As filed with the Securities and Exchange Commission on August ________, 2000
Registration No. 333-29289
File No. 811-8255
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |__|
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Pre-Effective Amendment No. ______ |__|
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Post-Effective Amendment No. 12 | X|
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |__|
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Amendment No. 14 | X|
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(Check appropriate box or boxes)
THE WORLD FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229
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(Address of Principal Executive Offices)(Zip Code)
(800)-527-9525
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Registrant's Telephone Number, Including Area Code
Steven M. Felsenstein, Esq.
Greenberg Traurig
2050 One Commerce Square
Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Upon effectiveness of this
Post-Effective Amendment. It is proposed that this filing will become
effective (check appropriate box)
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| | immediately upon filing pursuant to paragraph (b)
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| | on (date) pursuant to paragraph (b)
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| X | 60 days after filing pursuant to paragraph (a)(I)
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| | on (date) pursuant to paragraph (a)(I)
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| | 75 days after filing pursuant to paragraph (a)(2)
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| | on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
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|__| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered Common Stock of the Global e Fund series
par value $.01 per share.
<PAGE>
TABLE OF CONTENTS
This Filing of a post-effective amendment to the Registrant's registration
statement on Form N-1A consists of the following:
1. Part A Prospectus of the Global e Fund series of the Registrant.
2. Part B Statement of Additional Information of the Global e Fund
series of the Registrant.
3. Part C
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THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223, Richmond, Va. 23229
804-285-8211 * 800-527-9500 * 804-285-8251 (fax)
VIA EDGAR
August ______, 2000
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20049
RE: The World Funds, Inc.
File Numbers 333-29289 and 811-8255
Post Effective Amendment to Registration Statement
Dear Ladies and Gentlemen:
Transmitted herewith for electronic filing with the U.S. Securities and
Exchange Commission (the "Commission") on behalf of The World Funds, Inc. (the
"Registrant"), pursuant to Rule 485(a) (2) under the Securities Act of 1933, as
amended (the "1933 Act"), is Post-Effective Amendment No. 12 under the 1933 Act
and Amendment No. 14 under the Investment Company Act of 1940, as amended (the
"1940 Act"), referred to herein as the "485(a)(2) Amendment" to the registration
statement of the Registrant.
The 485(a)(2) Amendment contains a Prospectus and Statement of Additional
Information ("SAI") adding a new class of shares for the Global e Fund to be
added to the Registrant's Registration Statement. The Post-Effective Amendment
will become effective pursuant to paragraph (a)(2) sixty days after it is filed.
This Post-Effective Amendment does not amend the existing prospectuses and
statements of additional information of other series of the Registrant, and is
not an "amendment relating to the same prospectus" under paragraph (d)(3) of
Rule 485. ?????????????????????
Please contact Steven M. Felsenstein, Esquire at 215-988-7837, should you have
any questions or comments concerning this filing.
Sincerely,
/s/ John Pasco, III
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John Pasco, III
Chairman
cc: Carolyn Gilheany, Esq.
Steven M. Felsenstein, Esq.
<PAGE>
THE WORLD FUNDS, INC.
Global e Fund
PROSPECTUS
Prospectus Dated ______________________
This Prospectus describes the Global e Fund (the "Fund"), a series of The World
Funds, Inc. (the Company"). A series fund offers you a choice of investments,
with each series having its own investment objective and a separate portfolio.
The Fund seeks capital appreciation by investing in a non-diversified portfolio
of equity securities. The Fund offers two classes of shares: Class A Shares with
a front-end sales charge and Class B Shares subject to a contingent deferred
sales charge. As with all mutual funds, the U.S. Securities and Exchange
Commission has not approved or disapproved these securities or passed upon the
accuracy or completeness of this Prospectus. It is a criminal offense to suggest
otherwise.
<PAGE>
RISK RETURN SUMMARY
Investment Objective: Capital appreciation
Principal Investment
Strategies: The Fund will seek to achieve its investment objective
by investing in a non-diversified portfolio consisting
primarily of equity securities, securities
convertible into common stock and warrants of companies
principally engaged in Internet and Internet-related
businesses.
A company is considered principally engaged in Internet
or Internet-related business if it is engaged in the
research, design, development, manufacturing or
engaged to a significant extent in the business of
distributing products, processes or services for use
with the Internet or Internet-related businesses.
Under normal market conditions, the Fund will invest at
least 65% of its assets in securities of companies
located outside of the United States (the U.S.)
principally engaged in Internet and Internet-related
businesses. The Fund intends to invest its assets in
many countries and normally will have business
activities of not less than three (3) different
countries represented in its portfolio. The Fund may
also invest in securities of companies in emerging and
developing markets.
The Fund will not be limited to investing in securities
of companies of any size, securities of any particular
market, or to hold particular securities for a stated
time period. The Fund may invest in companies with
small market capitalization or companies that have
relatively small revenues, limited product lines, and a
small share of the market for their products or
services (collectively, "small companies").
Principal Risks: The principal risk of investing in the Fund is that the
value of its investments are subject to market,
economic and business risk that may cause the Net Asset
Value ("NAV") to fluctuate over time. Therefore, the
value of your investment in the Fund could decline.
There is no assurance that the investment adviser will
achieve the Fund's objective of capital appreciation.
The Fund operates as a non-diversified fund. As such
the Fund may invest a larger portion of its assets in
fewer securities. This may cause the market action of
the Fund's larger portfolio positions to have a greater
impact on the Fund's NAV, which could result in
increased volatility.
The value of the Fund's shares is susceptible to factors
affecting the Internet such as heightened regulatory
oversight and possible changes in government policies
which may have a material effect on the products and
services of this sector. Securities of companies in
this sector tend to be more volatile than securities of
companies in other sectors. Competitive pressures and
changing demand may have a significant effect on the
financial condition of Internet companies. These
companies spend heavily on research and development and
are especially sensitive to the risk of product
obsolescence. The occurrence of any of these factors,
individually or collectively, may adversely affect the
value of the Fund's shares and could result in the loss
of your investment.
Investments in foreign countries may involve financial,
economic or political risks that are not ordinarily
associated with U.S. securities. Hence, the Fund's
NAV may be affected by changes in exchange rates between
foreign currencies and the U.S. dollar, different
regulatory standards, less liquidity and increased
volatility, taxes and adverse social or political
developments. Foreign companies are not generally
subject to the same accounting, auditing and
financial reporting standards as are domestic companies.
Therefore, there may be less information available
about a foreign company than there is about a
domestic company. In addition, as investments may be
made utilizing foreign currencies, there is the risk
of currency devaluation that may effect this
investment.
In addition to the typical risks that are associated
with investing in foreign countries, companies in
developing countries generally do not have lengthy
operating histories. Consequently, these markets
may be subject to more substantial volatility and
price fluctuation than securities traded in more
developed markets.
Because exchange rates for currencies fluctuate daily,
prices of the foreign securities in which the fund
invests are more volatile than prices of securities
traded exclusively in the U.S.
Because the small companies in which the Fund may invest
may have unproven track records, a limited product or
services base and limited access to capital, they
may be more likely to fail than larger companies.
An investment in the Fund is not a bank deposit and is
not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government
agency.
Investor Profile: You may want to invest in the Fund if you are seeking
capital appreciation and are willing to accept share
prices that may fluctuate, sometimes significantly,
over the short-term. The Fund may be particularly
suitable for you if you wish to take advantage of
opportunities in the securities markets located outside
of the U.S. You should not invest in the Fund if you are
not willing to accept the risks associated with
investing in foreign countries. The Fund will not be
appropriate if you are seeking current income or
are seeking safety of principal.
Performance
Information: Because the Fund is new, it does not have historical
performance data and is not presenting historical
information at this time.
FEES AND EXPENSES
The following table describes the fees and expenses that you may pay directly or
indirectly in connection with an investment in the Fund. The annual operating
expenses, which cover the costs of investment management, administration,
accounting and shareholder communications, are shown as an annual percentage of
the Fund's average daily net assets.
Shareholder Transaction Fees (fees paid directly from your investment)
Class A Shares Class B Shares
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Maximum Sales Charge (Load)(1) 5.50% None
Maximum Deferred Sales Charge (Load) None(2) 5.00%(3)
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Distributions None None
Redemption Fees (4) None None
Exchange Fees (5) None None
Estimated Annual Operating Expenses(expenses that are deducted from Fund assets)
Class A Shares Class B Shares
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Advisory Fee 1.25% 1.25%
Distribution (12b-1) Fees(6) 0.50% 1.00%
Other Expenses 1.74% 1.74%
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Total Annual Fund Operating Expenses (7) 3.49% 3.99%
1) As a percentage of offering price. Reduced rates apply to purchases over
$25,000, and the sales charge is waived for certain classes of investors.
See "Buying Fund Shares-Public Offering Price" and "Buying Fund
Shares-Rights of Accumulation."
2) If you are in a category of investors who may purchase shares without a
sales charge, you will be subject to a 1% contingent deferred sales charge
if you redeem your shares within 1 year of purchase.
3) A 5% deferred sales charge as a percentage of the original purchase price
will apply to any redemption made within the first year. During the second
year, redeemed shares will incur a 4% sales charge. During years three and
four you will pay 3%, during year five 2%, and during year six 1%. The
contingent deferred sales charge is eliminated after the sixth year. Class
B Shares automatically convert to Class A Shares eight years after the
calendar month end in which the Class B Shares were purchased.
4) A shareholder electing to redeem shares by telephone request may be charged
$10 for each such redemption request.
5) A shareholder may be charged a $10 fee for each telephone exchange.
6) The Company has approved a Plan of Distribution pursuant to Rule 12b-1 of
the Investment Company Act of 1940, as amended, (the "1940 Act") providing
for the payment of distribution fees to the distributors for the Fund
("12b-1 Plan"). Class A Shares pay a maximum distribution fee of 0.50% of
average daily net assets, and Class B Shares pay a maximum distribution fee
of 1.00% of average daily net assets. See "Rule 12b-1 Fees." The higher
12b-1 fees borne by Class B Shares may cause long-term investors to pay
more than the economic equivalent of the maximum front end sales charge
permitted by the National Association of Securities Dealers (the "NASD").
7) In the interest of limiting expenses of the Fund, Global Assets Advisors,
Inc. (the "Adviser") has entered into a contractual 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 for the
first three years following commencement of operations so that the ratio of
total annual operating expenses of the Fund are limited to 3.49% for Class
A Shares and 3.99% for Class B Shares.
The purpose of these tables is to assist investors in understanding the various
costs and expenses that they will bear directly or indirectly.
EXAMPLE:
The following expense example shows the expenses that you could pay over time.
It will help you compare the costs of investing in the Fund with the cost of
investing in other mutual funds. The example assumes that you invest $10,000 in
the Fund and then redeem all of your shares at the end of the periods indicated.
The example assumes that you earn a 5% annual return, with no change in Fund
expense levels. Because actual return and expenses will be different, the
example is for comparison only.
Based on these assumptions, your costs would be:
1 Year 3 Years
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Total Expenses - Class A Shares (1) $882 $1,562
Total Expenses - Class B Shares (2) $901 $1,515
(1) With respect to Class A Shares, the above examples assume payment of the
maximum initial sales charge of 5.50% at the time of purchase. The sales
charge varies depending upon the amount of Fund shares that an investor
purchases. Accordingly, your actual expenses may vary.
(2) With respect to Class B Shares, the above examples assume payment of the
deferred sales charge applicable at the time of redemption.
Costs are an important consideration in choosing a mutual fund. Shareholders
indirectly pay the costs of operating a fund, plus any transaction costs
associated with buying and selling the securities a fund holds. These costs will
reduce a portion of the gross income or capital appreciation a fund achieves.
Even small differences in these expenses can, over time, have a significant
effect on a fund's performance.
OBJECTIVES AND STRATEGIES
The Fund's investment objective is to achieve capital appreciation. The Fund
seeks to achieve its objective by investing in common stocks and securities that
are convertible into common stocks and warrants. Under normal circumstances, the
Fund will invest at least 65% of its total assets in securities of companies
which are principally engaged in Internet and Internet-related businesses which
are: located outside of the U.S.; have a majority of their operations outside
the U.S.; or have securities primarily traded on a foreign exchange. The Fund
intends to invest its assets in many countries and normally will have business
activities of not less than three (3) different countries represented in its
portfolio. The securities the Fund purchases may not always be purchased on the
principal market. For example, American Depositary Receipts ("ADRs") may be
purchased if trading conditions and liquidity make them more attractive than the
underlying security. The Fund may select its investments from companies which
are listed on a securities exchange or from companies whose securities have an
established over-the-counter market, and may make limited investments in "thinly
traded" securities.
The Internet is an emerging global communication, information and distribution
system. The Adviser believes that the Internet offers favorable investment
opportunities because of its ever growing popularity among business and personal
users alike. Consequently, there are opportunities for continued growth in
demand for components, products, media, services, and systems to assist,
facilitate, enhance, store, process, record, reproduce, retrieve and distribute
information, products and services for use by businesses, institutions and
consumers. However, older technologies such as telephone, broadcast and cable
have entered the Internet world with a strong presence and may also be
represented when the Adviser believes that these companies may successfully
integrate existing technology with new technologies. Products and services
identified for investment include, but are not limited to, servers, routers,
search engines, portals, bridge and switches, network applications, software,
cable, satellite, fiber, modems, carriers, firewall and security, e-mail,
electronic commerce, video and publishing.
The Internet has exhibited and continues to demonstrate rapid growth, both
through increasing demand for existing products and services and the broadening
of the Internet market. This provides a favorable environment for investment in
small to medium capitalized companies. However, the Fund's investment policy is
not limited to any minimum capitalization requirement and the Fund may hold
securities without regard to the capitalization of the issuer. The Adviser's
overall stock selection for the Fund is not based on the capitalization or size
of the company but rather on an assessment of the company's fundamental
prospects.
Using a combination of top-down/bottom-up investment approach, the Adviser
analyzes foreign countries in relation to the U.S. to determine their level of
Internet "Evolution" . When selecting investments for the Fund, the Adviser will
seek to identify Internet companies that it believes are likely to benefit from
new or innovative products, services or processes that can enhance the
companies' prospects for future earnings growth. Some of these companies may not
have an established history of revenue or earnings at the time of purchase and
any dividend income is likely to be incidental.
The Fund may invest indirectly in securities through sponsored and unsponsored
American Depositary Receipts ("ADRs")(, Global Depositary Receipts ("GDRs"),
European Depositary Receipts ("EDRs") and other types of Depositary Receipts
(collectively "Depositary Receipts"), to the extent such Depositary Receipts
become available. ADRs are Depositary Receipts typically issued by a U.S. bank
or trust company evidencing ownership of underlying foreign securities. GDRs,
EDRs and other types of Depositary Receipts are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, evidencing ownership of underlying securities issued by either
a foreign or a U.S. corporation. Depositary Receipts may not necessarily be
denominated in the same currency of the underlying securities into which hey may
be converted. For purposes of the Fund's investment policies, investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
The Fund may invest in companies with small market capitalization (i.e., less
than $250 million) or companies that have relatively small revenues, limited
product lines, and a small share of the market for their products or services
(collectively, "small companies"). Small companies are also characterized by the
following: (1) they may lack depth of management; (2) they may be unable to
internally generate funds necessary for growth or potential development or to
generate such funds through external financing on favorable terms; and (3) they
may be developing or marketing new products or services for which markets are
not yet established and may never become established.
The Fund may invest in securities involving special circumstances, such as
initial public offerings, companies with new management or management reliant on
one or a few key people, special products and techniques, limited or cyclical
product lines, markets or resources or unusual developments, such as mergers,
liquidations, bankruptcies or leveraged buyouts.
In addition to common stocks and securities that are convertible into common
stocks, the Fund may invest in shares of closed-end investment companies which
invest in securities that are consistent with the Fund's objectives and
strategies. By investing in other investment companies, the Fund indirectly pays
a portion of the expenses and brokerage costs of these companies as well as its
own expenses. Also, federal and state securities laws impose limits on such
investments, which may affect the ability of the Fund to purchase or sell these
shares.
Other Investments. In addition to the investment strategies described above, the
Fund may engage in other strategies such as derivatives. Investments in
derivatives, such as options, can significantly increase a fund's exposure to
market risk or credit risk of the counterparty, as well as improper valuation
and imperfect correlation.
RISKS
Stock Market Risk.
The Fund is subject to stock market risk. Stock market risk is the possibility
that stock prices overall will decline over short or long periods. Because stock
prices tend to fluctuate, the value of your investment in the Fund may increase
or decrease. The Fund's investment success depends on the skill of the Adviser
in evaluating, selecting and monitoring the portfolio assets. If the Adviser's
conclusions about growth rates or securities values are incorrect, the Fund may
not perform as anticipated.
Non-diversification; Industry concentration.
The Fund is non-diversified under the 1940 Act. Under the 1940 Act, the Fund may
invest its assets in the securities of a smaller number of investors. In
addition, the Fund may invest more than 25% of its assets in what may be
considered a single industry sector or several closely related industries.
Accordingly, the Fund may be more susceptible to the effects of adverse
economic, political or regulatory developments affecting a single issuer or
industry sector than funds that diversify to a greater extent.
Sector Risk.
Internet and Internet-related companies are particularly vulnerable to rapidly
changing technology and relatively high risks of obsolescence caused by
progressive scientific and technological advances. The economic prospects of
Internet and Internet-related companies can dramatically fluctuate due to the
competitive environment in which these companies operate. Therefore, the Fund
may experience greater volatility than funds whose portfolio are not subject to
these types of risks.
Foreign Investing.
The Fund's investments in foreign securities may involve risks that are not
ordinarily associated with U.S. securities. Foreign companies are not generally
subject to the same accounting, auditing and financial reporting standards as
are domestic companies. Therefore, there may be less information available about
a foreign company than there is about a domestic company. Certain countries do
not honor legal rights enjoyed in the U.S. In addition, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or
diplomatic developments, which could affect U.S. investments in those countries.
Investments in foreign companies often are made in the foreign currencies,
subjecting the investor to the risk of currency devaluation or exchange rate
risk. In addition, many foreign securities markets have substantially less
trading volume than the U.S. markets, and securities of some foreign issuers are
less liquid and more volatile than securities of domestic issuers. These factors
make foreign investment more expensive for U.S. investors. Mutual funds offer an
efficient way for individuals to invest abroad, but the overall expense ratios
of mutual funds that invest in foreign markets are usually higher than those of
mutual funds that invest only in U.S. securities.
Emerging and Developing MarketsA Fund's investments in emerging and developing
countries involve those same risks that are associated with foreign investing in
general (see above). In addition to those risks, companies in such countries
generally do not have lengthy operating histories. Consequently, these markets
may be subject to more substantial volatility and price fluctuations than
securities that are traded on more developed markets.
Depositary Receipts.
In addition to the risk of foreign investments applicable to the underlying
securities, unsponsored Depositary Receipts may also be subject to the risks
that the foreign issuer may not be obligated to cooperate with the U.S. bank,
may not provide additional financial and other information to the bank or the
investor, or that such information in the U.S. market may not be current. Please
refer to the Statement of Additional Information (the "SAI") for more
information on Depositary Receipts.
Small Companies.
Historically, stocks of small companies have been more volatile than stocks of
larger companies and are, therefore, more speculative than investments in larger
companies. Among the reasons for the greater price volatility are the following:
(1) the less certain growth prospects of smaller companies; (2) the lower degree
of liquidity in the markets for such stocks; and (3) the greater sensitivity of
small companies to changing economic conditions. Besides exhibiting greater
volatility, small company stocks may, to a degree, fluctuate independently of
larger company stocks. Small company stocks may decline in price as large
company stocks rise, or rise in price as large company stocks decline. Due to
these and other factors, small companies may suffer significant losses, as well
as realize substantial growth. Thus, securities of small companies present
greater risks than securities of larger, more established companies. You should
therefore expect that the value of Fund shares to be more volatile than the
shares of mutual fund investing primarily in larger company stocks.
Investments in small or unseasoned companies or companies with special
circumstances often involve much greater risk than are inherent in other types
of investments, because securities of such companies may be more likely to
experience unexpected fluctuations in prices.
European Currency.
Several European countries are participating in the European Economic and
Monetary Union, which established a common European currency for participating
countries. This currency is commonly known as the "Euro". Each participating
country has pegged its existing currency with the Euro as of January 1, 1999 and
many transactions in these countries are valued and conducted in the Euro. The
majority of stock transactions in the major markets now are made in Euros.
Additional European countries may elect to participate in the common currency in
the future. The conversion presents unique uncertainties, including, among
others: (1) whether the payment and operational systems of banks and other
financial institutions will function properly; (2) how certain outstanding
financial contracts that refer to existing currencies rather than the Euro will
be treated legally; (3) how exchange rates for existing currencies and the Euro
will be established; and (4) how suitable clearing and settlement payment
systems for the Euro will be managed. The Fund invests in securities of
countries that have converted to the Euro or will convert in the future and
could be adversely affected if these uncertainties cause adverse effects on
these securities. To date the conversion of the Euro has had negligible impact
on the operations and investment returns of U.S. investment companies.
Portfolio Turnover.
Although the Fund does not generally intend to invest for the purpose of seeking
short-term profits, the Fund's investments may be changed when circumstances
warrant, without regard to the length of time a particular security has been
held. It is expected that the Fund will have an annual portfolio turnover rate
that will generally not exceed 100%. A 100% turnover rate would occur if all the
Fund's portfolio investments were sold and either repurchased or replaced within
a year. A high turnover rate (100% or more) results in correspondingly greater
brokerage commissions and other transactional expenses which are borne by the
Fund. High portfolio turnover may result in the realization of net short-term
capital gains by the Fund which, when distributed to shareholders, will be
taxable as ordinary income.
Temporary Defensive Positions.
