K. Raheemullah $400 $400
* The estimated compensation to be paid by the Trust to the independent
trustees for the current fiscal year.
** The Fund is the only investment company in the fund complex and the
Independent Trustees serve only as trustees for the Fund.
Each trustee who is not affiliated with the Adviser receives $100 per day plus
expenses for attendance at all meetings held on a day on which a regularly
scheduled board meeting is held and $50 per day plus expenses for attendance by
telephone at a meeting held on each day on which no regular board meeting is
held. The Trust requires no employees other than its officers, all of whom are
compensated by Income Achievers, Inc.
PRINCIPAL HOLDERS OF SECURITIES
As of [ ], [ ] owned all of the outstanding shares
of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Adviser
Income Achievers, Inc. acts as adviser to the Fund, with responsibility
for the overall management of the Fund. Its address is 1553 Bloomingdale Road,
Suite #1000, Glendale Heights, IL 60137. Pursuant to its Investment Management
Agreement, Income Achievers provides investment advisory and administrative
services for the Fund. In performing its duties, the Adviser will also determine
if the securities are in accordance with Islamic principles. Subject to the
policies the Board of Trustees may determine, the Adviser makes investment
decisions on behalf of the Fund, makes available research and any statistical
data therewith, and supervises the acquisition and disposition of investments by
the Fund, including the selection of broker-dealers to carry out portfolio
transactions. The Adviser will permit any of its officers and directors to serve
without compensation from the Fund as trustees or officers of the Trust if
elected to such positions.
B-9
<PAGE>
Qamaruddin Ali Yar Khan, Chairman, President and a trustee of the
Trust, is also President and majority shareholder of the Adviser. Accordingly,
the Adviser is controlled by Mr. Khan by virtue of his stock ownership.
In addition to the advisory services noted above, the Adviser will also
provide certain administrative services to the Trust, subject to the supervision
of the Board of Trustees and the terms of the Investment Management Agreement.
Under the Investment Management Agreement, the Adviser will provide to the Trust
facilities, equipment, statistical and research data, clerical, accounting and
bookkeeping services, internal auditing and legal services, and personnel to
carry out all management services required for operation of the business and
affairs of the Fund other than those services performed by the Trust's
distributor, custodian, transfer agent and administrator, accountant, and those
services normally performed by the Trust's counsel and auditors. The Adviser at
its own expense shall furnish all executive and other personnel, office space,
and office facilities required to render the investment management and
administrative services set forth in the Investment Management Agreement. Unless
expressly assumed by the Adviser, the Adviser shall not be obligated to pay any
costs or expenses incidental to the organization, operations or business of the
Trust. For its services, the Fund will pay the Adviser monthly a fee at the
annual rate of .8 of 1% of the Fund's average daily net assets. In addition to
the fee, the Fund bears all of its other expenses, including but not limited to,
telephone and other communications facilities, a pro rata portion of salary,
fees and expenses (including legal fees) of those trustees, officers and
employees of the Fund who are not officers, directors or employees of the
Adviser; interest expenses; fees and expenses of the custodian, transfer agent
and administrator; taxes and government fees; brokerage commissions and other
expenses incurred in acquiring or disposing of portfolio securities; expenses of
registering and qualifying shares for sale with the SEC and state securities
commissions; accounting costs (including those provided by the Adviser), legal
costs; insurance premiums; expenses of maintaining the Fund's legal existence
and of shareholders' meetings; expenses of preparation and distribution to
existing shareholders of reports, proxies and prospectuses; and fees and
expenses of membership in industry organizations. For the first few years of the
Fund's operations, the Adviser may bear some of these expenses at its own
discretion.
The Investment Management Agreement will continue in effect for a
period of more than two years only so long as it is approved at least annually
by the Trust's Board of Trustees or by a vote of the outstanding voting
securities of the Fund and in either case by a majority of the Trustees who are
not parties to the Agreement or interested persons of any such party. The
Agreement terminates automatically if it is assigned and may be terminated
without penalty by either party upon at least 60 days' written notice. The
Agreement provides that the Adviser shall not be liable for any loss sustained
by reason of the purchase, sale or retention of any security, if such
recommendation shall have been selected with due care and in good faith, except
for loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the Agreement.
