THE WORLD FUNDS
1500 Forest Avenue, Suite 223 * P. O. Box 8687 * Richmond, Virginia 23229
(804) 285-8211 * (800) 527-9525 * Fax (804) 285-8251
March 4, 2000
FILED VIA EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Reference: The World Funds, Inc.
File Number 333-29289
Filed Pursuant to Rule 497(e)
Gentlemen:
Transmitted herewith for electronic filing on behalf of The World Funds, Inc.
(the "Company") please find enclosed, pursuant to Rule 497(e) under the
Securities Act of 1933, as amended, a copy of the Statement of
Additional Information of the GenomicsFund.com series of the Company dated
March 1, 2000.
Should you have any questions regarding the filing of such documents, please
call the undersigned.
Sincerely,
/s/ John Pasco, III
- --------------------
John Pasco, III
enclosures
<PAGE>
GenomicsFund.com
a series of
THE WORLD FUNDS, INC.
(THE "COMPANY")
1500 FOREST AVENUE, SUITE 223 RICHMOND, VA 23229
1-800-527-9525
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the current Prospectus of GenomicsFund.com (the
"Fund") dated March 1, 2000. The Prospectus may be obtained by writing to The
World Funds, Inc. 1500 Forest Avenue, Suite 223, Richmond, VA 23229 or by
calling 1-800-527-9525.
The date of this SAI is March 1, 2000.
<PAGE>
TABLE OF CONTENTS PAGE NUMBER
GENERAL INFORMATION 1
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS 1
INVESTMENT OBJECTIVES 1
STRATEGIES AND RISKS 1
INVESTMENT PROGRAMS 1
DEPOSITARY RECEIPTS 1
REPURCHASE AGREEMENTS 1
DEBT SECURITIES 2
U.S. GOVERNMENT SECURITIES 2
CONVERTIBLE SECURITIES 2
WARRANTS 2
ILLIQUID SECURITIES 3
RESTRICTED SECURITIES 3
OTHER SECURITIES 3
INVESTMENT RESTRICTIONS 3
FUNDAMENTAL POLICIES OR RESTRICTIONS 3
NON-FUNDAMENTAL POLICIES OR RESTRICTIONS 4
MANAGEMENT OF THE COMPANY 4
PRINCIPAL HOLDERS OF SECURITIES 7
INVESTMENT ADVISER AND ADVISORY AGREEMENTS 7
MANAGEMENT-RELATED SERVICES 8
ADMINISTRATION 8
CUSTODIAN 8
ACCOUNTING SERVICES 8
TRANSFER AGENT 8
DISTRIBUTOR 9
INDEPENDENT ACCOUNTANTS 9
PORTFOLIO TRANSACTIONS 9
PORTFOLIO TURNOVER 10
CAPITAL STOCK AND DIVIDENDS 10
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 10
DISTRIBUTION AND TAXES 12
INVESTMENT PERFORMANCE 14
FINANCIAL INFORMATION 15
<PAGE>
GENERAL INFORMATION
The World Funds, Inc. (the "Company") was organized under the laws of the State
of Maryland in May, 1997. The Company is an open-end management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act") commonly known as a "mutual fund". This SAI relates to
GenomicsFund.com (the "Fund"). The Fund is a separate investment portfolio or
series of the Company. See "Capital Stock and Dividends" in this SAI. The Fund
is "non-diversified" as that term is defined in the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The following information supplements the discussion of the Fund's investment
objectives and policies. The Fund's investment objective and fundamental
investment restrictions may not be changed without approval by vote of a
majority of the outstanding voting shares of the Fund. As used in this SAI,
"majority of outstanding voting shares" means the lesser of (1) 67% of the
voting shares of the Fund represented at a meeting of shareholders at which the
holders of 50% or more of the shares of the Fund are represented; or (2) more
than 50% of the outstanding voting shares of the Fund. The investment programs,
restrictions and the operating policies of the Fund that are not fundamental
policies can be changed by the Board of Directors of the Company (the
"Directors") without shareholder approval.
INVESTMENT OBJECTIVES
The Fund's investment objective is capital appreciation. All investments entail
some market and other risks and there is no assurance that the Fund will achieve
its investment objective. You should not rely on an investment in the Fund as a
complete investment program.
STRATEGIES AND RISKS
Under normal circumstances, the Fund invests primarily in equity securities and
securities convertible into equity securities.
The following discussion of investment techniques and instruments supplements,
and should be read in conjunction with, the investment information in the Fund's
Prospectus. In seeking to meet its investment objective, the Fund may invest in
any type of security whose characteristics are consistent with its investment
program described below.
INVESTMENT PROGRAMS
Depositary Receipts: The Fund may invest on a global basis to take advantage of
investment opportunities both within the U.S. and other countries. The Fund may
buy foreign securities directly in their principal markets or indirectly through
the use of depositary receipts. The Fund may invest in sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDR's),
and other similar depositary receipts. ADRs are issued by an American bank or
trust company and evidence ownership of underlying securities of a foreign
company. EDRs are issued in Europe, usually by foreign banks, and evidence
ownership of either foreign or domestic underlying securities. The foreign
country may withhold taxes on dividends or distributions paid on the securities
underlying the ADRs and EDRs, thereby reducing the dividend or distribution
amount received by the Fund.
Unsponsored ADRs and EDRs are issued without the participation of the issuer of
the underlying securities. As a result, information concerning the issuer may
not be as current as for sponsored ADRs and EDRs. Holders of unsponsored ADRs
generally bear all the costs of the ADR facilities. The depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored ADR.