When the Adviser believes that investments should be deployed in a temporary
defensive posture because of economic or market conditions, the Fund may invest
up to 100% of its assets in U.S. Government securities (such as bills, notes, or
bonds of the U.S. Government and its agencies) or other forms of indebtedness
such as bonds, certificates of deposits or repurchase agreements (for the risks
involved in repurchase agreements see the SAI). For temporary defensive
purposes, the Fund may hold cash or debt obligations denominated in U.S. dollars
or foreign currencies. These debt obligations include U.S. and foreign
government securities and investment grade corporate debt securities, or bank
deposits of major international institutions. When a Fund is in a temporary
defensive position, it is not pursuing its stated investment policies. The
Adviser decides when it is appropriate to be in a defensive position. It is
impossible to predict for how long such defensive strategies will be utilized.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
The Company.
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") and is commonly known as a "mutual fund". The Company has retained
an adviser to manage all aspects of the investments of the Fund.
Investment Adviser.
Global Assets Advisors, Inc. (the "Adviser") manages the investment of the
assets of the Fund pursuant to the Investment Advisory Agreement (the "Advisory
Agreement"). The address of the Adviser is 250 Park Avenue South, Suite 200,
Winter Park, Florida 32789. Although the Adviser has not previously served as
the investment adviser for an open-end investment company, it has served as the
adviser to The Global Internet Trust, a unit investment trust registered under
the Investment Company Act of 1940 that is invested in a portfolio of global
internet securities.
Mr. Michael M. Ward is the Portfolio Manager of the Fund since it's
inception on May 1, 2000. Mr. Ward, a Chartered Financial Analyst (CFA), has
been Vice President and Director of Equity Research at International Assets
Advisory Corporation ("IAAC") since 1997. IAAC originated and maintains the
"NETDEX", an index of international internet companies. As a portfolio manager
of the Adviser, Mr. Ward manages and/or oversees more than $50 million in global
investments for a wide variety of clients. Prior to joining IAAC, he was a
Financial Analyst at Grande Journeys and a consultant with Winter Park Capital
Assets. Mr. Mido Shammaa and Mr. Stefan Spath are Assistant Portfolio Managers
of the Fund since its inception. Mr. Shammaa, regional strategist for Asia and
Internet analyst, joined IAAC in 1998. He specializes in the equity analysis of
both developed and emerging markets securities in Southeast Asia and the Pacific
Rim. Prior to joining IAAC, Mr. Shammaa worked in the Risk Management division
of Banco Popular. At Banco Popular, Mr. Shammaa helped develop financial
products and quantitative risk management tools. Mr. Spath joined IAAC in 1997
and specializes in international securities analysis, global macroeconomics and
geo-political risk. Prior to his work at IAAC, Mr. Spath was an investment
analyst with RMC Group plc, a British conglomerate. Mr. Spath was responsible
for all capital budgeting and investment analysis for international projects.
Under the Advisory Agreement, the Adviser provides the Fund with investment
management services, subject to the supervision of the Board of Directors, and
with office space, and pays the ordinary and necessary office and clerical
expenses relating to investment research, statistical analysis, supervision of
the Fund's portfolio and certain other costs. The Adviser also bears the cost of
fees, salaries and other remuneration of The World Funds' directors, officers or
employees who are officers, directors, or employees of the Adviser. The Fund is
responsible for all other costs and expenses, such as, but not limited to,
brokerage fees and commissions in connection with the purchase and sale of
securities, legal, auditing, bookkeeping and record keeping services, custodian
and transfer agency fees and fees and other costs of registration of the Fund's
shares for sale under various state and federal securities laws.
Under the Advisory Agreement, the monthly compensation paid to the Adviser is
accrued daily at an annual rate of 1.25% on the first $500 million of average
net assets; 1.00% on average net assets in excess of $500 million and not more
than $1 billion; and 0.75% on average net assets over 1 billion of the Fund's
average daily net assets. These fees are higher than those charged by most other
investment companies, but are comparable to investment companies with investment
objectives and policies similar to the Fund's investment objectives and
policies.
In the interest of limiting the expense ratio 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 ratio of total annual operating expenses for the Fund is
limited to 3.49% for Class A Shares and 3.99% for Class B Shares. 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 Board of Directors.
SHAREHOLDER INFORMATION
The Fund's share price, called its NAV per share, is determined as of the close
of trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern
Time) on each business day ("Valuation Time") that the NYSE is open. As of the
date of this prospectus, the Fund is informed that the NYSE observes the
following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. NAV per share is computed by adding the total value of the Fund's
investments and other assets, subtracting any liabilities and then dividing by
the total number of shares outstanding.
Shares are bought at the public offering price per share next determined after a
request has been received in proper form. Shares are sold or exchanged at the
NAV per share next determined after a request has been received in proper form.
Any request received in proper form before the Valuation Time, will be processed
the same business day. Any request received in proper form after the Valuation
Time, will be processed the next business day.
The Fund's securities are valued at current market prices. Investments in
securities traded on the national securities exchanges or included in the NASDAQ
National Market System are valued at the last reported sale price. Other
securities traded in the over-the-counter market and listed securities for which
no sales are reported on a date are valued at the last reported bid price.
Short-term debt securities (less than 60 days to maturity) are valued at their
fair market value using amortized cost. Other assets for which market prices are
not readily available are valued at their fair value as determined in good faith
under procedures set by the Board of Directors. Depositary Receipts will be
valued at the closing price of the instrument last determined prior to the
Valuation Time unless the Company is aware of a material change in value.
Securities for which such a value cannot be readily determined on any day will
be valued at the closing price of the underlying security adjusted for the
exchange rate. The value of a foreign security is determined as of the close of
trading on the foreign exchange on which it is traded or as of the scheduled
close of trading on the NYSE, whichever is earlier. Portfolio securities that
are listed on foreign exchanges may experience a change in value on days when
shareholders will not be able to purchase or redeem shares of the Fund.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the NAV is determined as of such times.
PURCHASING SHARES
Share Class Alternatives. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities, but the classes are subject to different expenses and
may have different share prices. When you buy shares be sure to specify the
class of shares in which you choose to invest. If you do not select a class,
your money will be invested in Class A Shares. Because each share class has a
different combination of sales charges, expenses and other features, you should
consult your financial adviser to determine which class best meets your
financial objectives. Additional details about each of the share class
alternatives may be found below under "Distribution Arrangements."
Class A Shares Class B Shares
Max. initial sales charge. 5.50% None
(Subject to
reductions
beginning with
investments
of $25,000)
See "Distribution Arrangements"
for a schedule itemizing reduced
sales charges.
Contingent None Year 1 5%
deferred sales (Except for 1% Year 2 4%
charge ("CDSC") on redemptions Year 3 3%
imposed when with 1 year) Year 4 3%
shares are Year 5 2%
redeemed Year 6 1%
(percentage based Year 7 None
on purchase Year 8 None
price). Years
are based on a
twelve-month
period.
See below for
information regarding
applicable waivers of
the CDSC.
Rule 12b-1 fees. 0.50% 1.00%
See "DistributionArrangements"
for important
information about
Rule 12b-1 fees.
Conversion
to Class A Shares N/A Automatically
after about 8
years, at which
time applicable
Rule 12b-1 fees
are reduced.
Appropriate for: All investors, Investors who
particularly plan to hold
those who intend their shares at
to hold their least 6 years.
shares for a long
period of time
and/or invest a
substantial
amount in the
Fund.
Share Transactions.
You may purchase and redeem Fund shares, or exchange shares of the Fund for
those of another, by contacting any broker authorized by the distributors to
sell shares of the Fund or by contacting Fund Services, Inc., the Company's
transfer and dividend disbursing agent (the "Transfer Agent"), at 1500 Forest
Avenue, Suite 111, Richmond, Virginia 23229 or by telephoning (800) 628-4077. A
sales charge may apply to your purchase. Brokers may charge transaction fees for
the purchase or sale of Fund shares, depending on your arrangement with the
broker.
Minimum Investments.
The following table provides you with information on the various investment
minimums, sales charges and expenses that apply to each class. Under certain
circumstances the Fund may waive the minimum initial investment for purchases by
officers, directors, employees or agents of the Company, and its affiliated
entities and for certain related advisory accounts, retirement accounts,
custodial accounts for minors and automatic investment accounts as detailed on
page ___ under "Waiver of Sales Charges."
Class A Shares Class B Shares
Minimum Initial Investment $1,000 $1,000
Minimum Subsequent Investment $ 50* $ 50*
* For automatic investments made at least quarterly, the minimum subsequent
investment is $100.
By Mail.
You may buy shares of the Fund by sending a completed application along
with a check drawn on a U.S. bank in U.S. funds, to Global e Fund, c/o Fund
Services, Inc., 1500 Forest Avenue, Suite 111, Richmond, Virginia 23229. See
"Proper Form." Third party checks are not accepted for the purchase of Fund
shares.
Investing by Wire.
You may purchase shares by requesting your bank to transmit by wire
directly to the Transfer Agent. To invest by wire, please call the Fund at (800)
527-9525 or the Transfer Agent at (800) 628-4077 to advise the Fund of your
investment and to receive further instructions. Your bank may charge you a small
fee for this service. Once you have arranged to purchase shares by wire, please
complete and mail the account application form promptly to the Transfer Agent.
This application is required to complete the Fund's records. You will not have
access to your shares until the Fund's records are complete. Once your account
is opened, you may make additional investments using the wire procedure
described above. Be sure to include your name and account number in the wire
instructions you provide your bank.
Public Offering Price.
When you buy shares of the Fund, you will receive the public offering price
per share as determined after your order is received in proper form, as defined
on page ___ under the section entitled "Proper Form." The public offering price
of Class A Shares is equal to the Fund's net asset value plus the initial sales
charge. The public offering price of Class B Shares is equal to the Fund's net
asset value. The Fund reserves the right to refuse to accept an order in certain
circumstances, such as, but not limited to, orders from short-term investors
such as market timers, or orders without proper documentation.
Net Asset Value.
The Fund's share price is equal to the NAV per share of the Fund. The Fund
calculates its NAV per share by valuing and totaling its assets, subtracting any
liabilities, and dividing the remainder, called net assets, by the number of
Fund shares outstanding. The value of the Fund's portfolio securities is
generally based on market quotes if they are readily available. If they are not
readily available, the Adviser will determine their market value in accordance
with procedures adopted by the Board of Directors. For information on how the
Fund values its assets, see "Valuation of Fund Shares" in the SAI.
DISTRIBUTION ARRANGEMENTS
Shares of the Fund may be purchased directly from the distributors or through
brokers or dealers which have a sales agreement with the distributors and who
are members of the NASD. When an investor acquires shares of the Fund from a
securities broker-dealer, the investor may be charged a transaction fee by that
broker-dealer. The minimum initial investment in the Fund is $1,000 and
additional investments must be $50 or more.
The Fund is offered through financial supermarkets, investment advisers and
consultants, financial planners, brokers, dealers and other investment
professionals, and directly through the distributors. Investment professionals
who offer shares may require payments of fees from their individual clients. If
you invest through a third party, the policies and fees may be different than
those described in this Prospectus. For example, third parties may charge
transaction fees or set different minimum investment amounts.
If you purchase your shares through a broker-dealer, the broker-dealer firm is
entitled to receive a percentage of the sales charge you pay in order to
purchase Fund shares. The following schedule governs the percentage to be
received by the selling broker-dealer firm.
Class A Sales Charge and Broker-Dealer Commission and Service Fee
Sales Charge as a Percentage of
-------------------------------- Dealer Discount
Amount of Purchase at Offering Net Amount as Percentage of
the Public Offering Price Price Invested Offering Price
------------------------- ----- -------- --------------
$1,000 but under $25,000 5.50% 5.82% 5.00%
$25,000 but under $50,000 5.25% 5.54% 4.75%
$50,000 but under $100,000 4.50% 4.71% 4.00%
$100,000 but under $250,000 3.50% 3.63% 3.25%
$250,000 but under $500,000 2.50% 2.56% 2.25%
$500,000 but under $1 million 1.50% 1.52% 1.25%
$1 Million or more 0.00% 0.00% 0.00%
After a one-year holding period, broker-dealers will be entitled to receive an
ongoing service fee at an annual rate of 0.25%, payable quarterly.
Class B Broker-Dealer Commission and Service Fee
Broker-Dealer Percentage
Up to $__________________ 4.00%
After a one-year holding period, broker-dealers will be entitled to receive an
ongoing service fee at an annual rate of 0.25%, payable quarterly.
Rule 12b-1 Fees.
The Board of Directors has adopted a Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1 Plan") for each class of shares. Pursuant
to the Rule 12b-1 Plans, the Fund may finance certain activities or expenses
that are intended primarily to result in the sale of its shares. The Fund
finances these distribution activities through payments made to the
distributors. The fee ("Rule 12b-1 fee") paid to the distributors by each class
is computed on an annualized basis reflecting the average daily net assets of a
class, up to a maximum of 1% for Class B Shares, payable to First Dominion
Capital Corp.; and 0.50% for Class A Share expenses, payable to International
Assets Advisory Corp. (each a "Distributor"; collectively, the "Distributors").
Up to 0.25% of the total Rule 12b-1 fee may be used to pay for certain
shareholder services provided by institutions that have agreements with a
distributor of shares to provide those services. The Company may pay Rule 12b-1
fees for activities and expenses borne in the past in connection with the
distribution of its shares as to which no Rule 12b-1 fee was paid because of the
maximum limitation. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost more than paying other types of sales charges.
Right Of Accumulation.
After making an initial purchase in the Fund, you may reduce the sales
charge applied to any subsequent purchases. Your shares in a Fund previously
purchased will be taken into account on a combined basis at the current net
asset value per share of a Fund in order to establish the aggregate investment
amount to be used in determining the applicable sales charge. Only previous
purchases of Fund shares that are still held in the Fund and that were sold
subject to the sales charge will be included in the calculation. To take
advantage of this privilege, you must give notice at the time you place your
initial order and subsequent orders that you wish to combine purchases. When you
send your payment and request to combine purchases, please specify your account
number.
Statement of Intention.
A reduced sales charge as set forth above applies immediately to all
purchases where the investor has executed a Statement of Intention calling for
the purchase within a 13-month period of an amount qualifying for the reduced
sales charge. The investor must actually purchase the amount stated in such
statement to avoid later paying the full sales charge on shares that are
purchased. For a description of the Statement of Intention, see the SAI.
Waiver of Front-End Sales Charges. No sales charge shall apply to:
(1) reinvestment of income dividends and capital gain distributions;
(2) exchanges of one Fund's shares for those of another Fund;
(3) purchases of Fund shares made by current or former directors, officers, or
employees, or agents of the Company, the adviser, the distributors and by
members of their immediate families, and employees (including immediate
family members) of a broker-dealer distributing Fund shares;
(4) purchases of Fund shares by the distributors for their own investment
account for investment purposes only;
(5) a "qualified institutional buyer," as that term is defined under Rule 144A
of the Securities Act of 1933, including, but not limited to, insurance
companies, investment companies registered under the 1940 Act, business
development companies registered under the 1940 Act, and small business
investment companies;
(6) a charitable organization, as defined in Section 501(c)(3) of the Internal
Revenue Code ("Code"), as well as other charitable trusts and endowments,
investing $50,000 or more;
(7) a charitable remainder trust, under Section 664 of the Code, or a life
income pool, established for the benefit of a charitable organization as
defined in Section 501(c)(3) of the Code;
(8) investment advisers or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of those investment
advisers or financial planners who place trades for their own accounts if
the accounts are linked to the master account of the investment adviser or
financial planner on the books and records of the broker or agent;
(9) institutional retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in section
401(a), 403(b) or 457 of the Code and "rabbi trusts"; and
(10) the purchase of Fund shares, if available, through certain third-party fund
"supermarkets." Some fund supermarkets may offer Fund shares without a
sales charge or with a reduced sales charge. Other fees may be charged by
the service-provider sponsoring the fund supermarket, and transaction
charges may apply to purchases and sales made through a broker-dealer.
Waiver Of Contingent Deferred Sales Charge.
The contingent deferred sales charge is waived for:
(1) certain post-retirement withdrawals from an IRA or other retirement plan if
you are over 70 1/2;
(2) redemptions by certain eligible 401 (a) and 401(k) plans and certain
retirement plan rollovers;
(3) withdrawals resulting from shareholder death or disability provided that
the redemption is requested within one year of death or disability; and
(4) withdrawals through Systematic Monthly Investment (systematic withdrawal
plan).
Additional information regarding the waiver of sales charges may be obtained by
calling (800) 432-0000. All account information is subject to acceptance and
verification by the Distributors.
General.
The Company reserves the right in its sole discretion to withdraw all or
any part of the offering of shares of the Fund when, in the judgment of the
Fund's management, such withdrawal is in the best interest of the Fund. An order
to purchase shares is not binding on, and may be rejected by, the Fund until it
has been confirmed in writing by the Fund and payment has been received.
REDEEMING SHARES
You may redeem your shares at any time and in any amount by mail or
telephone. For your protection, the Transfer Agent will not redeem your shares
until it has received all the information and documents necessary for your
request to be considered in proper order (see "Signature Guarantees"). You will
be notified promptly by the Transfer Agent if your redemption request is not in
proper order.
The Company's procedure is to redeem shares at the NAV determined after the
Transfer Agent receives the redemption request in proper order. Payment will be
made promptly, but no later than the seventh day following the receipt of the
request in proper order. The Company may suspend the right to redeem shares for
any period during which the NYSE is closed or the U.S. Securities and Exchange
Commission (the "SEC") determines that there is an emergency. In such
circumstances you may withdraw your redemption request or permit your request to
be held for processing after the suspension is terminated.
If you sell shares through a securities dealer or investment professional, it is
such person's responsibility to transmit the order to the Fund in a timely
fashion. Any loss to you resulting from failure to do so must be settled between
you and such person.
Delivery of the proceeds of a redemption of shares purchased and paid for by
check shortly before the receipt of the request may be delayed until the Fund
determines that the Transfer Agent has completed collection of the purchase
check which may take up to 14 days. Also, payment of the proceeds of a
redemption request for an account for which purchases were made by wire may be
delayed until the Fund receives a completed application for the account to
permit the Fund to verify the identity of the person redeeming the shares, and
to eliminate the need for backup withholding.
Redemption by Mail.
To redeem shares by mail, send a written request for redemption, signed by
the registered owner(s) exactly as the account is registered. Certain written
requests to redeem shares may require signature guarantees. For example,
signature guarantees may be required if you sell a large number of shares, if
your address of record on the account application has been changed within the
last 30 days, or if you ask that the proceeds to be sent to a different person
or address. Signature guarantees are used to help protect you and the Fund. You
can obtain a signature guarantee from most banks or securities dealers, but not
from a Notary Public. Please call the Transfer Agent at (800) 628-4077 to learn
if a signature guarantee is needed or to make sure that it is completed
appropriately in order to avoid any processing delays.
Redemption by Telephone.
You may redeem your shares by telephone provided that you request this
service on your initial Account Application. If you request this service at a
later date, you must send a written request along with a signature guarantee to
the Transfer Agent. Once your telephone authorization is in effect, you may
redeem shares by calling the Transfer Agent at (800) 628-4077. There is no
charge for establishing this service, but the Transfer Agent will charge your
account a $10 service fee for each telephone redemption. The Transfer Agent may
change the amount of this service at any time without prior notice.
Redemption by Wire.
If you request that your redemption proceeds be wired to you, please call
your bank for instructions prior to writing or calling the Transfer Agent. Be
sure to include your name, Fund account number, your account number at your bank
and wire information from your bank in your request to redeem by wire.
Signature Guarantees.
To help protect you and the Fund from fraud, signature guarantees are
required for: (1) all redemptions ordered by mail if you require that the check
be payable to another person or that the check be mailed to an address other
than the one indicated on the account registration; (2) all requests to transfer
the registration of shares to another owner; and, (3) all authorizations to
establish or change telephone redemption service, other than through your
initial Account Application.
In the case of redemption by mail, signature guarantees must appear on either:
(a) the written request for redemption; or, (b) a separate instrument of
assignment (usually referred to as a "stock power") specifying the total number
of shares being redeemed. The Company may waive these requirements in certain
instances.
The following institutions are acceptable signature guarantors: (a) participants
in good standing of the Securities Transfer Agents Medallion Program ("STAMP");
(b) commercial banks which are members of the Federal Deposit Insurance
Corporation ("FDIC"); (c) trust companies; (d) firms which are members of a
domestic stock exchange; (e) eligible guarantor institutions qualifying under
Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, that are
authorized by charter to provide signature guarantees (e.g., credit unions,
securities dealers and brokers, clearing agencies and national securities
exchanges); and, (f) foreign branches of any of the above. In addition, the
Company will guarantee your signature if you personally visit its offices at
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229. The Transfer Agent
cannot honor guarantees from notaries public, savings and loan associations, or
savings banks.
Proper Form.
Your order to buy shares is in proper form when your completed and signed
Account Application and check or wire payment is received. Your written request
to sell or exchange shares is in proper form when written instructions signed by
all registered owners, with a signature guarantee if necessary, is received.
Small Accounts.
Due to the relatively higher cost of maintaining small accounts, the Fund
may deduct $50 per year from your account or may redeem the shares in your
account, if it has a value of less than $1,000. The Fund will advise you in
writing thirty (30) days prior to deducting the annual fee or closing your
account, during which time you may purchase additional shares in any amount
necessary to bring the account back to $1,000. The Fund will not close your
account if it falls below $1,000 solely because of a market decline. The Adviser
and Distributor reserve the right to waive this fee for their clients.
Automatic Investment Plan.
Existing shareholders, who wish to make regular monthly investments in
amounts of $100 or more, may do so through the Automatic Investment Plan. Under
the Plan, your designated bank or other financial institution debits a
pre-authorized amount from your account on or about the 15th day of each month
and applies the amount to the purchase of shares. To use this service, you must
authorize the transfer of funds by completing the Plan Section of the Account
Application and sending a blank voided check.
Exchange Privileges.
You may exchange all or a portion of your shares for the shares of certain
other funds having different investment objectives, provided the shares of the
fund you are exchanging into are registered for sale in your state of residence.