Administrator
The administrator for the Fund is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds. Pursuant to an Administrative
Service Agreement with the Fund, the Administrator provides certain
administrative services necessary for the operations of the Fund, subject to
the supervision of the Fund's Board of Trustees.
Under the Administrative Service Agreement, the Administrator provides
the Fund with the necessary office space, communication facilities and personnel
to perform certain administrative services including: (i) monitoring all
regulatory and prospectus restrictions for compliance; (ii) preparing and
coordinating the printing of semi-annual and annual financial statements; (iii)
preparing selected management reports for performance and compliance analyses as
may be agreed upon from time to time; (iv) preparing selected financial data
required for directors' meetings as may be agreed upon and coordinating the
agendas of such meetings with outside counsel; (v) determining the income and
capital gains available for distribution, calculating the distributions required
to meet regulatory, income and excise tax requirements, and preparing the Fund's
tax returns, each function to be reviewed by the Fund's independent public
accountants; (vi) preparing and maintaining the Fund's operating expense budget;
(vii) in conjunction with the Fund's outside counsel, preparing the Fund's
semi-annual reports, updating the financial sections of the Fund's prospectus,
statement of additional information, proxy statements and coordinating their
completion, and preparing an annual update to the Fund's 24f-2 filings; (viii)
monitoring the services of the Fund's custodian and other service providers to
the Fund; (ix) providing certain financial schedules, coordinating the Fund's
annual or SEC audit, and providing office facilities, as may be required; (x)
attending board or management meetings, if requested; and (xi) preparing and
filing any applications and reports as necessary to register or maintain the
Fund's registration under the securities or "Blue Sky" laws of the various
states selected by the Fund or its Distributor.
For the services rendered by the Administrator, the Fund pays the
Administrator a monthly fee based on the Fund's average net assets. The Fund
also pays the Administrator for any out-of-pocket expenses. These fees are set
forth in the Fund's prospectus under the section entitled "General
Information--Custodian, Administrator and Transfer Agent."
The Administrative Service Agreement shall remain in effect for three
years following its initial approval; however, the Agreement may be terminated
by the Fund or the Administrator upon 90 days' prior written notice. The
Administrative Service Agreement may also be assigned provided the non-assigning
party provides prior written consent. The Agreement provides that the
Administrator shall be held to the exercise of reasonable care in carrying out
the provisions of the Agreement, but shall be without liability to the Fund for
any action taken or omitted by it in good faith without gross negligence, bad
faith, willful misconduct or reckless disregard of its duties under the
Agreement.
Pursuant to a Fund Accounting Service Agreement, the Administrator also
provides the Fund with accounting services, including (i) daily computation of
the Fund's net asset value, (ii) maintenance of books and records required by
Rule 31a-1 of the Investment Company Act of 1940 and such other documents as may
be agreed upon; (iii) daily portfolio valuation and other standard operational
reports as requested; (iv) provide certain accounting data in connection with
the preparation of the Fund's semi-annual reports and financial statements, tax
returns, updating the financial information in its registration statement, and
proxy statements; and (v) provide facilities to accommodate annual or SEC
audits. For providing the accounting related services, the Fund pays the
Administrator a monthly fee based on the Fund's average net assets plus any
out-of-pocket expenses for such services. In addition to accounting services,
the Administrator also serves as the Fund's transfer and dividend paying agent.
B-10
<PAGE>
BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for
the Fund and for the placement of the Fund's securities business, the
negotiation of the commissions to be paid on brokered transactions, the prices
for principal trades in securities, and the allocation of portfolio brokerage
and principal business. It is the policy of the Adviser to seek the best
execution at the best security price available with respect to each transaction,
and with respect to brokered transactions, in light of the overall quality of
brokerage and research services provided to the respective Adviser and its
advisees. The best price to the Fund means the best net price without regard to
the mix between purchase or sale price and commission, if any. Portfolio
securities transactions will normally be effected through brokers on securities
exchanges. Purchases may also be made from underwriters, dealers, and, on
occasion, the issuers. Purchases and sales of portfolio securities through
brokers involve a commission to the broker. The purchase price of portfolio
securities purchased from an underwriter or dealer may include underwriting
commissions and dealer spreads. The Fund may pay mark-ups on principal
transactions. In selecting broker-dealers and in negotiating commissions, the
portfolio manager considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition. The Adviser may also
consider sales of a Fund's shares as a factor in the selection of broker-dealers
to execute portfolio transactions, subject to the policy of obtaining best price
and execution.