Repurchase Agreements: As a means of earning income for periods as short as
overnight, the Fund may enter into repurchase agreements that are collateralized
by U.S. Government Securities. Under a repurchase agreement, a fund acquires a
security, subject to the seller's agreement to repurchase that security at a
specified time and price. The Fund considers a purchase of securities under
repurchase agreements to be a loan by the Fund. The Investment Adviser monitors
the value of the collateral to ensure that its value always equals or exceeds
the repurchase price and also monitors the financial condition of the seller of
the repurchase agreement. If the seller becomes insolvent, the ability to
dispose of the securities held as collateral may be impaired and the Fund may
incur extra costs. Repurchase agreements for periods in excess of seven days may
be deemed to be illiquid.
Debt Securities: The Fund may invest in investment grade debt securities; which
are securities rated Baa or higher by Moody's Investors Service, Inc.
("Moody's"), or BBB or higher by Standard & Poor's Ratings Group ("S&P") at the
time of purchase or, unrated securities which xGENx. LLC(the "Investment
Adviser") believes to be of comparable quality. The Fund does not currently
intend to invest more than 5% of its total assets in securities that are below
investment grade or that are unrated. Securities rated as Baa or BBB are
generally regarded as having adequate capacity to pay interest and repay
principal.
Debt securities consist of bonds, notes, government and government agency
securities, zero coupon securities, convertible bonds, asset-backed and
mortgage-backed securities, and other debt securities whose purchase is
consistent with the Fund's investment objective. The Fund's investments may
include international bonds that are denominated in foreign currencies,
including the European Currency Unit or "Euro". International bonds are defined
as bonds issued in countries other than the United States. The Fund's
investments may include debt securities issued or guaranteed by supranational
organizations, corporate debt securities, bank or holding company debt
securities.
U.S. Government Securities: The Fund may invest in U.S. Government Securities
that are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, and securities guaranteed by the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the United
States; others, such as those of the Federal Home Loan Banks, are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those
of the Federal National Mortgage Association ("FNMA"), are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality.
Convertible Securities: The Fund may invest in convertible securities.
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are convertible either at a stated price or a stated rate (that is,
for a specific number of shares of common stock or other security). As with
other fixed income securities, the price of a convertible security generally
varies inversely with interest rates. While providing a fixed income stream, a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so they may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the price of a convertible security tends to rise as a
reflection of the value of the underlying common stock. To obtain such an
opportunity for a higher yield or capital appreciation, the Fund may have to pay
more for a convertible security than the value of the underlying common stock.
The Fund will generally hold common stock it acquires upon conversion of a
convertible security for so long as the Investment Adviser anticipates such
stock will provide the Fund with opportunities that are consistent with its
investment objective and policies.
Warrants: The value of warrants is derived solely from capital appreciation of
the underlying equity securities. Warrants have no voting rights, pay no
dividends and have no rights with respect to the assets of the corporation
issuing them. Warrants are options to purchase equity securities at a specific
price for a specific period of time. If the Fund does not exercise or dispose of
a warrant prior to its expiration, it will expire worthless. They do not
represent ownership of the securities, but only the right to buy them. Warrants
differ from call options in that warrants are issued by the underlying
corporation, whereas call options may be written by anyone.
Illiquid Securities: The Fund may invest up to 15% of its net assets in illiquid
securities. The term "illiquid securities" means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities. Illiquid
securities include generally, among other things, certain written
over-the-counter options, securities or other liquid assets as cover for such
options, repurchase agreements with maturities in excess of seven days, certain
loan participation interests and other securities whose disposition is
restricted under the federal securities laws.
Restricted Securities: The Fund may invest in restricted securities. Generally,
"restricted securities" are securities which have legal or contractual
restrictions on their resale. In some cases, these legal or contractual
restrictions may impair the liquidity of a restricted security; in others, the
legal or contractual restrictions may not have a negative effect on the
liquidity of the security. Restricted securities which are deemed by the
Investment Adviser to be illiquid will be included in the Fund's policy which
limits investments in illiquid securities.
Other Securities: The Board of Directors may, in the future, authorize the Fund
to invest in securities other than those listed in this SAI and in the
Prospectus, provided such investments would be consistent with the Fund's
investment objective and would not violate the Fund's fundamental investment
policies or restrictions.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies and Restrictions: The Funds have adopted the
following fundamental investment restrictions which cannot be changed without
approval by vote of a "majority of the outstanding voting securities" of each
Fund. As a matter of fundamental policy, each Fund may not:
(1) Invest in companies for the purpose of exercising management or control;
(2) Invest in securities of other investment companies except by
purchase in the open market involving only customary
broker's commissions, or as part of a merger, consolidation,
or acquisition of assets;
(3) Purchase or sell commodities or commodity contracts;
(4) Invest in interests in oil, gas, or other mineral exploration or development
programs;
(5) Purchase securities on margin, except for use of short-term credits as
necessary for the clearance of purchase of portfolio securities;
(6) Issue senior securities, (except the Funds may engage in transactions such
as those permitted by SEC release IC-10666);
(7) Act as an underwriter of securities of other issuers, except that each
Fund may invest up to 10% of the value of its total assets (at the time of
investment) in portfolio securities which the Fund might not be free to
sell to the public without registration of such securities under the
Securities Act of 1933, as amended (the "1933 Act"), or any foreign law
restricting distribution of securities in a country of a foreign issuer;
(8) Participate on a joint or a joint and several basis in any securities
trading account;
(9) Engage in short sales;
(10)Purchase or sell real estate, provided that liquid securities of companies
which deal in real estate or interests therein would not be deemed
to be an investment in real estate;
(11)Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result, more than 10% of the outstanding voting securities of any
issuer would be held by the Fund; and
(12)Make loans.