Your account may be charged $10 for a telephone exchange fee. An exchange is
treated as a redemption and a purchase and may result in realization of a gain
or loss on the transaction.
Modification or Termination.
Excessive trading can adversely impact Fund performance and shareholders.
Therefore, the Company reserves the right to temporarily or permanently modify
or terminate the Exchange Privilege. The Company also reserves the right to
refuse exchange requests by any person or group if, in the Company's judgment, a
Fund would be unable to invest the money effectively in accordance with its
investment objective and policies, or would otherwise potentially be adversely
affected. The Company further reserves the right to restrict or refuse an
exchange request if the Company has received or anticipates simultaneous orders
affecting significant portions of a Fund's assets or detects a pattern of
exchange requests that coincides with a "market timing" strategy. Although the
Company will attempt to give you prior notice when reasonable to do so, the
Company may modify or terminate the Exchange Privilege at any time.
Dividends and Capital Gain Distributions.
Dividends from net investment income, if any, are declared annually. The
Fund intends to distribute annually any net capital gains.
Distributions will automatically be reinvested in additional shares, unless you
elect to have the distributions paid to you in cash. There are no sales charges
or transaction fees for reinvested dividends and all shares will be purchased at
NAV. If the investment in shares is made within an IRA, all dividends and
capital gain distributions must be reinvested.
Unless you are investing through a tax deferred retirement account, such as an
IRA, it is not to your advantage to buy shares of a fund shortly before the next
distribution, because doing so can cost you money in taxes. This is known as
"buying a dividend". To avoid buying a dividend, check the Fund's distribution
schedule before you invest.
DISTRIBUTIONS AND TAXES
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional shares of a Fund or receive them in cash. Any capital gains a fund
distributes are taxable to you as long-term capital gains no matter how long you
have owned your shares. Every January, you will receive a statement that shows
the tax status of distributions you received for the previous year.
Distributions declared in December but paid in January are taxable as if they
were paid in December.
When you sell shares of a fund, you may have a capital gain or loss. For tax
purposes, an exchange of your shares of a fund for shares of a different fund of
the Company is the same as a sale. The individual tax rate on any gain from the
sale or exchange of your shares depends on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to state and local income tax. Non-U.S. investors may be
subject to U.S. withholding and estate tax. You should consult with your tax
adviser about the federal, state, local or foreign tax consequences of your
investment in a fund.
By law, the Fund must withhold 31% of your taxable distribution and proceeds if
you do not provide your correct taxpayer identification number (TIN) or certify
that your TIN is correct, or if the Internal Revenue Service (the "IRS") has
notified you that you are subject to backup withholding and instructs the Fund
to do so.
Information about the Company, including the SAI, can be reviewed and copied at
the SEC's Public Reference Room, 450 Fifth Street NW, Washington, D.C.
Information about the operation of the Public Reference Room may be obtained by
calling the SEC at (202) 942-8090. Reports and other information regarding the
Fund are available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, after paying
a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington D.C. 20549-0102.
For more information about the Fund, you may wish to refer to the Company's SAI
dated _______, 2000 which is on file with the SEC and incorporated by reference
into this Prospectus. You can obtain a free copy of the SAI by writing to The
World Funds, Inc. , 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229, by
calling toll free (800) 527-9525 or by e-mail at: [email protected].
General inquiries regarding the Fund may also be directed to the above address
or telephone number.
(Investment Company Act File No. 811-8255)
<PAGE>
THE WORLD FUNDS, INC.
(THE "COMPANY")
1500 FOREST AVENUE, SUITE 223, RICHMOND, VA 23229
(800) 527-9525
STATEMENT OF ADDITIONAL INFORMATION
Global e Fund
This Statement of Additional Information ("SAI") is not a Prospectus. It should
be read in conjunction with the current Prospectus of the Global e Fund, dated
________________. You may obtain the Prospectus of the Fund, free of charge, by
writing to World Funds, Inc. at 1500 Forest Avenue, Suite 223, Richmond, VA
23229 or by calling (800) 527-9525.
The date of this SAI is ___________________.
<PAGE>
TABLE OF CONTENTS PAGE
General Information
Additional Information About The Fund's Investments
Investment Objectives
Strategies and Risks
Investment Programs
Warrants
Illiquid Securities
Depositary Receipts
Temporary Defensive Positions
U.S. Government Securities
Repurchase Agreements
Restricted Securities
Options
Other Investments
Investment Restrictions
Management of the Company
Principal Securities Holders
Policies Concerning Personal Investment Activities
Investment Adviser and Advisory Agreement
Management-Related Services
Portfolio Transactions
Portfolio Turnover
Capital Stock and Dividends
Dividends and Distributions
Additional Information about Purchases and Sales
Eligible Benefit Plans
Tax Status
Investment Performance
Financial Information
<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 Global e Fund
(the "Fund"). The Fund is a separate investment portfolio or series of the
Company. The Fund is authorized to issue two classes of shares: Class A Shares
imposing a front-end sales charge up to a maximum of 5.50%, and a sales charge
of 1% if shares are redeemed within the first year after purchase; and Class B
Shares charging a maximum back-end sales charge of 5%, if redeemed within six
years of purchase, carrying a higher 12b-1 fee then Class A Shares, but
converting to Class A Shares in approximately eight years after purchase. See
"Capital Stock and Dividends" in this SAI. The Fund is a "non-diversified"
series 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 policies 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
The Fund invests in equity securities and securities convertible into equity
securities, such as warrants, convertible bonds, debentures or convertible
preferred.
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
Warrants
The Fund may invest in warrants. Warrants are options to purchase equity
securities at a specific price for a specific period of time. They do not
represent ownership of the securities, but only the right to buy them. Hence,
warrants have no voting rights, pay no dividends and have no rights with respect
to the assets of the corporation issuing them. The value of warrants is derived
solely from capital appreciation of the underlying equity securities. Warrants
differ from call options in that the underlying corporation issues warrants,
whereas call options may be written by anyone.
Illiquid Securities
The Fund may invest up to 15% of its net assets in illiquid securities. For this
purpose, 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.
Depositary Receipts
American Depositary Receipts ("ADRs") are receipts typically issued in the U.S.
by a bank or trust company evidencing ownership of an underlying foreign
security. The Fund may invest in ADRs which are structured by a U.S. bank
without the sponsorship of the underlying foreign issuer. In addition to the
risks of foreign investment applicable to the underlying securities, such
unsponsored ADRs may also be subject to the risks that the foreign issuer may
not be obligated to cooperate with the U.S. bank, may not provide additional
financial and other information to the bank or the investor, or that such
information in the U.S. market may not be current.
Like ADRs, European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs"), and Registered Depositary Certificates ("RDCs") represent receipts for
a foreign security. However, they are issued outside of the U.S. The Fund may
invest in ADRs, EDRs, GDRs or RDCs. EDRs, GDRs and RDCs involve risks comparable
to ADRs, as well as the fact that they are issued outside of the U.S.
Furthermore, RDCs involve risks associated with securities transactions in
Russia.
Temporary Defensive Positions
When the Adviser believes that investments should be deployed in a temporary
defensive posture because of economic or market conditions, the Fund may invest
up to 100% of its assets in U.S. Government securities (such as bills, notes, or
bonds of the U.S. Government and its agencies) or other forms of indebtedness
such as bonds, certificates of deposits or repurchase agreements. For temporary
defensive purposes, the Fund may hold cash or debt obligations denominated in
U.S. dollars or foreign currencies. These debt obligations include U.S. and
foreign government securities and investment grade corporate debt securities, or
bank deposits of major international institutions. When the Fund is in a
temporary defensive position, it is not pursuing its stated investment policies.
The Adviser decides when it is appropriate to be in a defensive position. It is
impossible to predict for how long such alternative strategies will be utilized.
U.S. Government Securities
The Fund may invest in U.S. Government Securities. The term "U.S. Government
Securities" refers to a variety of securities which are issued or guaranteed by
the United States Treasury, by various agencies of the U.S. Government, and by
various instrumentalities which have been established or sponsored by the U.S.
Government. U.S. Treasury securities are backed by the full faith and credit of
the United States. Securities issued or guaranteed by U.S. Government agencies
or U.S. Government sponsored instrumentalities may or may not be backed by the
full faith and credit of the United States. In the case of securities not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim
directly against the United States in the event the agency or instrumentality
does not meet its commitment. An instrumentality of the U.S. Government is a
government agency organized under Federal charter with government supervision.
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. The Fund may enter into repurchase commitments for investment
purposes for periods of 30 days or more. Such commitments involve investment
risks similar to those of the debt securities in which the Fund invests. Under a
repurchase agreement, the Fund acquires a security, subject to the seller's
agreement to repurchase that security at a specified time and price. A purchase
of securities under a repurchase agreement is considered to be a loan by a fund.
The 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, a
fund's right 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.
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.
Options
The Fund may purchase put and call options and engage in the writing of covered
call options and put options on securities that meet the Fund's investment
criteria, and may employ a variety of other investment techniques,such as
options on futures. The Fund will engage in options transactions only to hedge
existing positions, and not for purposes of speculation or leverage. As
described below, the Fund may write "covered options" on securities in standard
contracts traded on national exchanges, or in individually-negotiated contracted
traded over-the-counter for the purpose of receiving the premiums from options
that expire and to seek net gains from closing purchase transactions with
respect to such options.
Buying Call and Put Options. The Fund may purchase call options. Such
transactions may be entered into in order to limit the risk of a substantial
increase in the market price of the security that the Fund intends to purchase.
Prior to its expiration, a call option may be sold in a closing sale
transaction. Any profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the call option plus the
related transaction costs.
The Fund may purchase Put Options. By buying a put, the Fund has the right to
sell the security at the exercise price, thus limiting its risk of loss through
a decline in the market value of the security until the put expires. The amount
of any appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and any profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs.
Writing (Selling) Call and Put Options. The Fund may write covered options on
equity and debt securities and indices. This means that, in the case of call
options, so long as the Fund is obligated as the writer of a call option, it
will own the underlying security subject to the option and, in the case of put
options, it will, through its custodian, deposit and maintain either cash or
securities with a market value equal to or greater than the exercise price of
the option.
Covered call options written by a Fund give the holder the right to buy the
underlying securities from the Fund at a stated exercise price. A call option
written by a Fund is "covered" if the Fund owns the underlying security that is
subject to the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian bank) upon
conversion or exchange of other securities held in its portfolio. A call option
is also covered if a Fund holds a call on the same security and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash and high grade debt securities in a segregated
account with its custodian bank. The Fund may purchase securities which may be
covered with call options solely on the basis of considerations consistent with
the investment objectives and policies of the Fund. The Fund's turnover may
increase through the exercise of a call option; this will generally occur if the
market value of a "covered" security increases and the Fund has not entered in
to a closing purchase transaction.
As a writer of an option, the Fund receives a premium less a commission, and in
exchange foregoes the opportunity to profit from any increase in the market
value of the security exceeding the call option price. The premium serves to
mitigate the effect of any depreciation in the market value of the security. The
premium paid by the buyer of an option will reflect, among other things, the
relationship of the exercise price to the market price, the volatility of the
underlying security, the remaining term of the option, the existing supply and
demand, and the interest rates.
The writer of a call option may have no control over when the underlying
securities must be sold because the writer may be assigned an exercise notice at
any time prior to the termination of the obligation. Exercise of a call option
by the purchaser will cause the Fund to forego future appreciation of the
securities covered by the option. Whether or not an option expires unexercised,
the writer retains the amount of the premium. This amount may, in the case of a
covered call option, be offset by a decline in the market value of the
underlying security during the option period. If a call option is exercised, the
writer experiences a profit or loss from the sale of the underlying security.
Thus, during the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security or
currency above the exercise price. It retains the risk of loss should the price
of the underlying security or foreign currency decline. Writing call options
also involves risks relating to a Fund's ability to close out options it has
written.
The Fund may write exchange-traded call options on its securities. Call options
may be written on portfolio securities, securities indices, or foreign
currencies. With respect to securities and foreign currencies, the Fund may
write call and put options on an exchange or over-the-counter. Call options on
portfolio securities will be covered since the Fund will own the underlying
securities. Call options on securities indices will be written only to hedge in
an economically appropriate way portfolio securities that are not otherwise
hedged with options or financial futures contracts and will be "covered" by
identifying the specific portfolio securities being hedged. Options on foreign
currencies will be covered by securities denominated in that currency. Options
on securities indices will be covered by securities that substantially replicate
the movement of the index.
A put option on a security, security index, or foreign currency gives the
purchaser of the option, in return for the premium paid to the writer (seller),
the right to sell the underlying security, index, or foreign currency at the
exercise price at any time during the option period. When the Fund writes a
secured put option, it will gain a profit in the amount of the premium, less a
commission, so long as the price of the underlying security remains above the
exercise price. However, the Fund remains obligated to purchase the underlying
security from the buyer of the put option (usually in the event the price of the
security falls below the exercise price) at any time during the option period.
If the price of the underlying security falls below the exercise price, the Fund
may realize a loss in the amount of the difference between the exercise price
and the sale price of the security, less the premium received. Upon exercise by
the purchaser, the writer of a put option has the obligation to purchase the
underlying security or foreign currency at the exercise price. A put option on a
securities index is similar to a put option on an individual security, except
that the value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash.
During the option period, the writer of a put option has assumed the risk that
the price of the underlying security or foreign currency will decline below the
exercise price. However, the writer of the put option has retained the
opportunity for an appreciation above the exercise price should the market price
of the underlying security or foreign currency increase. Writing put options
also involves risks relating to a Fund's ability to close out options it has
written.
The writer of an option who wishes to terminate his or her obligation may effect
a "closing purchase transaction" by buying an option of the same series as the
option previously written. The effect of the purchase is that the writer's
position will be cancelled by the clearing corporation. However, a writer may
not effect a closing purchase transaction after being notified of the exercise
of an option. There is also no guarantee that a Fund will be able to effect a
closing purchase transaction for the options it has written.
Effecting a closing purchase transaction in the case of a written call option
will permit a Fund to write another call option on the underlying security with
either a different exercise price, expiration date, or both. Effecting a closing
purchase transaction will also permit the Fund to use cash or proceeds from the
concurrent sale of any securities subject to the option to make other
investments. If a Fund desires to sell a particular security from its portfolio
on which it has written a call option, it will effect a closing purchase
transaction before or at the same time as the sale of the security.
A Fund will realize a profit from a closing purchase transaction if the price of
the transaction is less than the premium received from writing the
option. A
Fund will realize a loss from a closing purchase transaction if the price of the
transaction is more than the premium received from writing the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by a Fund.
Writing Over-the-Counter ("OTC") Options. A Fund may engage in options
transactions that trade on the OTC market to the same extent that it intends to
engage in exchange traded options. Just as with exchange traded options, OTC
options give the holder the right to buy an underlying security from, or sell an
underlying security to, an option writer at a stated exercise price.
However,
OTC options differ from exchange traded options in certain material respects.
OTC options are arranged directly with dealers and not, as is the case with
exchange traded options, through a clearing corporation. Thus, there is a risk
of non-performance by the dealer. Because there is no exchange, pricing is
typically done by reference to information from market makers. Since OTC options
are available for a greater variety of securities and in a wider range of
expiration dates and exercise prices, the writer of an OTC option is paid the
premium in advance by the dealer.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. There can be no assurance that a
continuously liquid secondary market will exist for any particular option at any
specific time. Consequently, a Fund may be able to realize the value of an OTC
option it has purchased only by exercising it or entering into a closing sale
transaction with the dealer that issued it. Similarly, when a Fund writes an OTC
option, it generally can close out that option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which it
originally wrote the option. If a covered call option writer cannot effect a
closing transaction, it cannot sell the underlying security or foreign currency
until the option expires or the option is exercised. Therefore, the writer of a
covered OTC call option may not be able to sell an underlying security even
though it might otherwise be advantageous to do so. Likewise, the writer of a
secured OTC put option may be unable to sell the securities pledged to secure
the put for other investment purposes while it is obligated as a put writer.
Similarly, a purchaser of an OTC put or call option might also find it difficult
to terminate its position on a timely basis in the absence of a secondary
market.
The staff of the U. S. Securities and Exchange Commission (the "SEC") has been
deemed to have taken the position that purchased OTC options and the assets used
to "cover" written OTC options are illiquid securities. The Fund will adopt
procedures for engaging in OTC options transactions for the purpose of reducing
any potential adverse effect of such transactions on the liquidity of the Fund.
Futures Contracts. Even though the Fund has no current intention to invest in
Futures Contracts, the Fund may buy and sell stock index futures contracts
traded on domestic stock exchanges to hedge the value of its portfolio against
changes in market conditions. The Fund will amend its Prospectus before engaging
in such transactions.
A stock index futures contract is an agreement between two parties to take or
make delivery of an amount of cash equal to a specified dollar amount, times the
difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck. A
stock index futures contract does not involve the physical delivery of the
underlying stocks in the index. Although stock index futures contracts call for
the actual taking or delivery of cash, in most cases the Fund expects to
liquidate its stock index futures positions through offsetting transactions,
which may result in a gain or a loss, before cash settlement is required.
A Fund will incur brokerage fees when it purchases and sells stock index futures
contracts, and at the time a Fund purchases or sells a stock index futures
contract, it must make a good faith deposit known as the "initial margin".
Thereafter, a Fund may need to make subsequent deposits, known as "variation
margin," to reflect changes in the level of the stock index. A Fund may buy or
sell a stock index futures contract so long as the sum of the amount of margin
deposits on open positions with respect to all stock index futures contracts
does not exceed 5% of the Fund's net assets.
To the extent a Fund enters into a stock index futures contract, it will
maintain with its custodian bank (to the extent required by the rules of the
SEC) assets in a segregated account to cover its obligations. Such assets may
consist of cash, cash equivalents, or high quality debt securities from its
portfolio in an amount equal to the difference between the fluctuating market
value of such futures contract and the aggregate value of the initial and
variation margin payments.
Risks Associated With Options and Futures. Although the Fund may write covered
call options and purchase and sell stock index futures contracts to hedge
against declines in market value of its portfolio securities, the use of these
instruments involves certain risks. As the writer of covered call options, a
Fund receives a premium but loses any opportunity to profit from an increase in
the market price of the underlying securities above the exercise price during
the option period. A Fund also retains the risk of loss if the price of the
security declines, though the premium received may partially offset such loss.
Although stock index futures contracts may be useful in hedging against adverse
changes in the value of a Fund's portfolio securities, they are derivative
instruments that are subject to a number of risks. During certain market
conditions, purchases and sales of stock index futures contracts may not
completely offset a decline or rise in the value of a Fund's Portfolio. In the
futures markets, it may not always be possible to execute a buy or sell order at
the desired price, or to close out an open position due to market conditions,
limits on open positions and/or daily price fluctuations. Changes in the market
value of a Fund's portfolio may differ substantially from the changes
anticipated by the Fund when it established its hedged positions, and
unanticipated price movements in a futures contract may result in a loss
substantially greater than a Fund's initial investment in such a contract.
Successful use of futures contracts depends upon Manager's ability to correctly
predict movements in the securities markets generally or of a particular segment
of a securities market. No assurance can be given that Manager's judgment in
this respect will be correct.
The CFTC and the various exchanges have established limits referred to as
"speculative position limits" on the maximum net long or net short position that
any person may hold or control in a particular futures contract. Trading limits
are imposed on the number of contracts that any person may trade on a particular
trading day. An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose sanctions or restrictions. These
trading and positions limits will not have an adverse impact on a Fund's
strategies for hedging its securities.
OTHER INVESTMENTS
The 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 Fund's investment objective and that such
investment 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 the 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 any security if, as a result of such purchase less than 50% of the
assets of the Fund would consist of cash and cash items, U.S. Government
securities, securities of other investment companies, and securities of
issuers in which the Fund has not invested more than 5% of its assets;
12) 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
13) Make loans, except that the Fund may lend securities, and enter into
repurchase agreements secured by U.S. Government Securities.
14) Except as specified below, the Fund 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.
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 Directors without
shareholder approval. As a matter of non-fundamental policy, the Fund may not:
1) Invest more than 15% of its net assets in illiquid securities; or
2) Engage in arbitrage transactions.
In applying the fundamental and policy concerning concentration:
The percentage restriction on investment or utilization of assets is adhered to
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
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, 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 Age 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., the
(55) 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;
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
(59) of 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 tax
5272 River Road consultant through his firm,
Bethesda, MD 20816 Management Consulting for
(60) 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 of
8704 Berwickshire Drive Alfred J. Dickinson, Inc.
Richmond, VA 23229 Realtors since April, 1971; and
(52) Director of Vontobel Funds,
Inc., a registered investment
company since March, 1997.
*F. Byron Parker, Jr. Secretary Mr. Parker is Secretary of
810 Lindsay Court Commonwealth Shareholder
Richmond, VA 23229 Services, Inc., and First
(57) 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.
*Jane H. Williams Vice President of Ms. Williams is the Executive
3000 Sand Hill Road the Company Vice President of Sand Hill
Suite 150 and President Advisors, Inc. since 1982.
Menlo Park, CA 94025 of the Sand Hill
(51) Portfolio Manager
Fund series
*Leland H. Faust President of the Mr. Faust is President of
One Montgomery St. CSI Equity Fund CSI Capital Management, Inc.
Suite 2525 and the CSI Fixed since 1978. Mr. Faust is also
San Francisco, CA 94104 Income Fund a Partner in the law firm
(53) Taylor & Faust since December,
1975.
*Franklin A. Trice, III Vice President of Mr. Trice is President
P.O. Box 8535 the Company and of Virginia Management
Richmond, VA 23226-0535 President of the Investment Corp. since May,
(36) 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 and
Stringfellow from March, 1996 to
May, 1998 and with Craigie, Inc.
from March, 1992 to January,
1996.