Section 28(e) of the Securities Exchange Act of 1934 ("SECTION 28(E)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services a
commission for effecting a transaction in excess of the amount of commission
another broker or dealer would have charged for effecting the transaction.
Brokerage and research services include (a) furnishing advice as to the value of
securities, the advisability of investing, purchasing or selling securities, and
the availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).
B-11
<PAGE>
In selecting brokers, the Adviser also considers investment and market
information and other research, such as economic, securities, financial and
performance measurement research, provided by such brokers, and the quality and
reliability of brokerage services, including execution capability, performance,
and financial responsibility. Accordingly, the commissions charged by any such
broker may be greater than the amount another firm might charge if the Adviser
determines in good faith that the amount of such commissions is reasonable in
relation to the value of the research information and brokerage services
provided by such broker to the Adviser or the Fund. The Adviser believes that
the research information received in this manner provides the Fund with benefits
by supplementing the research otherwise available to the Fund. The research
supplied, however, may or may not be of value or used in making investment
decisions for the Fund. Further, although as of the date of this Statement of
Additional Information the Adviser did not have any advisory accounts other than
the Fund, the Adviser may in the future advise other accounts. In such case, the
Adviser may use such research in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Fund. The Investment
Management Agreement provides that such higher commissions will not be paid by
the Fund unless the Adviser determines in good faith that the amount is
reasonable in relation to the services provided. The investment advisory fees
paid by the Fund to the Adviser under the Investment Management Agreement are
not reduced as a result of receipt by the Adviser of research services.
In addition, if the Adviser advises other accounts in the future, the
Adviser will seek to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund or with
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Fund. In making
such allocations between the Fund and any other advisory account, the main
factors considered by the Adviser are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment and the size of investment commitments
generally held.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
As described in the Prospectus, you may purchase shares of the Fund at
a price equal to their net asset value plus an up-front sales charge. For
information regarding the up-front sales charge, see "Summary of Fund Expenses"
and "How to Buy Fund Shares" in the Prospectus. Set forth is an example of the
method of computing the offering price of the shares of the Fund. The example
assumes a purchase on [__________________] of shares from the Fund at a price
based upon the net asset value of the shares.
Net Asset Value per share....................................................$
Per Share Sales Charge--3% of public offering price
(3.093% of net asset value).........................................$
Per Share Offering Price to the Public.......................................$
B-12
<PAGE>
Net asset value per share is determined by dividing the value of all
securities and other assets, less liabilities, by the number of shares
outstanding. The net asset value is determined for the Fund as of the close of
trading on the New York Stock Exchange (generally 4 p.m. New York time) on each
day the Exchange is open for trading. The Exchange is generally closed on: New
Year's Day, Washington's Birthday/President's Day, Good Friday, Memorial Day,
Independence Day (observance), Labor Day, Thanksgiving Day and Christmas
Holiday.
DISTRIBUTION OF SHARES
Income Achievers, the Fund's investment adviser, also acts as the
distributor of the shares of the Fund as provided by a distribution agreement
with the Trust (the "DISTRIBUTION AGREEMENT"). Pursuant to the Distribution
Agreement, the Trust appointed Income Achievers to be its agent for the
distribution of the Fund's shares on a continuous offering basis. Income
Achievers has agreed to use its "best efforts" to distribute the Fund's shares,
but has not committed to purchase or sell any specific number of shares. The
Distribution Agreement for the Fund shall continue in effect for a period of
more than two years only so long as its continuance is approved annually by the
vote of the Trustees at a meeting called for such purpose. The Distribution
Agreement will automatically terminate in the event of its assignment. Pursuant
to the Distribution Agreement, Income Achievers may sell the Fund's shares
directly to retail customers or to or through brokers, dealers, banks, or other
qualified financial intermediaries. Under the Distribution Agreement, Income
Achievers at its own expense will finance certain activities incident to the
sale and distribution of the Fund's shares including, printing and distributing
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of advertising and sales literature
(except such expenses shall not include expenses incurred by the Fund in
connection with the preparation, printing and distribution of any report or
other communication to shareholders in their capacity as such), and giving of
concessions to any dealers. Income Achievers receives for its services the
excess, if any, of the sales price of a Fund's shares less the net asset value
of those shares, and may reallow a majority or all of such amounts to any
dealers who sold the shares.