(13)Except as specified below, the Funds may only borrow money for temporary
or emergency purposes and then only in an amount not in excess of 5% of
the lower of value or cost of its total assets, in which case the Fund may
pledge, mortgage or hypothecate any of its assets as security for such
borrowing but not to an extent greater than 5% of its total assets. A Fund
may borrow money to avoid the untimely disposition of assets to meet
redemptions, in an amount up to 33 1/3% of the value of its assets,
provided that the Fund maintains asset coverage of 300% in connection with
borrowings, and the Fund does not make other investments while such
borrowings are outstanding.
(14)Concentrate its investments in any industry, except that the Fund may
concentrate in securities of companies which are genomic and
genomic-related companies as described in the prospectus.
Non-Fundamental Policies and Restrictions: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus and elsewhere in the SAI, the
Funds will be subject to the following investment restrictions, which are
considered non-fundamental and may be changed by the Board of Directors without
shareholder approval.
As a matter of non-fundamental policy, a Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities;
(2) Engage in arbitrage transactions; or
(3) Purchase or sell options.
In applying its investment policies and restrictions:
(1) A percentage restriction on investment or utilization of assets is
determined at the time an investment is made. A later change in percentage
resulting from changes in the value or the total cost of a Fund's assets
will not be considered a violation of the restriction; and
(2) Investments in certain categories of companies will not be considered to
be investments in a particular industry. Examples of these categories
include:
(i) financial service companies will be classified according to the end
users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry;
(ii) technology companies will be divided according to
their products and services, for example,
hardware, software, information services and
outsourcing, or telecommunications will each be a
separate industry; and
(iii)utility companies will be divided according to their services, for
example, gas, gas transmission, electric and telephone will each be
considered a separate industry.
MANAGEMENT OF THE COMPANY
Directors and Officers:
The Company is governed by a Board of Directors (the "Directors"), which is
responsible for protecting the interest of shareholders. The Directors are
experienced business persons who meet throughout the year to oversee the
Company's activities, review contractual arrangements with companies that
provide services to the Fund, and review performance. The names and addresses of
the Directors and officers of the Company, together with information as to their
principal occupations during the past five years, are listed below. The
Directors who are considered "interested persons" as defined in Section 2(a)(19)
of the 1940 Act, as well as those persons affiliated with the Investment Adviser
and principal underwriter, and officers of the Company, are noted with an
asterisk (*).
Name, Address Position(s) Held Principal Occupation(s)
and Birthdate With Registrant During the Past 5 Years
*John Pasco, III Chairman, Director Mr. Pasco is Treasurer and
1500 Forest Avenue and Treasurer Director of Commonwealth
Richmond, VA 23229 Shareholder Services, Inc.,
(4/10/45) the Company's Administrator,
since 1985; President and
Director of First Dominion
Capital Corp., the Company's
principal underwriter.
Director and shareholder of
Fund Services Inc., the
Company's Transfer and
Disbursing Agent,since 1987;
shareholder of Commonwealth
Fund Accounting, Inc. which
provides bookkeeping
services
to Star Bank; and Chairman,
Director and Treasurer of
Vontobel Funds, Inc., a
registered investment
company since March, 1997.
Mr. Pasco is also a
certified public accountant.
Samuel Boyd, Jr. Director Mr. Boyd is Manager of the
10808 Hob Nail Court Customer Services Operations
Potomac, MD. 20854 and Accounting Division of
(9/18/40) the Potomac Electric Power
Company since August, 1978;
and Director of Vontobel
Funds, Inc., a registered
investment company since
March, 1997. Mr. Boyd is
also a certified public
accountant.
William E. Poist Director Mr. Poist is a financial and
5272 River Road tax consultant through his
Bethesda, MD. 20816 firm, Management Consulting
(6/11/36) for Professionals since
1968; Director of Vontobel
Funds, Inc., a registered
investment company since
March, 1997. Mr. Poist
is also a certified
public accountant.
Paul M. Dickinson Director Mr. Dickinson is President
8704 Berwickshire Drive of Alfred J. Dickinson, Inc.
Richmond, VA 23229 Realtors since April, 1971;
(11/11/47) and Director of Vontobel
Funds, Inc. a registered
investment company
since March, 1997.
*Jane H. Williams Vice President of Ms. Williams is the
3000 Sand Hill Road the Company and Executive Vice President of
Suite 150 President of the Sand Hill Advisors, Inc.
Menlo Park, CA 94025 Sand Hill Portfolio since 1982.
(6/28/48) Manager Fund series
*Leland H. Faust President of Mr. Faust is President of
One Montgomery St. the CSI Equity CSI Capital Management, Inc.
Suite 2525 Fund and the CSI since 1978. Mr. Faust is
San Francisco, CA 94104 Fixed Income Fund also a Partner in the law
(8/30/46) firm Taylor & Faust since
December, 1975.
*F. Byron Parker, Jr. Secretary Mr. Parker is Secretary of
810 Lindsay Court Commonwealth Shareholder
Richmond, Virginia 23229 Services, Inc., and First
(1/26/43) Dominion Capital Corp.
since 1986; Secretary of
Vontobel Funds, Inc., a
registered investment
company since March, 1997;
and Partner in the law firm
Mustian & Parker.