*John T. Connor, Jr. Vice President of Mr. Connor is President of Third
515 Madison Ave., the Company and Millennium Investment Advisors,
24th Floor President of the LLC since April, 1998; and
New York, NY 10022 Third Millennium Chairman of ROSGAL,
(58) Russia Fund series a Russian financial company
and of its affiliated
ROSGAL Insurance since 1993.
*Steven T. Newby Vice President of Mr. Newby is President of Newby
555 Quince Orchard Rd. the Company and & Co., a NASD broker/dealer
Suite 606 President of since July, 1990; and
Gaithersburg, MD 20878 GenomicsFund.com President of xGENx, LLC
(53) series since November, 1999.
*Todd A. Boren President of the Mr. Boren joined
250 Park Avenue, So. Global e Fund International Assets Advisory in
Suite 200 series May of 1994. In his six years
Winter Park, FL 32789 with IAAC he has served as a
(40) Financial Adviser, VP of Sales,
Branch Manager,Training Manager,
and currently as Senior Vice
President and Managing Director
Private Client Operations
for both International Assets
Advisory and Global Assets
Advisors. He is responsible for
overseeing its International
Headquarters in Winter Park,
Florida as well as its New York
operation and joint venture.
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 and a fee of $200 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
From the Fund Total
Name and Fiscal Year Pension or Retirement Compensation
Position Ended August Benefits Accrued as from the
Held 31, 1999 Part of Fund Expenses Company(1)
---- ------------ --------------------- ----------
John Pasco, III, 0 N/A 0
Director
Samuel Boyd, Jr., 0 N/A $9,000
Director
William E. Poist, 0 N/A $9,000
Director
Paul M. Dickinson, 0 N/A $9,000
Director
(1) This amount represents the aggregate amount of compensation paid to the
Directors for service on the 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.
POLICIES CONCERNING PERSONAL INVESTMENT ACTIVITIES
The Fund, investment adviser and principal underwriters have each adopted a
Codes of Ethics, as required by federal securities laws. Under the Fund's Code
of Ethics, persons who are designated as access persons may engage in personal
securities transactions, including transactions involving securities that are
being considered for the Fund or that are currently held by the Fund, subject to
general restrictions and procedures. The personal securities transactions of
access persons of the Fund, its investment adviser and principal underwriters
will be governed by the Fund's Code of Ethics.
The Code of Ethics is on file with, and can be reviewed and copied at the U.
S. Securities and Exchange Commission's (the "SEC") Public Reference Room in
Washington, D.C. In addition, the Code of Ethics are also available on
the EDGAR Database on the SEC's Internet website at
http://www.sec.gov.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Global Assets Advisors, Inc. (the "Investment Adviser" or "Adviser"), located at
250 Park Avenue South, Suite 200, Winter Park, Florida 32789, manages the
investments of the Fund pursuant to an Investment Advisory Agreement (the
"Advisory Agreement" ), dated May 1, 2000. After the initial term of two years,
the Advisory Agreement may be renewed annually provided such renewal is approved
annually by: 1) the Company's Directors; or 2) by a majority vote of the
outstanding voting securities of the Company and, in either case, by 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 a wholly owned subsidiary
of International Assets Holding Corporation and is a related corporation of
International Assets Advisory Corporation ("IAAC").
International Assets Holding Corporation is an independent financial-services
firm dedicated to the concept of global diversification and the long-term value
of global investing. Founded in 1987 and publicly traded since in 1994, the
Company's business is conducted through two principal operating subsidiaries:
International Assets Advisory Corporation (IAAC) and Global Assets Advisors
Inc.(GAA). IAAC is a dealer of global securities offering institutions and
retail investors access to financial markets around the world. GAA is a
registered investment adviser specializing in professional global money
management for high net worth individuals and institutions. In addition, the
Company recently formed a third subsidiary, INTLTRADER.COM, to execute its
previously announced strategy to provide investors with 24-hour online trading
of foreign and domestic securities using the Internet.
The Adviser has not previously served as the investment adviser to an open-end
investment company, but has served as the adviser to The Global Internet Trust,
a unit investment trust registered under the 1940 Act. IAAC created the NETDEX
Index in March 1999 to track the performance of a basket of publicly traded
international companies which are internet related, the first U.S. index
established for that purpose.
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 1.25% on the first $500 million of average
daily net assets of the Fund; 1.00% on average daily net assets of the Fund in
excess of $500 million and not more than $1 billion; and , 0.75% on average
daily net assets of the Fund over $1 billion.
In the interest of limiting expenses of the Fund, the Adviser has entered into a
contractual 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, for the first three years following commencement of operations, so
that the ratio of total annual operating expenses of the Fund are limited to
3.49% for Class A Shares and 3.99% for Class B Shares. 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 Adviser 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 May 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 $500 million of
average daily net assets of the Fund; 0.175% on average daily net assets of the
Fund in excess of $500 million and not more than $1 billion; and 0.15% 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 AND ACCOUNTING SERVICES
Pursuant to the Custodian Agreement and Accounting Agency Agreement with the
Company dated April 12, 2000, Brown Brothers Harriman & Co. ("BBH"), 40 Water
Street, Boston Massachusetts, 02109, acts as the custodian of the Fund's
securities and cash and as the Fund's accounting services agent. 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 acquired and held by the Fund outside the U.S.
Such appointments are subject to appropriate review by the Company's Directors.
As the accounting services agent of the Fund, BBH maintains and keeps current
the books, accounts, records, journals or other records of original entry
relating to the Fund's business.
TRANSFER AGENT
Pursuant to a Transfer Agent Agreement with the Company dated August 19, 1997,
Fund Services, Inc. ("FSI") acts as the Company's transfer and disbursing agent.
FSI is located at 1500 Forest Avenue, Suite 111, Richmond, VA 23229. John Pasco,
III, Chairman of the Board of the Company and an officer and shareholder of CSS
(the Administrator of the Funds), owns one-third of the stock of FSI; 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 and payments for share
purchases. FSI mails proxy materials (and receives and tabulates proxies),
shareholder reports, confirmation forms for purchases and redemptions and
prospectuses to shareholders. FSI disburses income dividends and capital
distributions and prepares and files appropriate tax-related information
concerning dividends and distributions to shareholders.
DISTRIBUTOR
International Assets Advisory Corporation ("IAAC"), located at 250 Park Avenue
South, Suite 200, Winter Park, Florida 32789, serves as the principal
underwriter of the Fund's Class A Shares pursuant to a Distribution Agreement
dated ___________, 2000. First Dominion Capital Corp. ("FDCC"), located at 1500
Forest Avenue, Suite 223, Richmond, Virginia 23229, serves as the principal
underwriter of the Fund's Class B Shares pursuant to a Distribution Agreement
dated ____________,2000. (Each a "Distributor"; collectively the
"Distributors"). IAAC was formed as a Florida corporation in 1981 and registered
as a broker/dealer in 1982. The firm has focused on the sale of global debt and
equity securities to its clients and has developed an experienced team
specializing in the selection, research, trading, currency exchange and
execution of individual equity and fixed-income products. Members of IAAC's team
are also affiliated with the Investment Adviser and have many years of
experience in the global marketplace. John Pasco, III, Chairman of the Board of
the Company, owns 100% of FDCC, and is it President, Treasurer and a Director.
IAAC and FDCC are registered as a broker-dealer and are members of the National
Association of Securities Dealers, Inc. (the NASD").
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 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 Adviser, in placing orders for the purchase and sale of
the Fund's securities, to seek to obtain the best price and execution for
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 Adviser, the 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 Adviser, when placing transactions, may allocate a portion of a fund's
brokerage to persons or firms providing the Adviser with investment
recommendations, statistical, research or similar services useful to the
Adviser's investment 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) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, and portfolio strategy.
Such services are one of the many ways the 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 a
fund may be used by the Adviser for the benefit of 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 Adviser may be 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 account of the receipt of research, market or statistical information.
Except for implementing the policy stated above, there is no intention to place
portfolio transactions with particular brokers or dealers or groups thereof.
The Board of Directors of the Company has adopted policies and procedures
governing the allocation of brokerage to affiliated brokers. The Adviser has
been instructed not to place transactions with an affiliated broker-dealer,
unless that broker-dealer can demonstrate to the Company that the Fund will
receive (1) a price and execution no less favorable than that available from
unaffiliated persons, and (2) a price and execution equivalent to that which
that broker-dealer would offer to unaffiliated persons in a similar transaction.
The Board reviews all transactions which have been placed pursuant to those
policies and procedures at its Board meetings.
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 Adviser makes purchases and sales for the
Fund's portfolio whenever necessary, in the Adviser's opinion, to meet the
Fund's objective. The Adviser anticipates that the average annual portfolio
turnover rate of the Fund will be less than 100%.
CAPITAL STOCK AND DIVIDENDS
The Company is authorized to issue 750,000,000 shares of common stock, with a
par value of $0.01 per share. The Company has presently allocated 50,000,000
shares to the Fund, and has further reclassified those shares as follows:
Twenty-five Million (25,000,000) shares for Class A Shares of the series, which
includes those shares issued and outstanding prior to commencing the offering of
other classes of shares; and Twenty-five Million (25,000,000) shares for Class B
Shares of the series. Each share has equal dividend, voting, liquidation and
redemption rights and there are no conversion or preemptive rights. Shares of
the Funds 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 FSI.
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 the Directors create
additional series or classes of shares, 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 applicable Fund at
its 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,
transactions made as a result of the Automatic Investment Plan described below.
Shareholders may rely on these statements in lieu of stock certificates.
DISTRIBUTION
The Distributors may from time to time offer incentive compensation to dealers
(which sell shares of the Fund subject to sales charges) allowing such dealers
to retain an additional portion of the sales load. A dealer who receives all of
the sales load may be considered an underwriter of the Fund's shares.
In connection with promotion of the sales of the Fund, the Distributors may,
from time to time, offer (to all broker dealers who have a sales agreement with
the Distributors) the opportunity to participate in sales incentive programs
(which may include non-cash concessions). These non-cash concessions are in
addition to the sales load described in the Prospectus. The Distributors may
also, from time to time, pay expenses and fees required in order to participate
in dealer sponsored seminars and conferences, reimburse dealers for expenses
incurred in connection with pre-approved seminars, conferences and advertising,
and may, from time to time, pay or allow additional promotional incentives to
dealers as part of pre-approved sales contests.
Statement of Intention.
The reduced sales charges and public offering price set forth above and in
the Prospectus apply to purchases of $25,000 or more made within a 13-month
period pursuant to the terms of a written Statement of Intention in the form
provided by the Distributor and signed by the purchaser.
The Statement of Intention is not a binding obligation to purchase the indicated
amount. Shares equal to 5.50% (declining to 0% after an aggregate of $1,000,000
has been purchased under the Statement) of the dollar amount specified in the
Statement will be held in escrow and capital gain distributions on these
escrowed shares will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Distributor the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Distributor or the securities dealer, the appropriate number of escrowed shares
will be redeemed to pay such difference.
In the case of purchase orders by the trustees of certain employee plans by
payroll deduction, the sales charge for the investments made during the 13-month
period will be based on the following: total investments made the first month of
the 13-month period times 13; as the period progresses the sales charge will be
based (1) on the actual investment made previously during the 13-month period,
plus (2) the current month's investments times the number of months remaining in
the 13-month period. There will be no retroactive adjustments in sales charge on
investments previously made during the 13-month period.
PLAN OF DISTRIBUTION
The Fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
certain activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the Board of Directors of the Company and
the expenses paid under the Plan were 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 IAAC at an annual rate of
0.50% for Class A Shares and will pay a fee to FDCC at an annual rate of 1.00%
for Class B Shares of the Fund's average daily net assets. The fee is paid to
the respective Distributor as reimbursement for expenses incurred for
distribution-related activity.
RULE 18f-3 PLAN
At a meeting held on April 14, 2000, the Board adopted a Rule 18f-3 Multiple
Class Plan on behalf of the Fund for the benefit of each of its series. The key
features of the Rule 18f-3 Plan are as follows: (i) shares of each class of the
Fund represent an equal pro rata interest in the Fund and generally have
identical voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations qualifications, terms and conditions, except that each
class bears certain specific expenses and has separate voting rights on certain
matters that relate solely to that class or in which the interests of
shareholders of one class differ from the interests of shareholders of another
class; (ii) subject to certain limitations described in the Prospectus, shares
of a particular class of the Fund may be exchanged for shares of the same class
of another Fund; and (iii) the Fund's Class B Shares will convert automatically
into Class A Shares of the Fund after a period of eight years, based on the
relative net asset value of such shares at the time of conversion. At present,
the Fund offers Class A Shares charging a front-end sales charge and Class B
Shares imposing a back-end sales charge upon the sale of shares within six years
of purchase.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Redemptions In Kind.
The Company, on behalf of the Fund, will pay in cash (by check) all requests for
redemption by any shareholder of record of the Fund. The amount is limited,
however, during any 90-day period, to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior permission of the SEC. If redemption requests
exceed these amounts, the Board of Directors reserves the right to make payments
in whole or in part using securities or other assets of a Fund (if there is an
emergency, or if a cash payment would be detrimental to the existing
shareholders of the Fund). In these circumstances, the securities distributed
would be valued at the price used to compute the Fund's net asset and you may
incur brokerage fees as a result of converting the securities to cash. The
Company does not intend to redeem illiquid securities in kind. If this happens,
however, you may not be able to recover your investment in a timely manner.
Exchanging Shares.
If you request the exchange of the total value of your account from one Fund to
another, we will reinvest any declared by unpaid income dividends and capital
gain distributions in the new Fund at its net asset value. Backup withholding
and information reporting may apply. Information regarding the possible tax
consequences of an exchange appears in the tax section in this SAI.
If a substantial number of shareholders sell their shares of a Fund under the
exchange privilege, within a short period, the Fund may have to sell portfolio
securities that it would otherwise have held, thus incurring additional
transactional costs. Increased use of the exchange privilege may also result in
periodic large inflows of money. If this occurs, it is the fund's general policy
to initially invest in short-term, interest-bearing money market instruments.
However, if the Manager believes that attractive investment opportunities
(consistent with the Fund's investment objective and policies) exist
immediately, then it will invest such money in portfolio securities in an
orderly a manner as is possible.
The proceeds from the sale of shares of the Fund may not be available until the
third business day following the sale. The Fund you are seeking to exchange into
may also delay issuing shares until that third business day. The sale of Fund
shares to complete an exchange will be effected at net asset value of the Fund
next computed after your request for exchange is received in proper form. See
Buying, Redeeming, and Exchanging shares in the Prospectus.
Conversion of Class B Shares to Class A Shares.
Class B Shares of the Fund will automatically convert to Class A Shares of the
Fund, based on the relative net asset value per share of the aforementioned
classes, eight years after the end of the calendar month in which your Class B
share order was accepted. For the purpose of calculating the holding period
required for conversion of Class B Shares, order acceptance shall mean: (1) the
date on which such Class B Shares were issued, or (2) for Class B Shares
obtained through an exchange, or a series of exchanges, (subject to the exchange
privileges for Class B Shares) the date on which the original Class B Shares
were issued. For purposes of conversion of Class B Shares, Class B Shares
purchased through the reinvestment of dividends and capital gain distribution
paid in respect of Class B Shares, Class B Shares will be held in a separate
sub-account. Each time any Class B Shares in the shareholder's regular account
(other than those shares in the sub-account) convert to Class A shares, a pro
rata portion of the Class B Shares in the sub-account will also convert to Class
A Shares. The portion will be determined by the ratio that the shareholder's
Class B Shares converting to Class A Shares bears to the shareholder's total
Class B Shares not acquired through the reinvestment of dividends and capital
gain distributions. The conversion of Class B to Class A is not a taxable event
for federal income tax purposes.
Whether a Contingent Deferred Sales Charge Applies.
In determining whether a Contingent Deferred Sales Charge ("CDSC") is applicable
to a redemption, the calculation will be made in a manner that results in the
lowest possible rate. It will be assumed that the redemption is made first of
amounts representing (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held for over six years, and (3) shares
held the longest during the six-year period.
Eligible Benefit Plans
An eligible benefit plan is an arrangement available to the (1) employees of an
employer (or two or more affiliated employers) having not less than ten
employees at the plan's inception (2) or such an employer on behalf of employees
of a trust or plan for such employees, their spouses and their children under
the age of 21 or a trust or plan for such employees, which provides for
purchases through periodic payroll deductions or otherwise. There must be at
least five initial participants with accounts investing or invested in shares of
one or more of the Fund and/or certain other funds.
The initial purchase by the eligible benefit plan along with prior purchases by
or for the benefit of the initial participants of the plan must aggregate not
less than $500. Subsequent purchases must be at least $50 per account and must
aggregate at least $250. The eligible benefit plan must make purchases using a
single order and a single check or federal funds wire. The eligible benefit plan
may not make purchases more often than monthly. The Company will establish a
separate account for each employee, spouse or child for which purchases are
made. The Company may modify the requirements for initiating or continuing
purchases or stop offering shares to such a plan at any time without prior
notice.
Selling Shares
You may redeem shares of the Fund at any time and in any amount by mail or
telephone. The Fund will use reasonable procedures to confirm that instructions
communicated by telephone are genuine and, if the procedures are followed, will
not be liable for any losses due to unauthorized or fraudulent telephone
transactions.
The Company's procedure is to redeem shares at the Net Asset Value (the "NAV")
determined after the Transfer Agent receives the redemption request in proper
order. Payment will be made promptly, but no later than the seventh day
following the receipt of the request in proper order. The Company may suspend
the right to redeem shares for any period during which the New York Stock
Exchange (the "NYSE") is closed or the SEC determines that there is an
emergency. In such circumstances you may withdraw your redemption request or
permit your request to be held for processing after the suspension is
terminated.
Small Accounts
Due to the relatively higher cost of maintaining small accounts, the Company may
deduct $50 per year from your account or may redeem the shares in your account,
if it has a value of less than $1,000. The Company will advise you in writing
thirty (30) days prior to deducting the annual fee or closing your account,
during which time you may purchase additional shares in any amount necessary to
bring the account back to $1,000. The Company will not close your account if it
falls below $1,000 solely because of a market decline. The Adviser and
Distributor reserve the right to waive this fee for their clients.
Special Shareholder Services
As described briefly in the Prospectus, the Fund offers the following
shareholder services:
Regular Account
A regular account allows a shareholder to make voluntary investments and/or
withdrawals at any time. Regular accounts are available to individuals,
custodians, corporations, trusts, estates, corporate retirement plans and
others. You may use the Account Application provided with the Prospectus to open
a regular account.
Telephone Transactions
You may redeem shares or transfer into another fund if you request this service
on your initial Account Application. If you do not elect this service at that
time, you may do so at a later date by sending a written request and signature
guarantee to FSI.
The Fund employs reasonable procedures designed to confirm the authenticity of
your telephone instructions and, if it does not, it may be liable for any losses
caused by unauthorized or fraudulent transactions. As a result of this policy, a
shareholder that authorizes telephone redemption bears the risk of losses, which
may result from unauthorized or fraudulent transactions which the Fund believes
to be genuine. When you request a telephone redemption or transfer, you will be
asked to respond to certain questions. The Company has designed these questions
to confirm your identity as a shareholder of record. Your cooperation with these
procedures will protect your account and the Fund from unauthorized
transactions.
Invest-A-Matic Account
Invest-A-Matic Accounts allow shareholders to make automatic monthly investments
into their account. Upon request, FSI will withdraw a fixed amount each month
from a shareholder's checking account and apply that amount to additional
shares. This feature does not require you to make a commitment for a fixed
period of time. You may change the monthly investment, skip a month or
discontinue your Invest-A-Matic Plan as desired by notifying FSI. To receive
more information, please call the offices of the Company at 1-800-527-9525. Any
shareholder may utilize this feature.
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 (or $2,250 with a spouse who is not a wage
earner, for years prior to 1997). 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 that govern
contributions made by individuals with earned income. A special IRA program is
available for corporate employers 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 you have received a lump sum distribution from another qualified retirement
plan, you may rollover all or part of that distribution 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 5 year period, beginning with the first tax year for which
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 Retirement 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. You may wish to consult with your attorney or other tax
adviser for specific advice concerning your tax status and plans.
Exchange Privilege
Shareholders may exchange their shares for shares of any other series of the
Company, provided the shares of the fund the shareholder is exchanging into are
registered for sale in the shareholder's state of residence. Each account must
meet the minimum investment requirements (currently $25,000 for the Sand Hill
Portfolio Manager Fund; $1,000 for the CSI Equity Fund, the CSI Fixed Income
Fund, the New Market Fund, the Third Millennium Russia Fund and the Monument
EuroNet Fund; and, $5,000 for GenomicsFund.com). Also, to make an exchange, an
exchange order must comply with the requirements for a redemption or repurchase
order and must specify the value or the number of shares to be exchanged. Your
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). FSI will charge your
account a $10 service fee each time you make such an 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 exchanging 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. The
exchange privilege is available only in states where it is legally permissible
to do so.
TAX STATUS
DISTRIBUTIONS AND TAXES
Distributions of net investment income
The Fund receive income generally in the form of dividends and interest on their
investments. This income, less expenses incurred in the operation of a fund,
constitutes a fund's net investment income from which dividends may be paid to
you. Any distributions by a fund from such income will be taxable to you as
ordinary income, whether you take them in cash or in additional shares.
Distributions of capital gains
The Fund may derive capital gains and losses in connection with sales or other
dispositions of their 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 eliminate
excise or income taxes on the Fund.
Effect of foreign investments on distributions
Most foreign exchange gains realized on the sale of securities are treated as
ordinary income by a fund. Similarly, foreign exchange losses realized by a fund
on the sale of securities are generally treated as ordinary losses by the Fund.
These gains when distributed will be taxable to you as ordinary dividends, and
any losses will reduce a fund's ordinary income otherwise available for
distribution to you. This treatment could increase or reduce a fund's ordinary
income distributions to you, and may cause some or all of a fund's previously
distributed income to be classified as a return of capital.