TAX STATUS
The following discussion of federal income tax matters is based upon
the advice of Chapman and Cutler, counsel to the Trust.
As described in the Prospectus, the Fund intends to qualify under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "CODE") for
tax treatment as a regulated investment company. In order to qualify as a
regulated investment company, the Fund (i) must elect to be treated as a
regulated investment company and (ii) for each taxable year thereafter, must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, the Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options, futures, or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% GROSS
B-13
<PAGE>
INCOME TEST"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of the Fund's total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to
federal income tax in any taxable year for which it distributes at least 90% of
the sum of (i) its "investment company taxable income" (without regard to its
net capital gain, I.E., the excess of its net long-term capital gain over its
short-term capital loss) and (ii) its net tax-exempt interest (the excess of its
gross tax-exempt interest income over certain disallowed deductions). In
addition, to the extent the Fund timely distributes to shareholders at least 98%
of its taxable income (including any net capital gain), it will not be subject
to the 4% excise tax on certain undistributed income of regulated investment
companies. The Fund intends to make timely distributions in compliance with
these requirements and consequently it is anticipated that they generally will
not be required to pay the excise tax. The Fund may retain for investment its
net capital gain (which consists of the excess of its net long-term capital gain
over its net short-term capital loss). However, if the Fund retains any net
capital gain or any investment company taxable income, it will be subject to
federal income tax at regular corporate rates on the amount retained. If the
Fund retains any net capital gain, the Fund may designate the retained amount as
undistributed capital gains in a notice to its shareholders who, if subject to
federal income tax on long-term capital gains, (i) will be required to include
in income for federal income tax purposes, as long-term capital gain, their
shares of such undistributed amount, and (ii) will be entitled to credit their
proportionate shares of the tax paid by the Fund against their federal income
tax liabilities if any, and to claim refunds to the extent the credit exceeds
such liabilities. For federal income tax purposes, the tax basis of shares owned
by a shareholder of the Fund will be increased by an amount equal to the
difference between the amount of such includable gains and the tax deemed paid
by such shareholders in respect of such shares. The Fund intends to distribute
at least annually to its shareholders all or substantially all of its investment
company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain, to elect
(unless it has made a taxable year election for excise tax purposes as discussed
below) to treat all or part of any net capital loss, any net long-term capital
loss or any net foreign currency loss incurred after October 31 as if they had
been incurred in the succeeding year.
B-14
<PAGE>
If the Fund engages in hedging transactions involving financial futures
and options, these transactions will be subject to special tax rule, the effect
of which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Prior to purchasing shares in the Fund, a shareholder should carefully
consider the impact of dividends or distributions which are expected to be or
have been declared, but not paid. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution and will be subject to federal income tax to the extent it is a
distribution of ordinary income or capital gain.
In any taxable year of the Fund, distributions from the Fund, other
than distributions which are designated as capital gain dividends, will to the
extent of the earnings and profits on such Fund constitute dividends for Federal
income tax purposes which are taxable as ordinary income to shareholders. To the
extent that distributions to a shareholder in any year exceed the Fund's current
and accumulated earnings and profits, they will be treated as a return of
capital and will reduce the shareholder's basis in his or her shares and, to the
extent that they exceed his or her basis, will be treated as gain from the sale
of such shares as discussed below. Distributions of the Fund's net capital gain
which are properly designated as capital gain dividends by the Fund will be
taxable to the shareholders as long-term capital gain, regardless of the length
of time the shares have been held by a shareholder. Distributions will be taxed
in the manner described (I.E., as ordinary income, long-term capital gain,
return of capital or exempt-interest dividends) even if reinvested in additional
shares of the Fund.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received by
the shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of the Fund normally will
result in capital gain or loss to the shareholders. Generally, a shareholder's
gain or loss will be long-term gain or loss if the shares have been held for
more than one year.