*Franklin A. Trice, III Vice President of Mr. Trice is President of
P.O. Box 8535 the Company and Virginia Management
Richmond, VA 23226-0535 President of the Investment Corp. since May,
(12/25/63) New Market Fund 1998; and a registered
series. representative of
First Dominion Capital Corp,
the Company's underwriter
since September, 1998.
Mr. Trice was a broker
with Scott & Stringfellow
from March, 1996 to May,
1998 and with Craigie, Inc.
from March, 1992 to January,
1996.
*John T. Connor, Jr. Vice President of President of Third
515 Madison Ave., the Company and Millennium Investment
24th Floor President of the Advisors, LLL since April,
New York, NY 10022 Third Millennium 1998; and Chairman of
(6/16/41) Russia Fund series ROSGAL, a Russian financial
company and of its
affiliated ROSGAL Insurance
since 1993.
*Steven T. Newby Vice President of President of Newby & Co.,
555 Quince Orchard Rd. the Company and a NASD broker/dealer since
Suite 606 President of July, 1990; President of
Gaithersburg, MD 20878 GenomicsFund.com xGENx, LLC since November,
(9/18/46) series 1999.
Compensation of Directors: The Company does not compensate the Directors who are
officers or employees of the Investment Adviser. The "independent" Directors
receive an annual retainer of $1,000.00 and a fee of $200.00 for each meeting of
the Directors which they attend in person or by telephone. Directors are
reimbursed for travel and other out-of-pocket expenses. The Company does not
offer any retirement benefits for Directors.
For the fiscal period ended August 31, 1999, the Directors received the
following compensation from the Company:
Aggregate Compensation Total
From the Fund Pension or Retirement Compensation
Name and Fiscal Year Ended Benefits Accrued as from the
Position Held August 31, 1999 Part ofFund Expenses Company(1)
- --------------------------------------------------------------------------------
John Pasco, III,
Director 0 N/A 0
Samuel Boyd, Jr.,
Director 0 N/A $9,000
William E. Poist,
Director 0 N/A $9,000
Paul M. Dickinson,
Director 0 N/A $9,000
(1) This amount represents the aggregate amount of compensation paid to the
Directors for service on the Board of Directors for the Fund's fiscal year
ended August 31, 1999.
CONTROL PERSONS - PRINCIPAL HOLDERS OF SECURITIES
The Directors and officers of the Company, as a group, do not own 1% or more of
the Fund.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
xGENx, LLC (the "Investment Adviser"), 555 Quince Orchard Road, Suite 606,
Gaithersburg, Maryland 20878 manages the investments of the Fund pursuant to an
Investment Advisory Agreement (the "Advisory Agreement" ), dated March 1,2000.
The Advisory Agreement has an initial term of two years, and may be renewed
annually thereafter provided such renewal is approved by: 1) the Company's Board
of Directors; or 2) by a majority vote of the outstanding voting securities of
the Company, and in either event by and a majority of the Directors who are not
"interested persons" of the Company. The Advisory Agreements will automatically
terminate in the event of their "assignment," as that term is defined in the
1940 Act, and may be terminated without penalty at any time upon 60 days'
written notice to the other party by: (i) the majority vote of all the Directors
or by vote of a majority of the outstanding voting securities of the Fund; or
(ii) the Adviser.
The Investment Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 as amended, the "Advisers Act". The Investment
Adviser is an independent, privately-held corporation.
Steven T. Newby is President of the Investment Adviser and is the portfolio
manager of the Fund since its inception on March 1, 2000. Since July 1990, Mr.
Newby has been President of Newby & Company, a securities broker/dealer firm
located in Gaithersburg, Maryland. Newby & Company is a member firm of the
National Association of Securities Dealers ("NASD") and the Securities Investor
Protection Corporation ("SIPC").
Under the Advisory Agreement, the Investment Adviser, subject to the supervision
of the Directors, provides a continuous investment program for the Fund,
including investment research and management with respect to securities,
investments and cash equivalents, in accordance with the Fund's investment
objective, policies, and restrictions as set forth in the Prospectus and this
SAI. The Investment Adviser is responsible for effecting all security
transactions on behalf of the Fund, including the allocation of principal
business and portfolio brokerage and the negotiation of commissions. The
Investment Adviser also maintains books and records with respect to the
securities transactions of the Fund and furnishes to the Directors such periodic
or other reports as the Directors may request.
Under the Advisory Agreement, the monthly compensation paid to the Adviser is
accrued daily at an annual rate of 1.0% on the first $250 million of average
daily net assets of the Fund; 0.875% on average daily net assets of the Fund in
excess of $250 million and not more than $500 million; and , 0.75% on average
daily net assets of the Fund over $500 million.
In the interest of limiting expenses of the Fund, the Adviser has entered into
an expense limitation agreement with the Company. Pursuant to the agreement, the
Adviser has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses for the Fund is limited to 1.90%. The
limit does not apply to interest, taxes, brokerage commissions, other
expenditures capitalized in accordance with generally accepted accounting
principles or other extraordinary expenses not incurred in the ordinary course
of business. The Adviser will be entitled to reimbursement of fees waived or
remitted by the Adviser to the Fund. The total amount of reimbursement
recoverable by the Adviser (the "Reimbursement Amount") is the sum of all fees
previously waived or remitted by the Adviser to the Fund during any of the
previous five (5) years, less any reimbursement previously paid by the Fund to
the Adviser with respect to any waivers, reductions, and payments made with
respect to the Fund. The Reimbursement Amount may not include any additional
charges or fees, such as interest accruable on the Reimbursement Amount. Such
reimbursement will be authorized by the Directors.