A fund may be subject to foreign withholding taxes on income from certain of its
foreign securities. If more than 50% of a fund's total assets at the end of the
fiscal year are invested in securities of foreign corporations, a fund may elect
to pass-through to you your pro rata share of foreign taxes paid by the Fund. If
this election is made, the year-end statement you receive from a 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. A 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
their 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, a 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 does not pay federal income
tax on the income and gains they distribute to you. The board reserves the right
not to maintain the qualification of a fund as a regulated investment company if
it determines such course of action to be beneficial to shareholders. In such
case, a 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 such Fund's earnings and profits.
Excise tax distribution requirements
To avoid federal excise taxes, the Internal Revenue Code requires a fund to
distribute to you by December 31 of each year, at a minimum, the following
amounts: 98% of its taxable ordinary income earned during the calendar year; 98%
of its capital gain net 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 that are
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
Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. If you redeem your Fund shares, or exchange your
Fund shares for shares of a different series of the Company, the IRS will
require that you report a gain or loss on your redemption or exchange. If you
hold your shares as a capital asset, the gain or loss that you realize will be
capital gain or loss and will be long-term or short-term, generally depending on
how long you hold 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 you 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.
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, performance will be stated in terms of total return or yield. Both
"total return" and "yield" figures are based on the historical performance of a
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 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 of $1,000
T = average annual total return
n = number of years (1,5 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 a 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 specific periods of time by assuming the investment of $10,000 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 the various
publications and statistical services, including but not limited to, SEI, Lipper
Mutual 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 the Fund by contacting the Fund directly at:
THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
TELEPHONE: (800) 527-9525
E-MAIL: [email protected]
The books of the Fund will be audited at least once each year by Tait, Weller
and Baker, of Philadelphia, PA, independent public accountants.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a) ARTICLES OF INCORPORATION.
(1) Articles of Incorporation of the Registrant are herein incorporated
by reference to the Registrant's Initial Registration Statement on Form
N-1A(File Nos. 333-29289 and 811-8255), as filed with the Securities
and Exchange Commission (the "SEC") on June 16, 1997.
(2) Articles Supplementary.
a. Re: the creation of the CSI Equity Fund and CSI Fixed Income Fund
dated July 29, 1997 are herein incorporated by reference to
Post-Effective Amendment Nos. 1/1 to the Registrant's Initial
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on August 1, 1997.
b. Re: the creation of the Third Millennium Russia Fund and New Market
Fund dated June 19, 1998 are herein incorporated by reference to
Post-Effective Amendment Nos. 4/4 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on July 8, 1998.
c. Re: increasing the amount of authorized shares are herein
incorporated by reference to Post-Effective Amendment Nos. 4/4 to
the Registrant's Registration Statement on Form N-1A(File Nos.
333-29289 and 811-8255), as filed with the SEC on July 8, 1998.
d. Re: The creation of the GenomicsFund.com dated December 9, 1999
are herein incorporated by reference to Post-Effective Amendment Nos.
9/11 to the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on January 7,
2000.
e. Re: The creation of the Global e Fund dated April 14, 2000 are herein
incorporated by reference to Post-Effective Amendment Nos. 10/12 to
the Registrant's Registration Statement on Form N-1A (File Nos.
333-29289 and 811-8255), as filed with the SEC on February 24, 2000
f. Re: The creation of the Monument EuroNet Fund dated April 14, 2000 are
herein incorporated by reference to Post-Effective Amendment Nos.
11/13 to the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on May 12, 2000.
g. Re: Increasing the amount of authorized shares of the Registrant and
reallocating such shares among these series dated May 24, 2000 is
filed herewith as EX-99.a(1)
h. RE FORM OF: Articles reclassifying the existing shares of the
Global e Fund dated ___________, 2000 is filed herewith as EX-99.a(2).
(b) BY-LAWS.
By-Laws of the Registrant are herein incorporated by reference to the
Registrant's Initial Registration Statement on Form N-1A (File Nos. 333-29289
and 811-8255), as filed with the SEC on June 16, 1997.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS.
Specimen Share Certificate
a. 1/ Re: Sand Hill Portfolio Manager Fund is herein
incorporated by reference to the Registrant's Initial
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255) as filed with the SEC on June 16, 1997.
2/ Re: CSI Equity Fund and CSI Fixed Income Fund is herein
incorporated by reference to Post-Effective Amendment Nos. 1/1
to the Registrant's Initial Registration Statement on Form
N-1A (File Nos. 333-29289 and 811-8255), as filed with the SEC
on August 1, 1997.
3/ Re: Third Millennium Russia Fund and New Market Fund. Is
herein incorporated by reference to Post-Effective Amendment
Nos. 4/4 of the Registrant's Registration Statement on Form
N-1A (File Nos. 333-29289 and 811-8255) as filed with the SEC
on July 8, 1998.
4/ Re: GenomicsFund.com is herein incorporated by reference to
Post-Effective Amendment Nos. 9/11 of the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255) as filed with the SEC on January 7, 2000.
5/ Re: Global e-Fund is herein incorporated by
reference to Post-Effective Amendment Nos. 10/12 of the
Registrant's Registration Statement on Form N-1A (File Nos.
333-29289 and 811-8255) as filed with the SEC on February 24,
2000.
6/ Re: Monument EuroNet Fund is herein incorporated by reference
to Post-Effective Amendment Nos. 11/13 of the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on May 12, 2000.
b. Applicable sections of Articles and By-Laws to be referenced in
future Post-Effective Amendment.
(d) INVESTMENT ADVISORY CONTRACTS.
(1) Re: Sand Hill Portfolio Manager Fund.
Agreement dated August 19, 1997 between Sand Hill Advisors, Inc.
and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 2/2 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on December 1, 1997.
(2) Re: CSI Equity Fund.
Agreement dated October 14, 1997 between CSI Capital Management,
Inc. and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 2/2 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on December 1, 1997.
(3) Re: CSI Fixed Income Fund.
Agreement dated October 14, 1997 between CSI Capital Management
Inc. and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 2/2 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on December 1, 1997.
(4) Re: Third Millennium Russia Fund.
Agreement dated September 21, 1998 between Third Millennium
Investment Advisors LLC and the Registrant is herein incorporated by
reference to Post-Effective Amendment No.5 to the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on December 30, 1998.
(5) Re: New Market Fund.
a. Agreement dated September 21, 1998 between Virginia Management
Investment Corporation and the Registrant is herein
incorporated by reference to Post-Effective Amendment No. 5
to the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on
December 30, 1998.
b. Agreement dated September 21, 1998 between Virginia Management
Investment Corporation and the London Company of Virginia is
herein incorporated by reference to Post-Effective Amendment
No. 5 to the Registrant's Registration Statement on Form N-1A
(File Nos. 333-29289 and 811-8255), as filed with the SEC on
December 30, 1998.
(6) Re: GenomicsFund.com.
Agreement dated March 1, 2000 between xGENx, LLC and the
Registrant is herein incorporated by reference to Post-
Effective Amendment Nos. 11/13 to the Registrant's Registration
Statement on Form N-1A (File Nos.333-29289 and 811-8255), as
filed with the SEC on May 12, 2000.
(7) Re: Global e-Fund.
Agreement dated May 1, 2000 between Global Assets Advisors and
the Registrant is herein incorporated by reference to Post-
Effective Amendment Nos. 11/13 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as
filed with the SEC on May 12, 2000.
(8) Re: Monument EuroNet Fund.
a. Agreement dated June 19,2000 between Vernes Asset
Management, LLC and the Registrant is herein incorporated
by reference to Post-Effective Amendment Nos. 11/13 to
the Registrant's Registration Statement on Form N-1A
(File Nos. 333-29289 and 811-8255), as filed with the SEC
on May 12, 2000.
b. Agreement dated June 19, 2000 between Vernes Asset
Management, LLC and Financiere Rembrandt is herein
incorporated by reference to Post-Effective Amendment
Nos. 11/13 to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on May 12, 2000.
c. Agreement dated June 19,2000 between Vernes Asset
Management, LLC and Monument Advisors, Ltd. is herein
incorporated by reference to Post-Effective Amendment
Nos. 11/13 to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-29289 and 811-8255), as filed
with the SEC on May 12, 2000.
(e) UNDERWRITING CONTRACTS.
(1) Distribution Agreements.
Distribution Agreement dated September 21, 1998 between First
Dominion Capital Corp. and the Registrant is herein incorporated by
reference to Post-Effective Amendment No.5 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed with
the SEC on December 30, 1998.
(2) Distribution Agreement dated May 1, 2000 between International Assets
Advisory Corporation and the Registrant is herein incorporated by
reference to Post-Effective Amendment No.10/12 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed
with the SEC on February 24, 2000.
(3) Not Applicable
(4) Not Applicable
(5) Joint Distribution Agreement on behalf of the Monument EuroNet Fund
series of the Registrant, dated June 19, 2000 between the
Registrant, First Dominion Capital Corp. and Monument Distributors,
Inc. is filed herewith as EX-99.e(1).
(6) FORM OF: Joint Distribution Agreement on behalf of the Global e
Fund series of the Registrant, dated ____________, 2000 between the
Registrant, First Dominion Capital Corp. and International Assets
Advisors Corp. is filed herewith as EX-99.e(2).
(f) BONUS OR PROFIT SHARING CONTRACTS.
Not Applicable.
(g) CUSTODIAN AGREEMENTS.
(1) Custodian Agreement dated August 19, 1997 between Star Bank, N.A. and
the Sand Hill Portfolio Manager Fund series of the Registrant is
deleted and is no longer filed.
(2) Custodian Agreement dated October 14, 1997 between Star Bank, N.A.
and the CSI Equity Fund series and the CSI Fixed Income Fund series
of the Registrant is deleted and is no longer filed.
(3) Re: Third Millennium Russia Fund.
Agreement dated October 28, 1998 between Brown Brothers Harriman &
Co. and the Registrant is herein incorporated by reference to
Post-Effective Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A (File No. 811-8255), as filed with the SEC
on December 30, 1998.
(4) Custodian Agreement dated August 21, 1998 between Star Bank, N.A. and
The New Market Fund series of the Registrant is deleted and is no
longer filed.
(5) Re: CSI Equity Fund, CSI Fixed Income Fund, GenomicsFund.com, Global
e Fund, Monument EuroNet Fund, Sand Hill Portfolio Manager Fund and
The New Market Fund.
a. Appendix dated June 1, 2000 to Agreement dated October 28, 1998
between Brown Brothers Harriman & Co and the Registrant is filed
herewith as EX-99.g(1).
(6) FOREIGN CUSTODY ARRANGEMENTS.
a. Re: Third Millennium Russia Fund.
Foreign Custody Manager Delegation Agreement dated October 28,
1998 between Brown Brothers Harriman & Co. and the Registrant
is herein incorporated by reference to Post-Effective
Amendment No. 5 to the Registrant's Registration Statement on
Form N-1A (File No. 811-8255), as filed with the SEC on
December 30, 1998.
b. Re: CSI Equity fund, CSI Fixed Income Fund, GenomicsFund.com,
Global e Fund, Monument EuroNet Fund, Sand Hill Portfolio Manager
Fund and The New Market Fund.
1. Appendix dated June 1, 2000 to Foreign Custody Manager
Delegation Agreement dated October 28, 1998 between
Brown Brothers Harriman & Co and the Registrant is filed
herewith as EX-99.g(2).
(h) OTHER MATERIAL CONTRACTS.
(1) Transfer Agency.
a. Agreement dated August 19, 1997 between Fund Services, Inc.
and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 2/2 to the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on December 1, 1997.
b. Agreement between PFPC, Inc. and the Registrant on behalf of
the Monument EuroNet Fund series is filed herewith as
EX-99.h(1).
(2) Administrative Services.
a. Re: Sand Hill Portfolio Manager Fund.
Agreement dated August 19, 1997 between Commonwealth
Shareholder Services, Inc. and the Registrant is herein
incorporated by reference to Post-Effective Amendment No. 2/2
to the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on
December 1, 1997.
b. Re: CSI Equity Fund.
Agreement dated October 14, 1997 between Commonwealth
Shareholder Services, Inc. and the Registrant is herein
incorporated by reference to Post-Effective Amendment Nos. 2/2
to the Registrant's Registration Statement on Form N-1A(File
Nos. 333-29289 and 811-8255), as filed with the SEC on
December 1, 1997.
c. Re: CSI Fixed Income Fund.
Agreement dated October 14, 1997 between Commonwealth
Shareholder Services, Inc. and the Registrant is herein
incorporated by reference to Post-Effective Amendment Nos. 2/2
to the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on
December 1, 1997.
d. Re: Third Millennium Russia Fund.
Agreement dated September 21, 1998 between Commonwealth
Shareholder Services, Inc. and the Registrant is herein
incorporated by reference to Post-Effective Amendment No. 5 to
the Registrant's Registration Statement on Form N-1A (File No.
811-8255), as filed with the SEC on December 30, 1998.
e. Re: New Market Fund.
Agreement dated September 21, 1998 between Commonwealth
Shareholder Services, Inc. and the Registrant is herein
incorporated by reference to Post Effective Amendment No. 5 to
the Registrant's Registration Statement on Form N-1A (File
Nos. 333-29289 and 811-8255), as filed with the SEC on
December 29, 1998.
f. Re: GenomicsFund.com.
Agreement dated March 1, 2000 between Commonwealth Shareholder
Services, Inc. and the Registrant is herein incorporated by
reference to Post-Effective Amendment Nos. 11/13 to the
Registrant's Registration Statement on Form N-1A (File
Nos.333-29289 and 811-8255), as filed with the SEC on May 12,
2000.
g. Re: Global e-Fund. Agreement dated May 1, 2000, between
Commonwealth Shareholder Services, Inc. and the Registrant is
herein incorporated by reference to Post-Effective Amendment Nos.
11/13 to the Registrant's Registration Statement on Form N-1A
(File Nos.333-29289 and 811-8255), as filed with the SEC on May
12, 2000.
h. Re: Monument EuroNet Fund.
Agreement dated June 19, 2000 between Commonwealth Shareholder
Services, Inc. and the Registrant is herein incorporated by
reference to Post-Effective Amendment Nos. 11/13 to the
Registrant's Registration Statement on Form N-1A (File
Nos.333-29289 and 811-8255), as filed with the SEC on May 12,
2000.
(3) Fund Accounting Service.
a. Fund Accounting Services Agreement dated August 18, 1997 between
Star Bank, N.A. and the Sand Hill Portfolio Manager Fund series
of the Registrant is deleted and is no longer filed.
b. Fund Accounting Services Agreement dated October 14, 1997
between Star Bank, N.A. and the CSI Equity Fund series and the
CSI Fixed Income Fund series of the Registrant is deleted and
is no longer filed.
c. Fund Accounting Services Agreement dated August 21, 1998 between
Star Bank, N.A. and The New Market Fund series of the Registrant
is deleted and is no longer filed.
d. Re: CSI Equity Fund, CSI Fixed Income Fund, GenomicsFund.com,
Monument EuroNet Fund, Sand Hill Portfolio Manager Fund and The
New Market Fund.
i. Agreement dated July 1, 2000 between CFA and the
Registrant is filed herewith as EX-99.h(3).
(4) Accounting Agency.
a. Re: Third Millennium Russia Fund.
Agreement dated October 28, 1998 between Brown Brothers
Harriman & Co. and the Registrant is herein incorporated
by reference to Post-Effective Amendment Nos. 5/6 to the
Registrant's Registration Statement on Form N-1A (File Nos.
333-29289 and 811-8255), as filed with the SEC on January 29,
1999.
b. Re: Global e Fund.
Addendum to Agreement dated October 28, 1998 between Brown
Brothers Harriman & Co. and the Registrant is filed herewith
as EX-99.h(4).
(5) Retirement Plans.
a. IRA Service Agreement between Brown Brothers Harriman & Co.
and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 4/4 to the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on July 8, 1998.
(6) Expense Limitations Agreements.
a. Agreement dated October 1, 1998 between the New Market Fund
series of the Registrant and Virginia Management
Investment Corporation is herein incorporated by reference
to Post-Effective Amendment Nos. 11/13 to the Registrant's
Registration Statement on Form N-1A (File Nos. 333-29289 and
811-8255), as filed with the SEC on May 12, 2000.
b. Agreement dated October 1, 1998 between the Third Millennium
Russia Fund series of the Registrant and Third
Millennium Investment Advisors LLC is herein incorporated by
reference to Post-Effective Amendment Nos. 11/13 to the
Registrant's Registration Statement on Form N-1A (File Nos.
333-29289 and 811-8255), as filed with the SEC on May 12, 2000.
c. Agreement dated March 1, 2000 between the
GenomicsFund.com Fund series of the Registrant and xGENx,
LLC is herein incorporated by reference to Post-Effective
Amendment Nos. 11/13 to the Registrant's Registration
Statement on Form N-1A (File Nos. 333-29289 and 811-8255), as
filed with the SEC on May 12, 2000.
d. Agreement dated May 1, 2000 between the Global e Fund series
of the Registrant and Global Assets Advisors is herein
incorporated by reference to Post-Effective Amendment Nos.
11/13 to the Registrant's Registration Statement on Form N-1A
(File Nos. 333-29289 and 811-8255), as filed with the SEC on
May 12, 2000.
e. Agreement dated June 19, 2000 between the Monument EuroNet Fund
series of the Registrant and Vernes Asset Management, LLC is
herein incorporated by reference to Post-Effective Amendment Nos.
11/13 to the Registrant's Registration Statement on Form N-1A
(File Nos. 333-29289 and 811-8255), as filed with the SEC on May
12, 2000.
f. FORM OF: Agreement dated _________, 2000 between the Global e
Fund series of the Registrant and Global Assets Advisors is
filed herewith as EX-99.h(6).
(i) LEGAL OPINION.
(1) Deleted
(2) Deleted
(3) Deleted
(4) Opinion of Counsel dated May 12, 2000 is herein incorporated by
reference to Post-Effective Amendment Nos. 11/13 to the
Registrant's Registration Statement on Form N-1A (File Nos.
333-29289 and 811-8255), as filed with the SEC on May 12, 2000.
a. Consent of Counsel dated August 18, 2000 is filed
herewith as EX-23.
(k) OMITTED FINANCIAL STATEMENTS.
Not Applicable.
(l) INITIAL CAPITAL AGREEMENTS.
Not Applicable.
(m) RULE 12B-1 PLAN.
(1) Re: Third Millennium Russia Fund.
Plan of Distribution dated September 21, 1998 is herein
incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A (File No.
811-8255), as filed with the SEC on December 30, 1998.
(2) Re: New Market Fund.
Plan of Distribution dated September 21, 1998 is herein incorporated
by reference to Post Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed with
the SEC on December 30, 1998.
(3) Re: GenomicsFund.com
Plan of Distribution dated March 1, 2000 is herein incorporated by
reference to Post Effective Amendment Nos. 11/13 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed with
the SEC on May 12, 2000.
(4) Re: Global e-Fund.
Plan of Distribution dated May 1, 2000 is herein incorporated by
reference to Post Effective Amendment Nos. 11/13 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed with
the SEC on May 12, 2000.
(5) Re: Monument EuroNet Fund.
a. Plan of Distribution for Class A Shares dated June 19, 2000 is
herein incorporated by reference to Post Effective Amendment
Nos. 11/13 to the Registrant's Registration Statement on Form
N-1A (File No.811-8255), as filed with the SEC on May 12, 2000.
b. Plan of Distribution for Class B Shares dated June 19, 2000 is
herein incorporated by reference to Post Effective Amendment Nos
11/13 to the Registrant's Registration Statement on Form N-1A
(File No.811-8255), as filed with the SEC on May 12, 2000.
c. Plan of Distribution for Class C Shares dated June 19, 2000 is
herein incorporated by reference to Post Effective Amendment Nos
11/13 to the Registrant's Registration Statement on Form N-1A
(File No.811-8255), as filed with the SEC on May 12, 2000.
(6) Re: Global e Fund.
a. FORM OF Plan of Distribution for Class A Shares is filed herewith
as EX-99.m(1)(a).
b. FORM OF Plan of Distribution for Class B Shares is filed herewith
as EX-99.m(1)(b).
(n) RULE 18F-3 PLAN
1. Re: Monument EuroNet Fund. Rule 18f-3 Multiple Class Plan dated
June 19,2000 is herein incorporated by reference to Post
Effective Amendment Nos. 11/13 to the Registrant's Registration
Statement on Form N-1A (File No.811-8255), as filed with the SEC
on May 12, 2000.
2. Re: Global e Fund.
Rule 18f-3 Multiple Class Plan dated ____________is filed
herewith as EX-99.n.
(o) RESERVED.
(p) CODES OF ETHICS.
1. The Code of Ethics of the Registrant is herein incorporated by
reference to Post-Effective Amendment Nos. 11/13 to the Registrant's
Registration Statement on Form N-1A (File No.811-8255), as filed with
the SEC on May 12, 2000.
2. The Code of Ethics of Vernes Asset Management, LLC is herein
incorporated by reference to Post-Effective Amendment Nos. 11/13 to
the Registrant's Registration Statement on Form N-1A (File
No.811-8255), as filed with the SEC on May 12, 2000.
3. The Code of Ethics of First Dominion Capital Corp. is herein
incorporated by reference to Post-Effective Amendment Nos. 11/13
to the Registrant's Registration Statement on Form N-1A (File
No.811-8255), as filed with the SEC on May 12, 2000.
4. The Code of Ethics of Monument Distributors, Inc. is herein
incorporated by reference to Post-Effective Amendment Nos. 11/13
to the Registrant's Registration Statement on Form N-1A (File
No.811-8255), as filed with the SEC on May 12, 2000.
5. The Code of Ethics of xGENx, LLC is filed herewith as EX-99.p(1).
6. The Code of Ethics of International Assets Advisory Corp. is
filed herewith as EX-99.p(2).
7. The Code of Ethics of Global Assets Advisory Corp. is filed
herewith as EX-99.p(3).