B-15
<PAGE>
Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. The Internal Revenue
Service Restructuring and Reform Act of 1998 (the "1998 TAX ACT") provides that
for taxpayers other than corporations, net capital gain (which is defined as net
long-term capital gain over net short-term capital loss for the taxable year)
realized from property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain tax payers in the
lowest tax bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period for the
asset is one year or less. The date on which a share is acquired (I.E., the
"TRADE DATE") is excluded for purposes of determining the holding period of the
share. Capital gains realized from assets held for one year or less are taxed at
the same rates as ordinary income. In addition, please note that capital gains
may be recharacterized as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Shareholders and prospective investors should
consult with their tax advisers regarding the potential effect of this provision
on their investment in shares of the Fund.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses,
will be deductible by individuals only to the extent they exceed 2% of adjusted
gross income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of the Fund
are held by fewer than 500 persons, additional taxable income may be realized by
the individual (and other noncorporate) shareholders in excess of the
distributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of the Fund
cannot be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to the
extent shares of the Fund or another fund are subsequently acquired without
payment of a sales load or with the payment of a reduced sales load pursuant to
the reinvestment or exchange privilege. Any disregarded portion of such load
will result in an increase in the shareholder's tax basis in the shares
subsequently acquired. Moreover, losses recognized by a shareholder on the
redemption or exchange of shares of the Fund held for six months or less are
disallowed to the extent of any distribution of exempt-interest dividends
received with respect to such shares and, if not disallowed, such losses are
treated as long-term capital losses to the extent of any distributions of
long-term capital gains made with respect to such shares. In addition, no loss
will be allowed on the redemption or exchange of shares of the Fund if the
shareholder purchases other shares of such Fund (whether through reinvestment of
distributions or otherwise) or the shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such redemption or exchange. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares acquired.
B-16
<PAGE>
If in any year the Fund should fail to qualify under Subchapter M for
tax treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its shareholders would be taxable to shareholders as ordinary dividend income
for federal income tax purposes to the extent of the Fund's available earnings
and profits.
The Fund is required in certain circumstances to withhold 31% of
taxable dividends and certain other payments paid to non-corporate holders of
shares who have not furnished to the Fund their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
Shareholders who are non-resident aliens are subject to U.S.
withholding tax on ordinary income dividends (and, in certain cases, capital
gains dividends) at a rate of 30% or such lower rate as prescribed by an
applicable tax treaty.
A corporate shareholder may be entitled to a 70% dividends received
deduction with respect to any portion of such shareholder's ordinary income
dividends which are attributable to dividends received by the Fund on certain
portfolio securities. This rule does not apply to certain corporate
shareholders, such as "S" corporations, which are not eligible for the deduction
because of their special characteristics and also does not apply for purposes of
special taxes such as the accumulated earnings tax and the personal holding
corporation tax. The Fund will designate the portion of any taxable dividend
which is eligible for this deduction. However, a corporate shareholder should be
aware that Sections 246 and 246A of the Code impose additional limitations on
the eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore shares of the Fund)
must generally be held at least 46 days (as determined under Section 246(c) of
the Code). Regulations have been issued which address special rules that must be
considered in determining whether the 46 days holding requirement is met.
Moreover, the allowable percentage of the deduction will generally be reduced
from 70% if a corporate shareholder owns shares of the Fund the financing of
which is directly attributable to indebtedness incurred by such corporation. It
should be noted that various legislative proposals that would affect the
dividends received deduction have been introduced. To the extent dividends
received by the Fund are attributable to foreign corporations, a corporate
shareholder will not be entitled to the dividends received deduction with
respect to its share of such foreign dividends since the dividends received
deduction is generally available only with respect to dividends paid by domestic
corporations. It should be noted that payments to the Fund of dividends on
portfolio securities that are attributable to foreign corporations may be
subject to foreign withholding taxes. Corporate shareholders should consult with
their tax advisers with respect to the limitations on, and possible
modifications to, the dividends received deduction.