Pursuant to the terms of the Advisory Agreement, the Investment Advisor pays all
expenses incurred by it in connection with its activities thereunder, except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The services furnished by the Investment Adviser under the Advisory
Agreement are not exclusive, and the Investment Adviser is free to perform
similar services for others.
MANAGEMENT-RELATED SERVICES
ADMINISTRATION
Pursuant to an Administrative Services Agreement with the Company dated March 1,
2000 (the "Administrative Agreement"), Commonwealth Shareholder Services, Inc.
("CSS"), 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229, serves as
administrator of the Fund and supervises all aspects of the operation of the
Fund except those performed by the Investment Adviser. John Pasco, III, Chairman
of the Board of the Company, is the sole owner of CSS. CSS provides certain
administrative services and facilities for the Fund, including preparing and
maintaining certain books, records, and monitoring compliance with state and
federal regulatory requirements.
As administrator, CSS receives an asset-based administrative fee, computed daily
and paid monthly, at the annual rate of 0.20% on the first $250 million of
average daily net assets of the Fund; 0.175% on average daily net assets of the
Fund in excess of $250 million and not more than $500 million; 0.15% on average
daily net assets of the Fund in excess of $500 million and not more than $1
billion; and 0.10% on average daily net assets of the Fund in excess of $1
billion, subject to a minimum amount of $15,000 per year for a period of two
years from the date of the Administrative Agreement. Thereafter, the minimum
administrative fee is $30,000 per year. CSS receives an hourly rate, plus
certain out-of-pocket expenses, for shareholder servicing and state securities
law matters.
CUSTODIAN
Pursuant to a Custodian Agreement with the Company dated October 28, 1998, Brown
Brothers Harriman & Co. ("BBH"), 40 Water Street, Boston Massachusetts, 02109,
acts as the custodian of the Fund's securities and cash. With the consent of the
Company, BBH has designated The Depository Trust Company of New York as its
agent to secure a portion of the assets of the Fund. BBH is authorized to
appoint other entities to act as sub-custodians to provide for the custody of
foreign securities which may be acquired and held by the Fund outside the U.S.
Such appointments are subject to appropriate review by the Company's Board of
Directors.
ACCOUNTING SERVICES
Pursuant to an Accounting Service Agreement dated March 1, 2000 (the "Accounting
Agreement"), Commonwealth Fund Accounting, Inc. ("CFA"), is responsible for
accounting relating to the Fund and its investment transactions; maintaining
certain books and records of the Fund; determining daily the net asset value per
share of the Fund; and preparing security position, transaction and cash
position reports. CFA also monitors periodic distributions of gains or losses on
portfolio sales and maintains a daily listing of portfolio holdings. CFA is
responsible for providing expenses accrued and payment reporting services,
tax-related financial information to the Company, and for monitoring compliance
with the regulatory requirements relating to maintaining accounting records.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with the Company dated August 19, 1997,
Fund Services, Inc. ("FSI") acts as the Company's transfer, dividend disbursing
and redemption agent. FSI is located at 1500 Forest Avenue, Suite 111, Richmond,
VA 23229. John Pasco, III, Chairman of the Board of the Company owns one-third
of the voting shares of FSI, and therefore, FSI may be deemed to be an affiliate
of the Company and CSS.
FSI provides certain shareholder and other services to the Company, including
furnishing account and transaction information and maintaining shareholder
account records. FSI is responsible for processing orders for shares and
ensuring appropriate participation with the National Securities Clearing
Corporation for transactions in the Fund's shares. FSI receives and processes
redemption requests and administers distribution of redemption proceeds. FSI
also handles shareholder inquiries and provides routine account information. In
addition, FSI prepares and files appropriate tax related information concerning
dividends and distributions to shareholders.
Under the Transfer Agency Agreement, FSI is compensated pursuant to a schedule
of services, and is reimbursed for out-of-pocket expenses. The schedule calls
for a minimum payment of $12,000 for the first year and $16,500 per year
thereafter.
DISTRIBUTOR
First Dominion Capital Corp. ("FDCC"), located at 1500 Forest Avenue, Suite 223,
Richmond, Virginia 23229, serves as the principal underwriter and national
distributor for the shares of the Fund pursuant to a Distribution Agreement
dated August 19, 1997 (the "Distribution Agreement"). John Pasco, III, Chairman
of the Board of the Company, owns 100% of FDCC, and is its President, Treasurer
and a Director. FDCC is registered as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"). The offering of
the Fund's shares is continuous.
PLAN OF DISTRIBUTION
The Fund has a Plan of Distribution or "12b-1 Plan" (the "Plan") in accordance
with Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may finance
activities primarily intended to sell shares, provided that the categories of
the expenses are approved in advance by the Board of Directors of the Company
and the expenses paid under the Plan are incurred within the preceding 12 months
and accrued while the Plan is in effect.
The Plan provides that the Fund will pay a fee to the Distributor at an annual
rate of 0.25% of the Fund's average daily net assets. The fee is paid to the
Distributor as reimbursement for expenses incurred for distribution-related
activity.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Tait, Weller & Baker, audit the Company's
annual financial statements, assists in the preparation of certain reports to
the U.S. Securities and Exchange Commission (the "SEC"), and prepares the
Company's tax returns. Tait, Weller & Baker is located at 8 Penn Center Plaza,
Suite 800, Philadelphia, PA 19103.