8. The Code of Ethics of Sand Hill Advisors, Inc. is filed herewith
as EX-99.p(4).
q. POWERS-OF-ATTORNEY.
1. Re: Samuel Boyd, Jr., William E. Poist and Paul M. Dickinson
are herein incorporated by reference to the Registrant's
Initial Registration Statement on Form N-1A (File Nos. 333-29289
and 811-8255), as filed with the SEC on June 16, 1997.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None
ITEM 25. INDEMNIFICATION.
The Registrant is incorporated under the General Corporation Law (the "GCL") of
the State of Maryland. The Registrant's Articles of Incorporation provide the
indemnification of directors, officers and other agents of the corporation to
the fullest extent permitted under the GCL. The Articles limit such
indemnification so as to comply with the prohibition against indemnifying such
persons under Section 17 of the Investment Company Act of 1940, as amended, for
certain conduct set forth in that section ("Disabling Conduct"). Contracts
between the Registrant and various service providers include provisions for
indemnification, but also forbid the Registrant to indemnify affiliates for
Disabling Conduct.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
a.) Sand Hill Advisors, Inc., the investment Adviser to the Sand Hill
Portfolio Manager Fund series, provides investment advisory
services consisting of portfolio management for a variety of
individuals and institutions and as of December 21, 1999, had
approximately $500 million in assets under management.
b.) CSI Capital Management, Inc., ("CSI") the investment Adviser to the
CSI Equity Fund series and the CSI Fixed Income Fund series, provides
investment advisory services consisting of portfolio management for a
variety of individuals and institutions and as of December 21, 1999
had approximately $244 million in assets under management. A
principal of CSI acts as trustee supervising an additional $30
million in assets.
c.) Third Millennium Investment Advisors, LLC, the investment adviser to
the Third Millennium Russia Fund, is a newly formed adviser formed
for the purpose of advising Registered Investment Companies and as of
December 21, 1999, had approximately $1 million in assets under
management.
d.) Virginia Management Investment Corporation, the investment manager to
the New Market Fund is a newly formed Adviser formed for the purpose
of advising Registered Investment Companies. The London Company of
Virginia (The London Company") is the investment Adviser to the New
Market Fund pursuant to an Investment Advisory Agreement between
Virginia Management Investment Corporation and The London Company and
currently has $3.7 million in assets under management.
e.) xGENx, LLC, the investment adviser to the GenomicsFund.com, is
a newly formed adviser for the purpose of advising Registered
Investment Companies.
f.) Global Assets Advisors, Inc., the investment adviser to the
Global e Fund series, provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions and currently has approximately $50 million in assets
under management.
g.) Vernes Asset Management, LLC, the investment manager to the Monument
EuroNet Fund series, is a newly formed manager for the purpose of
advising Registered Investment Companies.
For information as to any other business, profession, vocation or employment of
a substantial nature in which each of the foregoing investment Advisers, and
each director, officer or partner of such investment Advisers, is or has been
engaged within the last two fiscal years for his or her own account or in the
capacity of director, officer, employee, partner or trustee, reference is made
to the investment Adviser's Form ADV listed opposite the investment Adviser's
name below, which is currently on file with the SEC as required by the
Investment Advisors Act of 1940, as amended.
Name of Investment Adviser Form ADV File Number
Sand Hill Advisors, Inc. 801-17601
CSI Capital Management, Inc. 801-14549
Third Millennium Investment Advisors, LLC 801-55720
Virginia Management Investment Corporation 801-55697
The London Company of Virginia 801-46604
xGENx, LLC 801-57224
Global Assets Advisors, Inc. 801-46753
Vernes Asset Management, LLC 801-57651
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) (1) First Dominion Capital Corp., also acts as underwriter
to Vontobel Funds, Inc.
(2) International Assets Advisory Corp.
(3) Monument Distributors, Inc. also acts as underwriter to
Monument Series Fund, Inc.
(b) (1) First Dominion Capital Corp.
Position and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Fund
John Pasco, III President, Chief Chairman,
1500 Forest Avenue Financial Officer President
Suite 223 and Treasurer and Director
Richmond VA 23229
Mary T. Pasco Director Assistant
1500 Forest Avenue Secretary
Suite 223
Richmond, VA 23229
Darryl S. Peay Vice President Assistant
1500 Forest Avenue Assistant Compliance Secretary
Suite 223 Officer
Richmond, VA 23229
Lori J. Martin Vice President and None
1500 Forest Avenue Assistant Secretary
Suite 223
Richmond, VA 23229
F. Byron Parker, Jr. Secretary Secretary
Mustian & Parker
8002 Discovery Drive
Suite 101
Richmond, VA 23229
(b) (2) International Assets Advisory Corporation
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Underwriter Fund
Diego J. Veitia Director, Chairman None
250 Park Ave., So. Of the Board,
Suite 200 President and Chief
Winter Park, FL 32789 Executive Officer
Stephen A. Saker Director and Exec. None
250 Park Ave., So. Vice President
Suite 200
Winter Park, FL 32789
Jerome F. Misceli Director None
250 Park Ave., So.
Suite 200
Winter Park, FL 32789
Jeffrey L. Rush, MD Director None
250 Park Ave., So.
Suite 200
Winter Park, FL 32789
Robert A. Miller Director None
250 Park Ave., So.
Suite 200
Winter Park, FL 32789
Jonathan C. Hinz Chief Financial None
250 Park Ave., So. Officer and Treasurer
Suite 200
Winter Park, FL 32789
Todd A. Boren Sr. Vice President None
250 Park Ave., So. & Managing Director
Suite 200 of Private Client
Winter Park, FL 32789 Operations
Gerard A. Mastrianni Sr. Vice President None
250 Park Ave., So.
Suite 200
Winter Park, FL 32789
Sheri Ann Cuff Vice President- None
250 Park Ave., So. Operations
Suite 200
Winter Park, FL 32789
Nancy M. McMurtry Vice President- None
250 Park Ave., So. Compliance
Suite 200
Winter Park, FL 32789
(b) (3) Monument Distributors, Inc.
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Underwriter Fund
David A. Kugler President, Treasurer None
7920 Norfolk Avenue and Director
Suite 500
Bethesda, Maryland 20814
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books or other documents of the Registrant required to be
maintained by Section 31 (a) of the Investment Company Act of 1940, as amended,
and the rules promulgated thereunder are kept in several locations:
(a) Investment records, including research information, records relating to
the placement of brokerage transactions, memorandums regarding
investment recommendations for supporting and/or authorizing the
purchase or sale of assets, information relating to the placement of
securities transactions, and certain records concerning investment
recommendations of the Fund are maintained at each Fund's investment
adviser, as follows:
Fund: Sand Hill Portfolio Manager Fund
Adviser: Sand Hill Advisors, Inc., located at:
Location: 3000 Sand Hill Road
Building 3, Suite 150
Menlo Park, CA 94025
Fund: CSI Equity Fund and CSI Fixed Income Fund
Adviser: CSI Capital Management
Location: 445 Bush Street, 5th Floor
San Francisco, CA 94108
Fund: Third Millennium Russia Fund
Adviser: Third Millennium Investment Advisors, LLC:
Location: 515 Madison Avenue, 24th Floor
New York, NY 10022
Fund: New Market Fund
Adviser: The London Company
Location: Riverfront Plaza, West Tower
901 E. Byrd Street, Suite 350A
Richmond, VA 23219
Fund: GenomicsFund.com
Adviser: xGENx, LLC
Location: 555 Quince Orchard Road, Suite 606
Gaithersburg, MD 20878
Fund: Global e-Fund
Adviser: Global Assets Advisors, Inc.
Location: 250 Park Avenue South, Suite 200
Winter Park, FL 32789
Fund: Monument EuroNet Fund
Adviser: Vernes Asset Management, LLC
Location: 993 Farmington Avenue, Suite 205
Hartford, CT 06107(b)
(b) Accounts and records for portfolio securities and other investment assets,
including cash of each of the Funds, as well as applicable accounting
records, general ledgers, supporting ledgers, pricing computations, etc.
are maintained in the custody of each Fund's custodian bank and accounting
services agent, as follows:
Custodian Bank/Accounting
Services Agent: Brown Brothers Harriman & Co.
Location: 40 Water Street
Boston, MA 02109
(c) (1) Shareholder Account Records (including share ledgers,
duplicate confirmations, duplicate account statements and
applications forms) pertaining to The CSI Equity Fund, CSI Fixed
Income Fund, GenomicsFund.com, Global e Fund, Sand Hill Portfolio
Manager Fund, The New Market Fund and Third Millennium Russia
Fund are maintained by their transfer agent, Fund Services, Inc.:
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
(2) Shareholder Account Records (including share ledgers, duplicate
confirmations, duplicate account statements and application
forms) pertaining to the Monument EuroNet Fund are maintained by
its transfer agent, PFPC, Inc.:
400 Bellevue Parkway
Wilmington, Delaware 19809
(d) Administrative records, including copies of the charter, by-laws,
minute books, agreements, compliance records and reports,
certain shareholder communications, etc. pertaining to each of
the Funds are kept at their administrator, Commonwealth
Shareholder Services, Inc., located at:
1500 Forest Avenue, Suite 223
Richmond, VA 23229
(e) Records relating to distribution of shares of Sand Hill Portfolio Manager
Fund, CSI Equity Fund, CSI Fixed Income Fund, New Market Fund, Third
Millennium Russia Fund, GenomicsFund.com, Monument EuroNet Fund and
Global e Fund B shares are kept at their distributor, First Dominion
Capital Corp., located at:
1500 Forest Avenue, Suite 223
Richmond, VA 23229.
(f) Records relating to distribution of shares of Global e-Fund are kept at
their distributor, International Assets Advisory Corporation, located at:
250 Park Avenue, South
Suite 200
Winter Park, Florida 32789
(g) Records relating to distribution of shares of Monument EuroNet
Fund are kept at their distributor, Monument Distributors, Inc., located
at:
7920 Norfolk Avenue, Suite 500
Bethesda, Maryland 20814
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A or B
of this Form.
ITEM 30. UNDERTAKINGS.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund has duly caused this registration statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Richmond, and Commonwealth of Virginia on the 18th day of August, 2000.
THE WORLD FUNDS, INC.
By /s/ John Pasco, III
------------------------
(Signature and Title)
John Pasco, III,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
(Signature) (Title) (Date)
/s/ John Pasco, III Director, Chairman August 18, 2000
John Pasco, III Chief Executive
Officer and Chief
Financial Officer
/s/ SAMUEL BOYD, JR.* Director August 18, 2000
Samuel Boyd, Jr.
/s/ PAUL M. DICKENSON* Director August 18, 2000
Paul M. Dickinson
/s/ WILLIAM E. POIST* Director August 18, 2000
William E. Poist
/s/ John Pasco, III
------------------------
John Pasco, III
* By John Pasco, III, Attorney-in-Fact Pursuant to Powers-of-Attorney.
<PAGE>
EXHIBIT INDEX EDGAR EXHIBIT #
-------------------- ---------------
Articles Supplementary EX-99.a(1)
Articles Supplementary EX-99.a(2)
Distribution Agreement EX-99.e(1)
Form Of: Distribution Agreement EX-99.e(2)
Custody Agreement Appendix EX-99.g(1)
Foreign Custody Agreement Appendix EX-99.g(2)
PFPC Transfer Agent Agreement EX-99.h(1)
Fund Accounting Services Agreement EX-99.h(3)
Accounting Agency Agreement Appendix EX-99.h(4)
Form Of: Expense Limitation Agreement EX-99.h(6)
Consent of Counsel EX-23
Form Of: Plan of Distribution - Class A Shares EX-99.m(1)(a)
Form Of: Plan of Distribution - Class B Shares EX-99.m(1)(b)
Rule 18f-3 Multiple Class Plan EX-99.n
Code of Ethics xGENx, LLC EX-99.p(1)
Code of Ethics International Assets Advisory Corp. EX-99.p(2)
Code of Ethics Global Assets Advisory Corp. EX-99.p(3)
Code of Ethics Sand Hill Advisors EX-99.p(4)
<PAGE>
EX-99.a(1)
THE WORLD FUNDS, INC.
Articles Supplementary
The World Funds, Inc., a Maryland corporation having an office in
Baltimore, Maryland (the "Corporation") and an open-end investment company
registered under the Investment Company Act of 1940, as amended, hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on May
24, 2000, adopted resolutions classifying the total number of shares of Common
Stock of the Corporation to be Seven Hundred Fifty Million (750,000,000) shares
of Common Stock with a par value of One Cent ($.01) per share; and
SECOND: (a) The total number of shares of stock which the Corporation was
authorized to issue prior to the aforesaid action was Five Hundred Million
(500,000,000) shares of Common Stock, with a par value of One Cent ($.01) per
share, having an aggregate value of Five Million Dollars ($5,000,000):
One series of shares was designated as the Sand Hill Portfolio Manager
Fund series and Fifty Million (50,000,000) shares of Common Stock (par value
$.01 per share) were classified and allocated to such series, with an aggregate
par value of Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the CSI Equity Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the CSI Fixed Income Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the Third Millennium Russia Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) were classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as The New Market Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the GenomicsFund.com series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the Global e-Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
(b) The total number of shares of stock which the Corporation is
authorized to issue, following the aforesaid actions, is Seven Hundred Fifty
Million (750,000,000) shares of Common Stock, with a par value of One Cent
($.01) per share, having an aggregate par value of Seven Million Five Hundred
Thousand Dollars ($7,500,000):
One series of shares is designated as the Sand Hill Portfolio Management
Fund series and Fifty Million (50,000,000) shares of Common Stock (par value
$.01 per share) are classified and allocated to such series, with an aggregate
par value of Five Hundred Thousand Dollars ($500,000).
One series of shares is designated as the CSI Equity Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the CSI Fixed Income Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the Third Millennium Russia Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) are classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000);
One series of shares is designated as the New Market Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the GenomicsFund.com series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000).
One series of shares is designated as the Global e-Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the Monument EuroNet Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, and further reclassified those shares
as follows: Twenty Million (20,000,000) shares for Class A shares of the series;
Fifteen Million (15,000,000) shares for Class B shares of the series; and
Fifteen Million (15,000,000) shares for Class C shares of the series, with an
aggregate par value of Five Hundred Thousand Dollars ($500,000);
THIRD, The shares of the Monument EuroNet Fund series shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as are stated in Article FIFTH of the Articles of
Incorporation of the Corporation.
FOURTH: With respect to the Monument EuroNet Fund series, at such times as may
be determined by the Board of Directors (or with the authorization of the Board
of Directors, the officers and the Corporation) in accordance with the
Investment Company Act of 1940, as amended, all other applicable rules and
regulations, and as reflected in the registration statement of the Monument
EuroNet Fund, current as of the time such shares are issued, shares of Class B
and Class Y, to the extent applicable, may be automatically converted into
shares of another class of capital stock of the Monument EuroNet Fund based on
the relative net asset values of such classes at the time of conversion,
subject, however, to any conditions of conversion that may be imposed by the
Board of Directors (or with the authorization of the Board of Directors, the
officers and the Corporation) and reflected in such current registration
statement relating to the Monument EuroNet Fund.
FIFTH: The aforesaid shares of the Monument EuroNet Fund series have been duly
classified and allocated by the Board of Directors pursuant to the authority and
power contained in the charter of the Corporation.
IN WITNESS WHEREOF, The World Funds, Inc., has caused these
Articles
Supplementary to be signed in its name and on its behalf this 24 day of
May,
2000.
The World Funds, Inc.
By /s/ John Pasco, III
------------------------
John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
/s/Darryl S. Peay
---------------------
Name: Darryl S. Peay
Title: Assistant Secretary
<PAGE>
THE UNDERSIGNED, Chairman and Chief Executive Officer of The World Funds,
Inc., who executed on behalf of said Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles to be the
corporate act of said Corporation and further certifies, that, to the best of
his knowledge, information and belief, the matters and facts set forth herein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ John Pasco, III
--------------------
John Pasco, III
Chairman and Chief Executive Officer
Attest:
/s/ Darryl S. Peay
--------------------
Darryl S. Peay
Assistant Secretary
<PAGE>
EX-99.a(2)
THE WORLD FUNDS, INC.
Articles Supplementary
The World Funds, Inc., a Maryland corporation having an office in
Baltimore, Maryland (the "Corporation") and an open-end investment company
registered under the Investment Company Act of 1940, as amended, hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held
on__________,2000, adopted resolutions to reclassify Common Stock of the Global
e Fund series of the Corporation as follows: (i) Fifty Million (50,000,000)
shares of Common Stock with a par value of One Cent ($.01) per share which has
been previously allocated to the Global e Fund series of the Corporation,
further reclassifies those shares as follows: Twenty-five Million (25,000,000)
shares for Class A shares of the series; and Twenty-five Million (25,000,000)
shares for Class B shares of the series.
SECOND: (a) The total number of shares of stock which the Corporation was
authorized to issue prior to the aforesaid action was Seven Hundred Fifty
Million (750,000,000) shares of Common Stock, with a par value of One Cent
($.01) per share, having an aggregate value of Seven Million Five Hundred
Thousand Dollars ($7,500,000):
One series of shares was designated as the Sand Hill Portfolio Manager Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) were classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the CSI Equity Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the CSI Fixed Income Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the Third Millennium Russia Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the New Market Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share)were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the GenomicsFund.com series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
One series of shares was designated as the Global e Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
(b) The total number of shares of stock which the Corporation is authorized to
issue, following the aforesaid actions, is Seven Hundred Fifty Million
(750,000,000) shares of Common Stock, with a par value of One Cent ($.01) per
share, having an aggregate par value of Seven Million Five Hundred Thousand
Dollars ($7,500,000):
One series of shares is designated as the Sand Hill Portfolio Management Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) are classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000).
One series of shares is designated as the CSI Equity Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the CSI Fixed Income Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the Third Millennium Russia Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
are classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the New Market Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) are
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000);
One series of shares is designated as the GenomicsFund.com series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars ($500,000); and
One series of shares is designated as the Global e Fund series and Fifty Million
(50,000,000) shares of Common Stock (par value $.01 per share) were classified
and allocated to such series, and further reclassified those shares as follows:
Twenty-five Million (25,000,000) shares for Class A shares of the series; and
Twenty-five Million (25,000,000) shares for Class B shares of the series, with
an aggregate par value of Five Hundred Thousand Dollars ($500,000); and One
series of shares is designated as the Monument EuroNet Fund series and Fifty
Million (50,000,000) shares of Common Stock (par value $.01 per share) were
classified and allocated to such series, and further reclassified those shares
as follows: Twenty Million (20,000,000) shares for Class A shares of the series;
Fifteen Million (15,000,000) shares for Class B shares of the series; and
Fifteen Million (15,000,000) shares for Class C shares of the series, with an
aggregate par value of Five Hundred Thousand Dollars ($500,000); and
THIRD: The shares of the Global e Fund series shall have such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other
characteristics as are stated in Article FIFTH of the Articles of Incorporation
of the Corporation.
FOURTH: With respect to the Global e Fund series, at such times as may be
determined by the Board of Directors (or with the authorization of the Board of
Directors, the officers of the Corporation) in accordance with the Investment
Company Act of 1940, as amended, all other applicable rules and regulations, and
as reflected in the registration statement of the Global e Fund, current as of
the time such shares are issued, shares of Class B to the extent applicable, may
be automatically converted into shares of Class A of capital stock of the Global
e Fund based on the relative net asset values of such classes at the time of
conversion, subject, however, to any conditions of conversion that may be
imposed by the Board of Directors (or with the authorization of the Board of
Directors, the officers and the Corporation) and reflected in such current
registration statement relating to the Global e Fund.
FIFTH: The aforesaid shares of the Global e Fund series have been duly
classified and allocated by the Board of Directors pursuant to the authority and
power contained in the charter of the Corporation.
IN WITNESS WHEREOF, The World Funds, Inc., has caused these Articles
Supplementary to be signed in its name and on its behalf this ____ day of
_________________, 2000.
The World Funds, Inc.
By:
-------------------
John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
-------------------------------
Name: Darryl S. Peay
Title: Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of The World Funds, Inc.,
who executed on behalf of said Corporation the foregoing Articles Supplementary
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles to be the corporate act of
said Corporation and further certifies, that, to the best of his knowledge,
information and belief, the matters and facts set forth herein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
--------------------
John Pasco, III
Chairman and Chief Executive Officer
Attest:
---------------------
Darryl S. Peay
Assistant Secretary
<PAGE>
EX-99.e(1)
The World Funds, Inc.
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, effective as of June 19, 2000, by and between The
World Funds, Inc., a Maryland corporation (the "Fund") for the benefit of its
Monument EuroNet Fund series, and First Dominion Capital Corp. a Virginia
corporation ("FDCC") and Monument Distributors, Inc. ("MDI"), a Maryland
corporation. FDCC and MDI are referred to herein collectively as the
"Distributors."
WITNESSETH:
1. DISTRIBUTION SERVICES
The Fund hereby engages the Distributors to assist the Fund in the sale and
distribution to investors of shares of common stock of the Fund (the "Shares").
In connection therewith, the Distributors shall promote the sale of Shares, act
as underwriters of Shares of the Fund, and otherwise assist the Fund in the
distribution of Shares directly to investors through dealers or otherwise. For
this purpose the Fund agrees to offer shares for sale at all times when, and in
such places as, such shares are to be made available for sale and may lawfully
be offered for sale and sold. As and when necessary in connection therewith the
Distributors may act as principal or agent for the sale of such shares.
2. SALE OF FUND SHARES
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively
presumed to have been accepted by the Fund if the Fund shall fail to
notify the responsible Distributor of the rejection of such offer or
sale prior to the computation of the net asset value of the Fund's
shares next following receipt by the Fund of notice of such offer or
sale.
(b) No share of the Fund shall be sold for any consideration other than
cash or, except in instances otherwise provided for by the Fund's
currently effective Prospectus, for any amount less than the public
offering price per share, which shall be determined in accordance with
the Fund's currently effective Prospectus. No shares may be sold for
less than the net asset value thereof.