B-17
<PAGE>
The foregoing is a general and abbreviated summary of the provisions of
the Code and Treasury Regulations presently in effect as they directly govern
the federal income taxation of the Fund and their shareholders and relates only
to the federal income tax status of the Fund and to the tax treatment of
distributions by the Fund to United States shareholders. For complete
provisions, reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Shareholders are advised to consult their own
tax advisers for more detailed information concerning the federal taxation of
the Fund and the income tax consequences to their shareholders, as well as with
respect to foreign, state and local tax consequences of ownership of Fund
shares.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Firstar Trust Company located at 615 E. Michigan Street, Milwaukee,
Wisconsin 53201 is the custodian of the Fund. As custodian for the Fund, the
bank holds in custody all securities and cash, settles for all securities
transactions, receives money from sale of shares and on order of the Fund pays
the authorized expenses of the Fund. When Fund shares are redeemed by investors,
the proceeds are paid to the shareowner from an account at the custodian bank.
Arthur Andersen LLP, 33 West Monroe Street, Chicago, Illinois 60603,
are the independent accountants for the Trust and the Fund. The accountants will
conduct an annual audit of the Fund and assist the Adviser in any accounting
matters throughout the year.
FINANCIAL STATEMENTS
To be filed by pre-effective amendment.
B-18
<PAGE>
PART C -- OTHER INFORMATION
Item 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in the Prospectus:
Not Applicable
Included in Statement of Additional Information:
Statements of Net Assets, [_________], for each Fund.
Report of Independent Public Accountants dated [__________].
(b) Exhibits:
1(a). Declaration of Trust of Registrant.(1)
1(b). Certificate of Establishment and Designation of Series.1
2. Bylaws of Registrant.(1)
3. Not Applicable.
4. Not Applicable.
5(a). Form of Investment Management Agreement between Registrant and Income
Achievers, Inc. (2)
6(a). Form of Distribution Agreement between Registrant and Income
Achievers, Inc.(1)
7. Not Applicable.
8. Form of Custodian Agreement between Registrant and Firstar Trust
Company.(1)
<PAGE>
9(a). Form of Transfer Agency Agreement. *
9(b). Form of Administrative Service Agreement.*
10(a). Opinion and consent of Chapman and Cutler, dated [___________].*
11. Consent of Independent Public Accountants.*
12. Not Applicable.
13. Subscription Agreement with ___________.*
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial Data Schedule.*
18. Not applicable.
*To be filed by pre-effective amendment.
(1) Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant on January 22, 1997.
(2) Incorporated by reference to pre-effective amendment no. 1 filed on Form
N-1A for Registrant on July 22, 1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of [________________] the following information is furnished for the
Trust:
-2-
<PAGE>
(1) (2)
Title of Series Number of Record Holders
Islamia Income Fund [_________]
ITEM 27. INDEMNIFICATION
Section 4 of Article XII of Registrant's Declaration of Trust provides
as follows:
Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "COVERED PERSON"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director, officer, employee or agent and
against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by
reason of a final adjudication by the court or other body before which
the proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office;
(b) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a) or (b))
and resulting in a payment by a Covered Person, unless there has been
either a determination that such Covered Person did not engage in
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office by the court or
other body approving the settlement or other disposition or a
reasonable determination, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that he did not engage in
such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (PROVIDED that a majority of the Disinterested Trustees then
in office act on the matter); or
(ii) by written opinion of independent legal counsel.
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The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding subject to a claim for indemnification under this
Section 4 shall be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 4, PROVIDED that either:
(a) such undertaking is secured by a surety bond or some
other appropriate security or the Trust shall be insured against losses
arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (PROVIDED that a majority of the Disinterested Trustees then in
office act on the matter) or independent legal counsel in a written
opinion shall determine, based upon a review of the readily available
facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is
not an Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the word "liability" and "expenses" shall include without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
The trustees and officers of the Registrant are covered by Investment
Trust Errors and Omission policies in the aggregate amount of $[____________]
(with a maximum deductible of $[____________]) against liability and expenses of
claims of wrongful acts arising out of their position with the Registrant,
except for matters which involved willful acts, bad faith, gross negligence and
willful disregard of duty (I.E., where the insured did not act in good faith for
a purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to the officers, trustees or controlling persons of
the Registrant pursuant to the Declaration of Trust of the Registrant or
otherwise, the Registrant has been advised that in the opinion of the Securities
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<PAGE>
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The following table sets forth any other business, profession, vocation
or employment of a substantial nature in which any director or officer of the
Adviser has engaged during the last two years for his account or in the capacity
of director, officer, employee, partner or trustee.