PORTFOLIO TRANSACTIONS
It is the policy of the Investment Adviser, in placing orders for the purchase
and sale of the Fund's securities, to seek to obtain the best price and
execution for its securities transactions, taking into account such factors as
price, commission, where applicable, (which is negotiable in the case of U.S.
national securities exchange transactions but which is generally fixed in the
case of foreign exchange transactions), size of order, difficulty of execution
and the skill required of the executing broker/dealer. After a purchase or sale
decision is made by the Investment Adviser, the Investment Adviser arranges for
execution of the transaction in a manner deemed to provide the best price and
execution for the Fund.
Exchange-listed securities are generally traded on their principal exchange
unless another market offers a better result. Securities traded only in the
over-the-counter market may be executed on a principal basis with primary market
makers in such securities, except for fixed price offerings and except where the
Fund may obtain better prices or executions on a commission basis or by dealing
with other than a primary market maker.
The Investment Adviser, when placing transactions, may allocate a portion of the
Fund's brokerage to persons or firms providing it with investment
recommendations or statistical, research or similar services useful in its
decision making process. The term "investment recommendations or statistical,
research or similar services" means (1) advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and (2)
analyses and reports concerning issuers, industries, securities, economic
factors and trends, and portfolio strategy. The Investment Adviser may cause the
Fund to pay a commission higher than that charged by another broker in
consideration of such research services. Such services are one of the many ways
the Investment Adviser can keep abreast of the information generally circulated
among institutional investors by broker-dealers. While this information is
useful in varying degrees, its value is indeterminable. Such services received
on the basis of transactions for the Fund may be used by the Investment Adviser
for the benefit of the Fund and other clients, and the Fund may benefit from
such transactions effected for the benefit of other clients.
While there is no formula, agreement or undertaking to do so, and when it can be
done consistent with the policy of obtaining best price and execution, the Fund
may consider sales of its shares as a factor in the selection of brokers to
execute portfolio transactions. The Investment Adviser is not authorized, when
placing portfolio transactions for the Fund, to pay a brokerage commission in
excess of that which another broker might have charged for executing the same
transaction solely on the basis of execution. Except for implementing the policy
stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
PORTFOLIO TURNOVER
Average annual portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less. A higher
portfolio turnover rate involves greater transaction expenses to a fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed. The Investment Adviser makes purchases and sales
for the Fund's portfolio whenever necessary, in its opinion, to meet the Fund's
objective. The Investment Adviser anticipates that the Fund's average annual
portfolio turnover rate will be 100%.
CAPITAL STOCK AND DIVIDENDS
The Company is a series investment company that currently offers one class of
shares. The Company is authorized to issue 500,000,000 shares of common stock,
with a par value of $0.01 per share. The Company has currently allocated
50,000,000 shares to the Fund and 250,000,000 shares to other series of the
Company. Each share has equal dividend, voting, liquidation and redemption
rights. There are no conversion or preemptive rights. Shares of the Fund do not
have cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect all of the Directors
if they choose to do so. In such event, the holders of the remaining shares will
not be able to elect any person to the Board of Directors. Shares will be
maintained in open accounts on the books of the Transfer Agent.
If they deem it advisable and in the best interests of shareholders, the
Directors may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act or as
permitted by the Directors. Upon the Company's liquidation, all shareholders of
a series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Company will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of the Automatic Investment Plan described below. Shareholders may rely
on these statements in lieu of stock certificates.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES:
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. Under certain circumstances the Company or the
Investment Adviser may waive the minimum initial investment for purchases by
officers, Directors, and employees of the Company and its affiliated entities
and for certain related advisory accounts and retirement accounts (such as
IRAs). The Fund may also change or waive policies concerning minimum investment
amounts at any time.
SELLING SHARES:
You may sell your shares by giving instructions to the Transfer Agent by mail or
by telephone.
The Board of Directors may suspend the right of redemption or postpone the date
of payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such exchange is closed for other than
weekends and holidays, (b) the SEC has by order permitted such suspension, or
(c) an emergency, as defined by rules of the SEC, exists during which time the
sale of Fund shares or valuation of securities held by the Fund are not
reasonably practicable.
SMALL ACCOUNTS:
Due to the relative higher cost of maintaining small accounts, the Fund may
deduct $50 per year from your account, if, as a result of redemption or exchange
of shares, the total investment remaining in the account has a value of less
than $1,000. Shareholders will receive 30 days' written notice to increase the
account value above $1,000 before the fee is to be deducted. A decline in the
market value of your account alone would not require you to bring your
investment up to this minimum.
SPECIAL SHAREHOLDER SERVICES
As described briefly in the Prospectus, the Fund offers the following
shareholder services:
Regular Account: The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. Simply
use the Account Application provided with the Prospectus to open your account.
Telephone Transactions: A shareholder may redeem shares or transfer into another
fund by telephone if this service is requested at the time the shareholder
completes the initial Account Application. If you do not elect this telephone
service at that time, you may do so at a later date by putting your request in
writing to the Transfer Agent and having your signature guaranteed.
The Fund employs reasonable procedures designed to confirm the authenticity of
instructions communicated by telephone and, if the procedures are followed the
Fund will not be liable for any losses due to unauthorized or fraudulent
transactions. As a result of this policy, a shareholder authorizing telephone
redemption bears the risk of loss which may result from unauthorized or
fraudulent transactions which the Fund believes to be genuine. When requesting a
telephone redemption or transfer, the shareholder will be asked to respond to
certain questions designed to confirm the shareholder's identify as a
shareholder of record. Cooperation with these procedures helps to protect the
account and the Fund from unauthorized transactions.