3. REGISTRATION OF SHARES; REGISTRATION OF DISTRIBUTORS
(a) The Fund agrees to make prompt and reasonable efforts to effect and to
keep in effect the registration or qualification of its shares for
sale in such jurisdictions as the Fund may designate. The Distributors
may serve as dealer of record to assist the Fund in connection with
any such registration or qualification.
(b) Each Distributor represents that it is registered as a broker-dealer
under all applicable Federal and State securities laws, and each
further represents that it is a member in good standing of the
National Association of Securities Dealers (the "NASD"). Each dealer
acknowledges that its registration is required for the performance of
the duties required hereunder, and that the absence of such
registration shall be grounds for the immediate termination of this
Agreement, provided, that termination of this Agreement shall not
relieve a party of its obligation to pay all amounts properly payable
by that party through the time of such termination.
4. INFORMATION TO BE FURNISHED TO THE DISTRIBUTORS
The Fund agrees that it will furnish to the Distributors such information
with respect to the affairs and accounts of the Fund as the Distributors may
from time to time reasonably require, and further agrees that the Distributors,
at all reasonable times, shall be permitted to inspect books and records of the
Fund relating to the issuance and distribution of Shares, and to verify
information contained in the current registration statement of the Fund with
respect thereto.
5. INFORMATION TO BE FURNISHED TO THE FUND
(a) Each Distributor acknowledges that the Fund has adopted a Plan of
Distribution (the "Plan of Distribution") pursuant Rule 12b-1 ("Rule
12b-1") adopted under Investment Company Act of 1940, as amended. Each
Distributor agrees to abide by the terms of such Plan of Distribution
in marketing and distributing the Shares of the Fund, and to comply
with any budget or supervisory procedures required under such Plan.
(b) Each Distributor agrees that it will provide to the Fund reasonably
detailed information concerning the use made of all funds paid to that
Distributor by the Fund pursuant to the Fund's Plan of Distribution.
MDI agrees to furnish such information to FDCC, and FDCC agrees to
assemble such information from MDI both separately and together with
comparable information from its own records, and to promptly transmit
the same to the Fund. When a Distributor applies Rule 12b-1 payments
for payment to an unaffiliated person, it acknowledges its duty under
that rule to identify the use made of such funds. When a Distributor
applies such funds to make a payment to an affiliated person, it
agrees to further identify both the use and further recipient of such
funds. Each Distributor hereby acknowledges that it is familiar with
the requirements of Rule 12b-1, and will abide by the reporting
requirements of that rule. Each Distributor hereby authorizes the Fund
to inspect books and records of the Distributor relating to the
issuance and distribution of Shares of the Fund and the expenses of
promoting and distributing the Shares of the Fund, to verify that the
12b-1 payments of the Fund have been applied in accordance with the
Fund's Plan of Distribution and requirements contained in the current
registration statement of the Fund with respect thereto.
6. ALLOCATION OF EXPENSES
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs, and fees incurred by the Fund which are not assumed by the
Distributors or any investment manager, investment advisor, or other service
provider to the Fund. Each Distributor shall pay Fund authorized advertising and
promotional expenses incurred by that Distributor at its discretion in
connection with the distribution of the Fund's shares that are sold subject to
the imposition of a sales or other distribution charge, including paying for
prospectuses for delivery to prospective shareholders, subject to reimbursement
from 12 b-1 plan for authorized expenditures.
7. COMPENSATION TO THE DISTRIBUTORS
It is understood and agreed by the parties hereto that each Distributor
will receive compensation for the services it performs hereunder in accordance
with Schedule A hereto.
8. LIMITATION OF EACH DISTRIBUTOR'S AUTHORITY
Each Distributor shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority to
act for or represent the Fund. In the performance of its duties hereunder, each
Distributor may solicit and enter into selling dealer agreements with other
broker-dealers in a form approved by the Fund. Such selling dealer agreements
shall provide for the sale of shares of the Fund (or any series of the Fund) on
terms consistent with the registration statement of the Fund as then if effect.
Unless otherwise provided in a selling dealer agreement, any selling dealer
agreement of a Distributor in effect as of the date of this agreement, when
approved as to form by the Fund, shall be deemed to continue hereunder upon
delivery to the selling dealer of any amendment required to set forth the terms
of the offering of the affected Fund shares.
9. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELLED ORDERS
If a Distributor elects to act as a principal, and not as agent, for a sale
of Fund shares, that Distributor agrees that it will subscribe for Shares of the
Fund only for the purpose of fulfilling purchase orders already received by it
or for the purpose of investment for its own account. Whether acting as
principal or agent, in the event that an order for the purchase of shares of the
Fund is placed with a Distributor by a customer or dealer and subsequently
cancelled, the Distributor shall forthwith cancel the subscription for such
shares entered on the books of the Fund, and, if the Distributor has paid the
Fund for such shares, shall be entitled to receive from the Fund in refund of
such payments the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation
by the Distributor.
10. INDEMNIFICATION OF THE FUND
Each Distributor agrees to indemnify the Fund against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost, or penalty imposed as a result of such litigation or
proceedings in any way arising out of or in connection with the sale or
distribution of the shares of the Fund by the Distributor. In the event of the
threat or institution of any such litigation or legal proceedings against the
Fund, the Distributors shall defend such action on behalf of the Fund at their
own expense, and shall pay any such liability, judgment, cost, or penalty
resulting therefrom, whether imposed by legal authority on agreed upon by way of
compromise and settlement; provided, however, the Distributors shall not be
required to pay or reimburse the Fund for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of the
omission to supply information by, the Fund or any director, officer, or
employee of the Fund who is not an interested person of the Distributors, unless
the information so supplied or omitted was available to the Distributors or the
Fund's investment adviser without recourse to the Fund or any such person
referred to above.
11. FREEDOM TO DEAL WITH THIRD PARTIES
Each Distributor shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
12. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
The effective date of this Agreement shall be the date first set forth
above. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of the Fund (or of
any series of the Fund) shall mean the vote of 67% or more of the securities of
the Fund (or of any affected series of the Fund) if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of the securities of the Fund (or an affected series of the Fund) whichever
is the lesser, or as required by applicable law. Unless sooner terminated as
hereinafter provided, this Agreement shall continue in effect from year to year
but only so long as such continuance is specifically approved at least annually
by the Board of Directors of the Fund, including the specific approval of a
majority of the directors who are not interested person of the Distributors as
defined by the Investment Company Act of 1940, as amended, cast in person at a
meeting called for the purpose of voting on such approval, or by the vote of the
holders of a majority of the outstanding voting securities of the Fund or an
affected series of the Fund. This Agreement may be terminated at any time
without the payment of any penalty by the vote of the Board of Directors of the
Fund or by the vote of the holders of a majority of the outstanding voting
securities of the Fund, or by the Distributors, upon 60 days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment (as defined by the provisions of the Investment Company Act of
1940, as amended).
13. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until approved
by the Distributors and by the affirmative vote of a majority of the Board of
Directors of the Fund (including a majorityof the directors who are not
interested persons of the Distributors or any affiliate of the Distributors).
14. NOTICES
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
<PAGE>
IN WITNESS WHEREOF, the Fund and the Distributors have caused this
Agreement to be executed by their duly authorized officers affixed hereto all as
of the day and year first above written.
THE WORLD FUNDS, INC.
By:___________________________
John Pasco, III
Chairman
Attested by: _______________________________
FIRST DOMINION CAPITAL CORP.
By:___________________________
Darryl Peay
Vice President
Attested by: _______________________________
MONUMENT DISTRIBUTORS, INC.
By:___________________________
David A. Kugler
President
Attested by: _______________________________
<PAGE>
SCHEDULE A
The Fund shall direct its Administrator to pay to the Distributors amounts
authorized to be expended for the promotion and distribution of the Shares of
the Fund. Such amounts include both compensation for services pursuant to this
Distribution Agreement, reimbursement of expenses authorized under this
Agreement and the Fund's Plan of Distribution. Such compensation and
reimbursement shall be computed separately as to each Distributor. Such
compensation or reimbursement shall be paid as and when approved by the Fund.
Each Distributor acknowledges that it has agreed to furnish to the Fund such
information as may be required under Rule 12b-1 to support the payment of
amounts derived under the Fund's Plan of Distribution, and the Fund is not
required to approve any payment that is not supported by records complying with
Rule 12b-1.
With respect to transmission of funds from the sale of Shares by the
Distributor the following shall apply:
(a) With respect to any shares of the Fund sold subject to a sales charge,
a Distributor shall be entitled to retain the underwriter's portion of
the sales charge for the investment in the Fund's shares, computed as
a percentage of the offering price determined in accordance with the
Fund's currently effective Prospectus and as otherwise provided in the
Fund's registration statement.
(b) With respect to sales of shares of the Fund sold subject to a sales
charge for which the Distributors is the selling dealer, the
Distributors shall retain the dealer's sales charge for each
investment in the Fund's shares, computed as a percentage of the
offering price determined in accordance with the Fund's currently
effective Prospectus and as otherwise provided in the Fund's
registration statement.
Subject to the repayment to FDCC of advances for Fund launch expenses,
compensation to the Distributors payable from asset-based sales charges shall be
paid through the Administrator to each Distributor as collected from the Fund
for that purpose in proportion to the respective sales made through the
Distributors. With respect to any amounts withheld from the proceeds of a
redemption, such as a contingent deferred sales charge, the Fund agrees that it
will also cause the payment to the appropriate Distributor of such amounts.
With respect to amounts to be paid to a Distributor by the Fund, the Fund
agrees to accept and honor any instruction that it may receive with respect to
the assignment of any payments called for hereunder as security for any loan or
advance obtained by the instructing Distributor.
<PAGE>
EX-99.e(2)
The World Funds, Inc.
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, effective as of _______, 2000, by and between The
World Funds, Inc., a Maryland corporation (the "Fund") for the benefit of its
Global e Fund series, and First Dominion Capital Corp. a Virginia corporation
("FDCC") and International Assets Advisory Corp. a Florida corporation ("IAAC").
FDCC and IAAC are referred to herein individually as a "Distributor";
collectively, as the "Distributors."
WITNESSETH:
1. DISTRIBUTION SERVICES
The Fund hereby engages the Distributors to assist the Fund in
the sale and distribution to investors of shares of common stock of the Fund
(the "Shares"). In connection therewith, IAAC shall promote the sale of Class A
Shares, act as underwriter of Class A Shares of the Fund, and otherwise assist
the Fund in the distribution of Class A Shares directly to investors through
dealers or otherwise. FDCC shall promote the sale of Class B Shares, act as
underwriter of Class B Shares of the Fund, and otherwise assist the Fund in the
distribution of Class B Shares directly to investors through dealers or
otherwise. For this purpose the Fund agrees to offer shares for sale at all
times when, and in such places as, such shares are to be made available for sale
and may lawfully be offered for sale and sold. As and when necessary in
connection therewith the Distributors may act as principal or agent for the sale
of such shares.
2. SALE OF FUND SHARES
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively
presumed to have been accepted by the Fund if the Fund shall fail to
notify the responsible Distributor of the rejection of such offer or
sale prior to the computation of the net asset value of the Fund's
shares next following receipt by the Fund of notice of such offer or
sale.
(b) No share of the Fund shall be sold for any consideration other than
cash or, except in instances otherwise provided for by the Fund's
currently effective Prospectus, for any amount less than the public
offering price per share, which shall be determined in accordance with
the Fund's currently effective Prospectus. No shares may be sold for
less than the net asset value thereof.
3. REGISTRATION OF SHARES; REGISTRATION OF DISTRIBUTORS
(a) The Fund agrees to make prompt and reasonable efforts to effect and to
keep in effect the registration or qualification of its shares for
sale in such jurisdictions as the Fund may designate. The Distributors
may serve as dealer of record to assist the Fund in connection with
any such registration or qualification.
(b) Each Distributor represents that it is registered as a broker-dealer
under all applicable Federal and State securities laws, and each
further represents that it is a member in good standing of the
National Association of Securities Dealers (the "NASD"). Each dealer
acknowledges that its registration is required for the performance of
the duties required hereunder, and that the absence of such
registration shall be grounds for the immediate termination of this
Agreement, provided, that termination of this Agreement shall not
relieve a party of its obligation to pay all amounts properly payable
by that party through the time of such termination.
4. INFORMATION TO BE FURNISHED TO THE DISTRIBUTORS
The Fund agrees that it will furnish to the Distributors such information
with respect to the affairs and accounts of the Fund as the Distributors may
from time to time reasonably require, and further agrees that the Distributors,
at all reasonable times, shall be permitted to inspect books and records of the
Fund relating to the issuance and distribution of Shares, and to verify
information contained in the current registration statement of the Fund with
respect thereto.
5. INFORMATION TO BE FURNISHED TO THE FUND
(a) Each Distributor acknowledges that the Fund has adopted a Plan of
Distribution (the "Plan of Distribution") pursuant Rule 12b-1 ("Rule
12b-1") adopted under Investment Company Act of 1940, as amended. Each
Distributor agrees to abide by the terms of such Plan of Distribution
in marketing and distributing the Shares of the Fund, and to comply
with any budget or supervisory procedures required under such Plan.
(b) Each Distributor agrees that it will provide to the Fund reasonably
detailed information concerning the use made of all funds paid to that
Distributor by the Fund pursuant to the Fund's Plan of Distribution.
IAAC agrees to furnish such information to FDCC, and FDCC agrees to
assemble such information from IAAC both separately and together with
comparable information from its own records, and to promptly transmit
the same to the Fund. When a Distributor applies Rule 12b-1 payments
for payment to an unaffiliated person, it acknowledges its duty under
that rule to identify the use made of such funds. When a Distributor
applies such funds to make a payment to an affiliated person, it
agrees to further identify both the use and further recipient of such
funds. Each Distributor hereby acknowledges that it is familiar with
the requirements of Rule 12b-1, and will abide by the reporting
requirements of that rule. Each Distributor hereby authorizes the Fund
to inspect books and records of the Distributor relating to the
issuance and distribution of Shares of the Fund and the expenses of
promoting and distributing the Shares of the Fund, to verify that the
12b-1 payments of the Fund have been applied in accordance with the
Fund's Plan of Distribution and requirements contained in the current
registration statement of the Fund with respect thereto.
6. ALLOCATION OF EXPENSES
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs, and fees incurred by the Fund which are not assumed by the
Distributors or any investment manager, investment adviser, or other service
provider to the Fund. Each Distributor shall pay Fund authorized advertising and
promotional expenses incurred by that Distributor at its discretion in
connection with the distribution of the Fund's shares that are sold subject to
the imposition of a sales or other distribution charge, including paying for
prospectuses for delivery to prospective shareholders, subject to reimbursement
from 12 b-1 plan for authorized expenditures.
7. COMPENSATION TO THE DISTRIBUTORS
It is understood and agreed by the parties hereto that each Distributor
will receive compensation for the services it performs hereunder in accordance
with Schedule A hereto.
8. LIMITATION OF EACH DISTRIBUTOR'S AUTHORITY
Each Distributor shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority to
act for or represent the Fund. In the performance of its duties hereunder, each
Distributor may solicit and enter into selling dealer agreements with other
broker-dealers in a form approved by the Fund. Such selling dealer agreements
shall provide for the sale of shares of the Fund (or any series of the Fund) on
terms consistent with the registration statement of the Fund as then if effect.
Unless otherwise provided in a selling dealer agreement, any selling dealer
agreement of a Distributor in effect as of the date of this agreement, when
approved as to form by the Fund, shall be deemed to continue hereunder upon
delivery to the selling dealer of any amendment required to set forth the terms
of the offering of the affected Fund shares.
9. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELLED ORDERS
If a Distributor elects to act as a principal, and not as agent, for a sale
of Fund shares, that Distributor agrees that it will subscribe for Shares of the
Fund only for the purpose of fulfilling purchase orders already received by it
or for the purpose of investment for its own account. Whether acting as
principal or agent, in the event that an order for the purchase of shares of the
Fund is placed with a Distributor by a customer or dealer and subsequently
cancelled, the Distributor shall forthwith cancel the subscription for such
shares entered on the books of the Fund, and, if the Distributor has paid the
Fund for such shares, shall be entitled to receive from the Fund in refund of
such payments the lesser of: (a) the consideration received by the Fund for said
shares; or (b) the net asset value of such shares at the time of cancellation by
the Distributor.
10. INDEMNIFICATION OF THE FUND
Each Distributor agrees to indemnify the Fund against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost, or penalty imposed as a result of such litigation or
proceedings in any way arising out of or in connection with the sale or
distribution of the shares of the Fund by the Distributor. In the event of the
threat or institution of any such litigation or legal proceedings against the
Fund, the Distributors shall defend such action on behalf of the Fund at their
own expense, and shall pay any such liability, judgment, cost, or penalty
resulting therefrom, whether imposed by legal authority on agreed upon by way of
compromise and settlement; provided, however, the Distributors shall not be
required to pay or reimburse the Fund for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of the
omission to supply information by, the Fund or any director, officer, or
employee of the Fund who is not an interested person of the Distributors, unless
the information so supplied or omitted was available to the Distributors or the
Fund's investment adviser without recourse to the Fund or any such person
referred to above.
11. FREEDOM TO DEAL WITH THIRD PARTIES
Each Distributor shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair its performance of the services and duties to be rendered by
it hereunder.
12. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
The effective date of this Agreement shall be the date first set forth
above. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of the Fund (or of
any series of the Fund) shall mean the vote of 67% or more of the securities of
the Fund (or of any affected series of the Fund) if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of the securities of the Fund (or an affected series of the Fund) whichever
is the lesser, or as required by applicable law. Unless sooner terminated as
hereinafter provided, this Agreement shall continue in effect from year to year
but only so long as such continuance is specifically approved at least annually
by the Board of Directors of the Fund, including the specific approval of a
majority of the directors who are not interested person of the Distributors as
defined by the Investment Company Act of 1940, as amended, cast in person at a
meeting called for the purpose of voting on such approval, or by the vote of the
holders of a majority of the outstanding voting securities of the Fund or an
affected series of the Fund. This Agreement may be terminated at any time
without the payment of any penalty by the vote of the Board of Directors of the
Fund or by the vote of the holders of a majority of the outstanding voting
securities of the Fund, or by the Distributors, upon 60 days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment (as defined by the provisions of the Investment Company Act of
1940, as amended).
13. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until approved
by the Distributors and by the affirmative vote of a majority of the Board of
Directors of the Fund (including a majority of the directors who are not
interested persons of the Distributors or any affiliate of the Distributors).
14. NOTICES
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Distributors have caused this
Agreement to be executed by their duly authorized officers affixed hereto all as
of the day and year first above written.
THE WORLD FUNDS, INC.
By:___________________________
John Pasco, III
Chairman
Attested by: _______________________________
FIRST DOMINION CAPITAL CORP.
By:___________________________
Darryl Peay
Vice President
Attested by: _______________________________
INTERNATIONAL ASSETS ADVISORS CORP.
By:___________________________
Todd A. Boren
Vice President
Attested by: _______________________________
<PAGE>
SCHEDULE A
The Fund shall direct its Administrator to pay to the Distributors amounts
authorized to be expended for the promotion and distribution of the Shares of
the Fund. Such amounts include both compensation for services pursuant to this
Distribution Agreement, reimbursement of expenses authorized under this
Agreement and the Fund's Plan of Distribution. Such compensation and
reimbursement shall be computed separately as to each Distributor. Such
compensation or reimbursement shall be paid as and when approved by the Fund.
Each Distributor acknowledges that it has agreed to furnish to the Fund
such information as may be required under Rule 12b-1 to support the payment of
amounts derived under the Fund's Plan of Distribution, and the Fund is not
required to approve any payment that is not supported by records complying with
Rule 12b-1.
With respect to transmission of funds from the sale of Shares by the
Distributor the following shall apply:
(a) With respect to any shares of the Fund sold subject to a sales
charge, the Distributor of such shares shall be entitled to
retain the underwriter's portion of the sales charge on each
investment in Fund's shares, computed as a percentage of the
offering price determined in accordance with the Fund's currently
effective Prospectus and as otherwise provided in the Fund's
registration statement.
(b) With respect to sales of shares of the Fund sold subject to a
sales charge for which the Distributor is the selling dealer, the
Distributor shall be entitled to retain both the underwriter's
portion of the sales charge and the dealer's sales charge for
each investment in the Fund's shares, computed as a percentage of
the offering price determined in accordance with the Fund's
currently effective Prospectus and as otherwise provided in the
Fund's registration statement. With respect to any amounts
withheld from the proceeds of a redemption, such as a contingent
deferred sales charge, the Fund agrees that it will also cause
the payment to the appropriate Distributor of such amounts.
(c) With respect to any sales of shares of the Fund sold pursuant to
arrangements authorizing the selling dealer to withhold any
amounts from the proceeds of a sale, the underwriter of such
shares shall cause to be paid to the fund the full amount of the
purchase price of such shares, and shall then be entitled to
receive from the Fund any asset-based sales charge or contingent
deferred sales charge assessable on such shares, which amount the
fund agrees that it will cause to be paid to the appropriate
Distributor of such shares any amouns withheld from the proceeds
of a redemption, such as a contingent deferred sales charge, the
Fund agrees that it will also cause the payment to the
appropriate Distributor of such amounts.
With respect to amounts to be paid to a Distributor by the Fund, the Fund
agrees to accept and honor any instruction that it may receive with respect to
the assignment of any payments called for hereunder as security for any loan or
advance obtained by the instructing Distributor.
<PAGE>
EX-99.g(1)
APPENDIX "C"
TO
CUSTODIAN AGREEMENT
BETWEEN
THE WORLD FUNDS, INC and BROWN BROTHERS HARRIMAN & CO.
Dated as of June 1, 2000
The following is a list of Funds for which the Custodian shall serve under a
Custodian Agreement dated as of October 28, 1998 (the "Agreement"):
CSI EQUITY FUND
CSI FIXED INCOME FUND
GENOMICSFUND.COM
GLOBAL E-FUND
MONUMENT EURONET FUND
SAND HILL PORTFOLIO MANAGER FUND
THE NEW MARKET FUND
THIRD MILLENIUM RUSSIA FUND
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and on the behalf of each such Fund.