RELATIONSHIP WITH
NAME AND ADDRESS POSITION WITH ADVISER OTHER BUSINESSES
- ---------------- --------------------- ----------------
Qamaruddin Ali Yar Khan President and sole Chairman, President and
1553 Bloomingdale Road shareholder Trustee of the Islamia
Suite #1000 Group of Funds; Controller
Glendale Heights, IL 60137 of Sonoscan, Inc.; President
and owner of Glenside
Accounting and Tax Services.
Sabera Khan Secretary Lab Manager of Vaughan's
1553 Bloomingdale Road Seed Company.
Suite #1000
Glendale Heights, IL 60137
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The Adviser acts as investment adviser and distributor to the Fund.
The Adviser does not presently act as investment adviser or distributor to any
other investment company.
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(b)
POSITION WITH POSITIONS AND OFFICES
NAME AND ADDRESS UNDERWRITER WITH REGISTRANT
- ---------------- ----------- ---------------------
Qamaruddin Ali Yar Khan President and sole Chairman, President and a
1553 Bloomingdale Road shareholder Trustee of the Islamia Group
Suite #1000 of Funds.
Glendale Heights, IL 60137
Sabera Khan Secretary None.
1553 Bloomingdale Road
Suite #1000
Glendale Heights, IL 60137
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Income Achievers, Inc., 1553 Bloomingdale Road, Suite #1000, Glendale
Heights, IL 60137, maintains the Declaration of Trust, By-Laws, minutes of
trustees and shareholder meetings and contracts of the Registrant and all
advisory material of the investment adviser.
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin
53201, maintains all general and subsidiary ledgers, journals, trial balances,
records of portfolio purchases and sales and all other required records not
maintained by Income Achievers, Inc. or American Data Services, Inc.
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American Data Services, Inc., Hauppauge Corporate Center, 150 Motor
Parkway, Suite 109, Hauppauge, New York 11788-0132, maintains all the required
records in its capacity as administrator and transfer and dividend paying
agent for the Registrant.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
-7-
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
pre-effective amendment no. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Glendale
Heights, State of Illinois, on the 16th day of June, 1999.
ISLAMIA GROUP OF FUNDS
By /s/ Qamaruddin Ali Yar Khan
----------------------------
----------------------------
Qamaruddin Ali Yar Khan,
President
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, this pre-effective amendment no. 2 to the
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Qamaruddin Ali Yar Khan Trustee, Chairman of the June 16, 1999
- ---------------------------
Qamaruddin Ali Yar Khan Board, and President
/s/ Sharmeen F. Hussain Trustee, Treasurer June 16, 1999
- ---------------------------
Sharmeen F. Hussain
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED PAGE
NUMBER EXHIBIT
1(a). Declaration of Trust of Registrant.(1)
1(b). Certificate of Establishment and Designation of Series.(1)
2. Bylaws of Registrant.(1)
3. Not Applicable.
4. Not Applicable.
5(a). Form of Investment Management Agreement between Registrant and
Income Achievers, Inc.(2)
6(a). Form of Distribution Agreement between Registrant and Income
Achievers, Inc.(1)
7. Not Applicable.
8. Form of Custodian Agreement between Registrant and
Firstar Trust Company.(1)
9(a). Form of Transfer Agency Agreement.*
9(b). Form of Administrative Service Agreement.*
10(a). Opinion and consent of Chapman and Cutler, dated _______.*
11. Consent of Independent Public Accountants.*
12. Not Applicable.
<PAGE>
13. Subscription Agreement with ______________.*
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial Data Schedule.*
18. Not Applicable.
*To be filed by pre-effective amendment.
(1) Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant on January 22, 1997.
(2) Incorporated by reference to pre-effective amendment no. 1 filed on Form
N-1A for Registrant on July 22, 1997.