Invest-A-Matic Accounts: Any shareholder may utilize this feature, which
provides for automatic monthly investments into your account. Upon your request,
the Transfer Agent will withdraw a fixed amount each month from a checking or
savings account for investment into the Fund. This does not require a commitment
for a fixed period of time. A shareholder may change the monthly investment,
skip a month or discontinue the Invest-A-Matic Plan as desired by notifying the
Transfer Agent.
Individual Retirement Account ("IRA"): All wage earners under 70-1/2, even those
who participate in a company sponsored or government retirement plan, may
establish their own IRA. You can contribute 100% of your earnings up to $2,000.
A spouse who does not earn compensation can contribute up to $2,000 per year to
his or her own IRA. The deductibility of such contributions will be determined
under the same rules as for contributions made by individuals with earned
income. A special IRA program is available for corporate employees under which
the employers may establish IRA accounts for their employees in lieu of
establishing corporate retirement plans. Known as SEP-IRA's (Simplified Employee
Pension-IRA), they free the corporate employer of many of the recordkeeping
requirements of establishing and maintaining a corporate retirement plan trust.
If a shareholder has received a distribution from another qualified retirement
plan, all or part of that distribution may be rolled over into your Fund IRA. A
rollover contribution is not subject to the limits on annual IRA contributions.
By acting within applicable time limits of the distribution you can continue to
defer federal income taxes on your rollover contribution and on any income that
is earned on that contribution.
Roth IRA: A Roth IRA permits certain taxpayers to make a non-deductible
investment of up to $2,000 per year. Provided an investor does not withdraw
money from his or her Roth IRA for a five-year period, beginning with the first
tax year for which a contribution was made, deductions from the investor's Roth
IRA would be tax free after the investor reaches the age of 59-1/2. Tax free
withdrawals may also be made before reaching the age of 59-1/2 under certain
circumstances. Please consult your financial and/or tax professional as to your
eligibility to invest in a Roth IRA. An investor may not make a contribution to
both a Roth IRA and a regular IRA in any given year. An annual limit of $2,000
applies to contributions to regular and Roth IRAs. For example, if a taxpayer
contributes $2,000 to a regular IRA for a year, he or she may not make any
contribution to a Roth IRA for that year.
How to Establish Retirements Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan accounts.
Each plan's custodian charges nominal fees in connection with plan establishment
and maintenance. These fees are detailed in the plan documents. A shareholder
may wish to consult with an attorney or other tax adviser for specific advice
concerning tax status and plans.
Exchange Privilege: Shareholders may exchange their shares for shares of a
suitable money market fund. The account must meet the minimum investment
requirements (currently $2,500). A written request must have been completed and
be on file with the Transfer Agent. To make an exchange, an exchange order must
comply with the requirements for a redemption or repurchase order and must
specify dollar amount or the number of shares to be exchanged. An exchange will
take effect as of the next determination of the Fund's NAV per share (usually at
the close of business on the same day). The Transfer Agent may charge the
shareholder's account a $10 service fee each telephone exchange. The Company
reserves the right to limit the number of exchanges or to otherwise prohibit or
restrict shareholders from making exchanges at any time, without notice, should
the Company determine that it would be in the best interest of its shareholders
to do so. For tax purposes an exchange constitutes the sale of the shares of the
fund from which you are redeeming and the purchase of shares of the fund into
which you are exchanging. Consequently, the sale may involve either a capital
gain or loss to the shareholder for federal income tax purposes.
TAX STATUS
DISTRIBUTIONS AND TAXES
Distributions of net investment income: The Fund receives income generally in
the form of interest and other income on their investments. This income, less
expenses incurred in the operation of the Fund, constitutes net investment
income from which dividends may be paid to you. Any distributions by the Fund
from such income will be taxable to you as ordinary income, whether you take
them in cash or reinvest them in additional shares.
Distribution of capital gains: The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminated excise or income taxes on the Fund.
Effect of foreign investments on distributions: Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
Fund. Similarly, foreign exchange losses realized by the Fund on the sale of
debt securities are generally treated as ordinary losses. These gains when
distributed will be taxable to you as ordinary dividends, and any losses will
reduce the Fund's ordinary income otherwise available for distribution to you.
This treatment could increase or reduce the Fund's ordinary income distributions
to you, and may cause some or all of its previously distributed income to be
classified as return of capital.
The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of its total assets at the end of the
fiscal year are invested in securities of foreign corporations, it may elect to
pass-through to you your pro rata share of foreign taxes paid by it. If this
election is made, the year-end statement you receive from the Fund will show
more taxable income than was actually distributed to you. However, you will be
entitled to either deduct your share of such taxes in computing your taxable
income or (subject to limitations) claim a foreign tax credit for such taxes
against your U.S. federal income tax. The Fund will provide you with the
information necessary to complete your individual income tax return if it makes
this election.
Information on the tax character of distributions: The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of the tax status for federal income
tax purposes shortly after the close of each calendar year. If you have not held
Fund shares for a full year, the Fund may designate and distribute to you, as
ordinary income or capital gain, a percentage of income that is not equal to the
actual amount of such income earned during the period of your investment in the
Fund.
Election to be taxed as a regulated investment company: The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the Fund generally pay no federal income tax on the income and gains it
distributes to you. The Board reserves the right not to maintain the
qualifications of the Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the Fund's earnings and profits.
Excise tax distribution requirements: To avoid federal excise taxes, the
Internal Revenue Code requires a fund to distribute to shareholders by December
31 of each year, at a minimum the following amounts: 98% of its taxable ordinary
income earned during the twelve month period ending October 31, and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
Redemption of Fund shares: Redemption and exchanges of Fund shares are taxable
transactions for federal and state income tax purposes. If you redeem or
exchange your Fund shares for shares of a different fund within the Company, the
IRS will require that you report a gain or loss on your redemption or exchange.
The gain or loss that you realize will be either a long-term or short-term
capital gain or loss depending on how long you held your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in such Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you purchase.
U.S. government obligations: Many states grant tax-free status to
dividends paid to shareholders from interest earned on
direct obligations of the U.S. government, subject in some
states to minimum investment requirements that must
be met by the Fund. Investments in Government National Mortgage
Association or Federal National Mortgage Association
securities, bankers' acceptances, commercial paper and
repurchase agreements collateralized by U.S. government
securities do not generally qualify for tax-free treatment.
The rules on exclusion of this income are different for
corporations.
Dividends received deduction for corporations: Because the Fund's income
includes corporate dividends, if the shareholder is a corporation, a portion of
its distributions may qualify for the intercorporate dividends-received
deduction. You will be permitted in some circumstances to deduct these qualified
dividends, thereby reducing the tax that you would otherwise be required to pay
on these dividends. The dividends-received deduction will be available only with
respect to dividends designated by the Fund as eligible for such treatment. All
dividends (including the deducted portion) must be included in your alternative
minimum taxable income calculations.
Investment in complex securities: The Fund may invest in complex securities,
such as original issue discount obligations, the shares of passive foreign
investment companies and others. These investments may be subject to numerous
special and complex tax rules. These rules could affect whether gains and losses
recognized by the Fund are treated as ordinary income or capital gain,
accelerate the recognition of income to the Fund and/or defer the Fund's ability
to recognize losses, and, in limited cases, subject the Fund to U.S. federal
income tax on income from certain of its foreign securities. In turn, these
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to that of
other mutual funds and to relevant indices, in advertisements or in reports to
shareholders, The Fund states performance in terms of total return or yield.
Both "total return" and "yield" figures are based on the historical performance
of the Fund, show the performance of a hypothetical investment and are not
intended to indicate future performance.
YIELD INFORMATION
From time to time, the Fund may advertise a yield figure. A portfolio's yield is
a way of showing the rate of income the portfolio earns on its investments as a
percentage of the portfolio's share price. Under the rules of the SEC, yield
must be calculated according to the following formula:
6
YIELD = 2[(A-B + 1) -1]
---
CD
Where:
A = dividends and interest earned during the period.
B = expenses accrued for the period (net of
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.
A fund's yield, as used in advertising, is computed by dividing the fund's
interest and dividend income for a given 30-day period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by a fund's net asset value ("NAV") at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock and
bond mutual funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation. Income calculated for the purpose
of calculating a fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yield quoted for a
fund may differ from the rate of distributions the fund paid over the same
period or the rate of income reported in the fund's financial statements.
TOTAL RETURN PERFORMANCE
Under the rules of the SEC, fund advertising performance must include total
return quotes, "T" below, calculated according to the following formula:
n
P(1+ T) = ERV
Where:
P = a hypothetical initial payment $1,000
T = average annual total return
n = number of years (l, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods (or
fractional portion thereof).
The average annual total return will be calculated under the foregoing formula
and the time periods used in advertising will be based on rolling calendar
quarters, updated to the last day of the most recent quarter prior to submission
of the advertising for publication, and will cover prescribed periods. When the
period since inception is less than one year, the total return quoted will be
the aggregate return for the period. In calculating the ending redeemable value,
all dividends and distributions by the Fund are assumed to have been reinvested
at NAV as described in the prospectus on the reinvestment dates during the
period. Total return, or "T" in the formula above, is computed by finding the
average annual compounded rates of return over the prescribed periods (or
fractional portions thereof) that would equate the initial amount invested to
the ending redeemable value.
The Fund may also from time to time include in such advertising an aggregate
total return figure or an average annual total return figure that is not
calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. The
Fund may quote an aggregate total return figure in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, Russell Indices, the
Value Line Composite Index, the Lehman Brothers Bond, Government Corporate,
Corporate and Aggregate Indices, Merrill Lynch Government & Agency Index,
Merrill Lynch Intermediate Agency Index, Morgan Stanley Capital International
Europe, Australia, Far East Index or the Morgan Stanley Capital International
World Index. For such purposes, the Fund calculates its aggregate total return
for the specified periods of time by assuming the investment of $1,000 in shares
of the Fund and assuming the reinvestment of each dividend or other distribution
at NAV on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. To calculate its average annual
total return, the aggregate return is then annualized according to the SEC's
formula for total return quotes outlined above.
The Fund may also advertise the performance rankings assigned by various
publications and statistical services, including but not limited to, SEI, Lipper
Mutual Fund Performance Analysis, Intersec Research Survey of Non-U.S. Equity
Fund Returns, Frank Russell International Universe, and any other data which may
be reported from time to time by Dow Jones & Company, Morningstar, Inc., Chase
Investment Performance, Wilson Associates, Stanger, CDA Investment Technologies,
Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor National Index, or
IBC/Donaghue's Average U.S. Government and Agency, or as appears in various
publications, including but not limited to, The Wall Street Journal, Forbes,
Barron's Fortune, Money Magazine, The New York Times, Financial World, Financial
Services Week, USA today and other national or regional publications.
FINANCIAL INFORMATION
You can receive free copies of reports, request other information and discuss
your questions about GenomicsFund.com (the "Fund") by contacting the Fund
directly at:
THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
TELEPHONE: 1-800-527-9525
E-MAIL: [email protected]