THE WORLD FUNDS, INC BROWN BROTEHRS HARRIMAN &CO.
/s/Darryl S. Peay /s/ W. Casey Gildea
----------------- -------------------
Name: Darryl S. Peay Name: W. Casey Gildea
Title: Assistant Secretary Title: Senior Vice President
<PAGE>
IN THE FOLLOWING COUNTRIES THE LIABILITY OF THE CUSTODIAN UNDER THE
ATTACHED CUSTODIAN AGREEMENT SHALL BE SUBJECT TO THE ADDITIONAL CONDITION THAT
THE CUSTODIAN ACTUALLY RECOVERS FROM THE SUBCUSTODIAN IN THE RELEVANT MARKET. 1
COSTA RICA
CYPRUS
ESTONIA
GHANA
JAMAICA
LATVIA
LITHUANIA
TRINIDAD & TOBAGO
<PAGE>
EX-99.g(2)
ADDENDUM
TO
FOREIGN CUSTODY MANAGER DELEGATION AGREEMENT
BETWEEN
THE WORLS FUNDS, INC and BROWN BROTHERS HARRIMAN & CO.
Dated as of June 1, 2000
The following is a list of Funds for which the Custodian shall serve as Delegate
under a Delegation Agreement dated as of June 26, 1998 (the "Agreement"):
CSI EQUITY FUND
CSI FIXED INCOME FUND
GENOMICSFUND.COM
GLOBAL E-FUND
MONUMENT EURONET FUND
SAND HILL PORTFOLIO MANAGER FUND
THE NEW MARKET FUND
THIRD MILLENIUM RUSSIA FUND
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and on the behalf of each such Fund.
THE WORLD FUNDS, INC BROWN BROTEHRS HARRIMAN &CO.
/s/ Darryl S. Peay /s/ W. Casey Gildea
------------------ -------------------
Name: Darryl S. Peay Name: W. Casey Gildea
Title: Assistant Secretary Title: Senior Vice President
<PAGE>
SCHEDULE 1
TO THE WORLD FUNDS, INC.
DELEGATION AGREEMENT
AS OF June 26, 1998
ARGENTINA
AUSTRALIA
AUSTRIA
BELGIUM
BRAZIL
CANADA
CHILE
CHINA
CZECH REPUBLIC
DENMARK
EGYPT
FINLAND
FRANCE
GERMANY
GREECE
HONG KONG
HUNGARY
INDIA
INDONESIA
IRELAND
ITALY
JAPAN
KOREA
LUXEMBOURG
MEXICO
NETHERLANDS
NEW ZEALAND
NORWAY
PHILIPPINES
POLAND
PORTUGAL
RUSSIA
SINGAPORE
SPAIN
SWEDEN
SWITZERLAND
TAIWAN
THAILAND
TURKEY
UNITED KINGDOM
<PAGE>
EX-99.h(1)
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of June 20, 2000 by and between PFPC INC., a
Massachusetts corporation ("PFPC") and THE WORLD FUNDS, INC., a Maryland
corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent with
respect to the Fund's investment portfolios listed on Exhibit A attached hereto
and made a part hereof, as such Exhibit A may be amended from time to time (each
a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. As Used in this Agreement:
---------------------------------------
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any person authorized by the Fund to give
Oral Instructions and Written Instructions hereunder. An Authorized
Person's scope of authority may be limited by setting forth such
limitation in a written document signed by the parties hereto.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Change of Control" means a change in ownership or control (not
including transactions between wholly-owned direct or indirect
subsidiaries of a common parent) of 25% or more of the beneficial
ownership of the shares of common stock or shares of beneficial
interest of an entity or its parents(s), or as otherwise defined in
the 1940 Act.
(f) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person. Instructions received by PFPC via electronic
mail will be considered Oral Instructions.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act,
the CEA and all regulations under those laws.
(i) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(j) "Written Instructions" mean (i) written instructions signed by an
Authorized Person and received by PFPC or (ii) trade instructions
transmitted (and received by PFPC) by means of an electronic
transaction reporting system access to which requires use of a
password or other authorized identifier. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent for
the Portfolio in accordance with the terms set forth in this Agreement.
PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) A copy of the Fund's most recent effective registration statement;
(b) A copy of the advisory agreement with respect to each investment
Portfolio of the Fund;
(c) A copy of the distribution/underwriting agreement with respect to
each class of Shares of the Fund;
(d) A copy of each Portfolio's administration agreements if PFPC is not
providing the Portfolio with such services;
(e) Copies of any distribution and/or shareholder servicing plans and
agreements made in respect of the Fund or a Portfolio;
(f) A copy of the Fund's organizational documents as they relate to the
Portfolio, as filed with the state in which the Fund is organized;
and
(g) Copies (certified or authenticated where applicable) of any and all
amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations. PFPC undertakes to comply with all
applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect
to the duties to be performed by PFPC hereunder. Except as specifically
set forth herein, PFPC assumes no responsibility for such compliance by
the Fund or any other entity.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions or Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instruction or Written
Instruction it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not in any way inconsistent with
the provisions of organizational documents or this Agreement or of
any vote, resolution or proceeding of the Fund's Board of Directors
or of the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are
received. The fact that such confirming Written Instructions are not
received by PFPC or differ from the Oral Instructions shall in no way
invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions or PFPC's ability to rely upon
such Oral Instructions. Where Oral Instructions or Written
Instructions reasonably appear to have been received from an
Authorized Person, PFPC shall incur no liability for acting upon such
Oral Instructions or Written Instructions provided that PFPC's
actions comply with the other provisions of this Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including
Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may
request that the Fund seek guidance from its counsel. Alternatively,
PFPC at its own expense, may request advice from counsel of its own
choosing (who may be counsel for the Fund or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between directions or
advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from its own counsel, the
parties will address the issue together and agree on the appropriate
course of action with the assistance of counsel and/or the Fund's
independent public accountants; provided, that if the parties are not
able to agree on a course of action, PFPC may inform the Fund and
rely upon and follow the advice of its own counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions or advice or Oral
Instructions or Written Instructions it receives from the Fund or
from counsel and which PFPC believes, in good faith based on
standards considered reasonable in the industry, to be consistent
with those directions or advice or Oral Instructions or Written
Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC (i) to seek such directions or advice
or Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions or advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or
not taking such action.
7. Records; Visits. The books and records pertaining to the Fund, which
are in the possession or under the control of PFPC, shall be the
property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities
laws, rules and regulations. The Fund and Authorized Persons shall have
access to such books and records at all times during PFPC's normal
business hours. Upon the request of the Fund, such books and records
shall be provided by PFPC to the Fund or to an Authorized Person,
provided that the Fund shall pay the reasonable costs to make copies of
such books and records.
8. Confidentiality. Each party shall keep confidential any information
relating to the other party's business ("Confidential Information").
Confidential Information shall include (a) any data or information that
is competitively sensitive material, and not generally known to the
public, including, but not limited to, information about product plans,
marketing strategies, finances, operations, customer relationships,
customer profiles, customer lists, sales estimates, business plans, and
internal performance results relating to the past, present or future
business activities of the Fund or PFPC, their respective subsidiaries
and affiliated companies and the customers, clients and suppliers of any
of them; (b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or PFPC a
competitive advantage over its competitors; (c) all confidential or
proprietary concepts, documentation, reports, data, specifications,
computer software, source code, object code, flow charts databases,
inventions, know-how, and trade secrets, whether or not patentable or
copyrightable; and (d) anything designated as confidential.
Notwithstanding the foregoing, information shall not be subject to such
confidentiality obligations if it: (a) is already known to the receiving
party at the time it is obtained; (b) is or becomes publicly known or
available through no wrongful act of the receiving party; (c) is
rightfully received from a third party who, to the best of the receiving
party's knowledge, is not under a duty of confidentiality; (d) is
released by the protected party to a third party without restriction;
(e) is required to be disclosed by the receiving party pursuant to a
requirement of a court order, subpoena, governmental or regulatory
agency or law provided the receiving party will provide the party whose
information is being disclosed written notice of such requirement, to
the extent such notice is permitted); (f) is relevant to the defense of
any claim or cause of action asserted against the receiving party; or
(g) has been or is independently developed or obtained by the receiving
party.
9. Cooperation with Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund or (upon request by
the Fund) the Securities Laws.
10. PFPC System. To the extent PFPC had a prior legal right to such property,
PFPC shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade
secrets, and other related legal rights utilized by PFPC in connection
with the services provided by PFPC hereunder.
11. Disaster Recovery. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to
the extent appropriate equipment is available. In the event of
equipment failures, PFPC shall, at no additional expense to the Fund,
take reasonable steps to minimize service interruptions. PFPC shall
have no liability with respect to the loss of data or service
interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties or obligations under this
Agreement.
12. Compensation. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC. The Fund
acknowledges that PFPC may receive float benefits and/or investment
earnings in connection with maintaining certain accounts required to
provide services under this Agreement.
13. Indemnification. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, attorneys' fees
and disbursements and liabilities arising under the Securities Laws and
any state and foreign securities and blue sky laws) arising directly or
indirectly from any act or omission to act which PFPC takes in
connection with the provision of services hereunder. Neither PFPC, nor
any of its affiliates, shall be indemnified against any liability (or
any expenses incident to such liability) caused by PFPC's or its
affiliates' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement, provided
that in the absence of a finding by a court of competent jurisdiction to
the contrary the acceptance, processing and/or negotiation of a
fraudulent payment for the purchase of Shares shall be presumed not to
have been the result of PFPC's or its affiliates own willful
misfeasance, bad faith, negligence or reckless disregard of such duties
and obligations.
14. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action hereunder except as
specifically set forth herein or as may be specifically agreed to by
PFPC and the Fund in a written amendment hereto. PFPC shall be
obligated to exercise care and diligence in the performance of its
duties hereunder and to act in good faith in performing services
provided for under this Agreement. PFPC shall be liable only for any
damages arising out of PFPC's failure to perform its duties under
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, negligence or reckless disregard of such
duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, including without limitation (subject to Section
11), delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, provided that PFPC has acted in
accordance with the standard set forth in Section 14(a) above; and
(ii) PFPC shall not be under any duty or obligation to inquire into
and shall not be liable for the validity or invalidity or authority
or lack thereof of any Oral Instruction or Written Instruction,
notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to
be genuine.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable for any
consequential, special or indirect losses or damages, whether or not
the likelihood of such losses or damages was known by PFPC or its
affiliates. Notwithstanding anything in this Agreement to the
contrary, PFPC's cumulative liability to the Fund for all losses,
claims, suits, controversies, breaches or damages for any cause
whatsoever (including but not limited to those arising out of or
related to this Agreement) and regardless of the form of action or
legal theory shall not exceed $100,000.
(d) No party may assert a cause of action against PFPC or any of its
affiliates that allegedly occurred more than 12 months immediately
prior to the filing of the suit (or, if applicable, commencement of
mediation sessions or arbitration proceedings) alleging such cause of
action; except, however, that this proscription will not apply (i)
unless the Fund had knowledge of all of the relevant circumstances and
accordingly knew or should have known of the existence of the claim
during that time period; (ii) if PFPC or any of its affiliates
withheld information from the party asserting the claim that would
have been deemed material in the decision to file a claim; (iii) if
PFPC or any of its affiliates employed delaying tactics that resulted
in the passage of the time period during which a claim would have been
filed but for the delaying tactics; or (iv) if, during the 12-month
period following the action giving rise to the claim, the party
asserting the claim notifies PFPC or any of its affiliates in writing
of its intent to commence a legal action once sufficient information
has been collected.
(e) Each party shall have a duty to mitigate damages for which another
party may become responsible.
15. Description of Services.
(a) Services Provided on an Ongoing Basis, If Applicable.
----------------------------------------------------------------
(i) Calculate 12b-1 payments;
(ii) Maintain shareholder registrations;
(iii)Review new applications and correspond with shareholders to
complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
(vi) Countersign share certificates;
(vii)Prepare and mail to shareholders confirmation of activity;
(viii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(ix) Mail duplicate confirmations to broker-dealers of their clients'
activity, whether executed through the broker-dealer or directly
with PFPC;
(x) Provide periodic shareholder lists and statistics to the Fund;
(xi) Provide detailed data for underwriter/broker confirmations;
(xii)Prepare periodic mailing of year-end tax and statement
information;
(xiii) Notify on a timely basis the investment adviser,
accounting agent, and custodian of fund activity; and
(xiv)Perform other participating broker-dealer shareholder services
as may be agreed upon from time to time.
(b) Services Provided by PFPC Under Oral Instructions or Written
Instructions.
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(i) Accept and post daily Share purchases and redemptions;
(ii) Accept, post and perform shareholder transfers and exchanges;
(iii)Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in writing by
the shareholder).
(c) Purchase of Shares. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account; and
(iii)Confirmation of receipt or crediting of funds for such order to
the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if that function
is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Directors. Shares shall be redeemed
and payment therefor shall be made in accordance with the Fund's
prospectus, when the recordholder tenders Shares in proper form and
directs the method of redemption. If Shares are received in proper
form, Shares shall be redeemed before the funds are provided to PFPC
from the Fund's custodian (the "Custodian"). If the recordholder has
not directed that redemption proceeds be wired, when the Custodian
provides PFPC with funds, the redemption check shall be sent to and
made payable to the recordholder, unless: (i) the surrendered
certificate is drawn to the order of an assignee or holder and
transfer authorization is signed by the recordholder; or
(ii) transfer authorizations are signed by the recordholder when
Shares are held in book-entry form. When a broker-dealer
notifies PFPC of a redemption desired by a customer, and the
Custodian provides PFPC with funds, PFPC shall prepare and
send the redemption check to the broker-dealer and made
payable to the broker-dealer on behalf of its customer.
(e) Dividends and Distributions. Upon receipt of a resolution of the Fund's
Board of Directors authorizing the declaration and payment of dividends and
distributions, PFPC shall issue dividends and distributions declared by the Fund
in Shares, or, upon shareholder election, pay such dividends and distributions
in cash, if provided for in the Fund's prospectus. Such issuance or payment, as
well as payments upon redemption as described above, shall be made after
deduction and payment of the required amount of funds to be withheld in
accordance with any applicable tax laws or other laws, rules or regulations.
PFPC shall mail to the Fund's shareholders such tax forms and other information,
or permissible substitute notice, relating to dividends and distributions paid
by the Fund as are required to be filed and mailed by applicable law, rule or
regulation. PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above a
stipulated amount paid by the Fund to its shareholders as required by tax or
other law, rule or regulation.
(f) Shareholder Account Services.
----------------------------
(i) PFPC may arrange, in accordance with the prospectus, for
issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC may arrange, in accordance with the prospectus, for a
shareholder's:
- Exchange of Shares for shares of another fund with which
the Fund has exchange privileges;
- Automatic redemption from an account where that shareholder
participates in a automatic redemption plan; and/or
- Redemption of Shares from an account with a checkwriting
privilege.
(g) Communications to Shareholders. Upon timely Written Instructions,
-------------------------------
PFPC shall mail all communications by the Fund to its shareholders,
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii)Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.
(h) Records. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii)Historical information regarding the account of each
shareholder, including dividends and distributions paid and
the date and price for all transactions on a shareholder's
account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii)Any information required in order for PFPC to perform any
calculations required by this Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop notice against
any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss
or alleged misappropriation. A new certificate shall be registered
and issued only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other appropriate indemnity bond issued by a surety company approved by PFPC;
and
(ii) Completion of a release and indemnification agreement signed
by the shareholder to protect PFPC and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request from any
Fund shareholder to inspect stock records, PFPC will notify the Fund
and the Fund will issue instructions granting or denying each
such request. Unless PFPC has acted contrary to the Fund's
instructions, the Fund agrees to and does hereby release PFPC from any
liability for refusal of permission for a particular shareholder to inspect
the Fund's stock records.
(k) Withdrawal of Shares and Cancellation of Certificates. Upon
receipt of Written Instructions, PFPC shall cancel outstanding
certificates surrendered by the Fund to reduce the total amount of
outstanding shares by the number of shares surrendered by the Fund.
(l) Lost Shareholders. PFPC shall perform such services as are
required in order to comply with Rules 17a-24 and 17Ad-17 of the 1934 Act
(the "Lost Shareholder Rules"), including, but not limited to, those
set forth below. PFPC may, in its sole discretion, use the services
of a third party to perform some of or all such services.
(i) documentation of search policies and procedures;
(ii) execution of required searches;
(iii)tracking results and maintaining data sufficient to comply
with the Lost Shareholder Rules; and
(iv) preparation and submission of data required under the Lost
Shareholder Rules.
Except as set forth above, PFPC shall have no responsibility for
any escheatment services.
(m) Print Mail. In addition to performing the foregoing services, the
Fund hereby engages PFPC as its print/mail service provider with
respect to those items identified in the Fee Letter.
(n) PFPC will provide to the Fund a monthly summary of net sales
(i.e., purchases less redemptions) for each class of Shares, broken down
by state.
16. Duration and Termination. This Agreement shall continue
until terminated by the Fund or by PFPC on ninety (90) days' prior
written notice to the other. In the event the Fund gives notice of
termination, all reasonable expenses associated with movement (or
duplication) of records and materials and conversion thereof to a successor
transfer agent or other service provider, and all trailing expenses incurred by
PFPC, will be borne by the Fund. In the event PFPC gives notice of termination
(other than for breach of this Agreement by the Fund, in which case the Fund
shall pay such reasonable deconversion costs and charges as PFPC may charge),
PFPC will absorb its own internal personnel costs related to the deconversion
and the other costs and charges related to the deconversion will be payable by
the Fund as agreed in good faith between PFPC and the Fund.
17. Change of Control. Notwithstanding any other provision of this
Agreement, in the event of an agreement to enter into a transaction that would
result in a Change of Control of the Fund's asset manager, the Fund's ability to
terminate the Agreement pursuant to Section 16 will (1) if such agreement is
entered into within two years of the date of this Agreement, be suspended from
the time of such agreement until one year after the Change of Control (or until
termination of such agreement) and (2) if such agreement is entered into more
than two years after the date of this Agreement, be suspended from the time of
such agreement until six months after the Change of Control (or until
termination of such agreement). This Section 17 will not apply where (1) the
Fund's Board of Directors terminates the Agreement due to a breach by PFPC of
this Agreement which is not remedied by PFPC within thirty (30) days written
notice to PFPC of such breach or (2) the Board of Directors of the Fund declines
to approve a new agreement with the asset manager that would be in place
following the Change of Control.
18. Notices. Notices shall be addressed (a) if to PFPC, at 400 Bellevue
Parkway, Wilmington, Delaware 19809, Attention: President; (b) if to the Fund,
at 1500 Forest Avenue, Suite 223, Richmond, VA 23229; or (c) if to none of the
foregoing, at such other address as shall have been given by like notice to the
sender of any such notice or other communication by the receiving party. If
notice is sent by confirming telegram, cable, telex or facsimile sending device,
it shall be deemed to have been given immediately. If notice is sent by
first-class mail, it shall be deemed to have been given three days after it has
been mailed. If notice is sent by messenger, it shall be deemed to have been
given on the day it is delivered.
19. Amendments. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
20. Delegation; Assignment. PFPC may assign its rights and delegate its
duties hereunder to any majority-owned direct or indirect subsidiary of PFPC or
of The PNC Financial Services Group, Inc., provided that PFPC gives the Fund 30
days prior written notice of such assignment or delegation.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. Miscellaneous.
(a) Entire Agreement. This Agreement, including all exhibits, attachments
and appendices, embodies the entire agreement and understanding among
the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may
embody in one or more separate documents their agreement, if any, with
respect to delegated duties.
(b) No Changes that Materially Affect Obligations. Notwithstanding
anything in this Agreement to the contrary, the Fund agrees not to
make any modifications to its registration statement or adopt any
policies which would affect materially the obligations or
responsibilities of PFPC hereunder without the prior written approval
of PFPC, which approval shall not be unreasonably withheld or delayed.
(c) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(d) Governing Law. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(e) Partial Invalidity. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(f) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(g) No Representations or Warranties. Except as expressly provided in this
Agreement, PFPC hereby disclaims all representations and warranties,
express or implied, made to the Fund or any other person, including,
without limitation, any warranties regarding quality, suitability,
merchantability, fitness for a particular purpose or otherwise
(irrespective of any course of dealing, custom or usage of trade), of
any services or any goods provided incidental to services provided
under this Agreement. PFPC disclaims any warranty of title or
non-infringement except as otherwise set forth in this Agreement.
(h) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
24. Internet Access Services. PFPC shall provide to the Fund the
internetaccess services as set forth on Exhibit B attached hereto and made a
part hereof, as such Exhibit B may be amended from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
Title:
THE WORLD FUNDS, INC.
By:
Title:
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of June 20, 2000, is Exhibit A to that certain
Transfer Agency Services Agreement dated as of June 20, 2000, between PFPC Inc.,
and The World Funds, Inc.
PORTFOLIOS
The Monument EuroNet Fund
<PAGE>
EXHIBIT B
Online Internet Access Services
THIS EXHIBIT B, dated as of June 20, 2000, is Exhibit B to the Transfer Agency
Services Agreement dated June 20, 2000 (the "Agreement") between The World
Funds, Inc. (the "Fund"), and PFPC Inc. ("PFPC"). This Exhibit B shall supersede
all previous forms of Exhibit B to the Agreement as of the date hereof.
1. Definitions. Any term not herein defined shall have the meaning given such
-----------
term in the Agreement. The following definitions shall apply to this Exhibit
B:
(a) "Customer Options" means the series of edits and instructions mutually
agreed upon by the Fund and PFPC through which the Fund specifies its
instructions for Transactions listed on Attachment 1 attached hereto and made a
part hereof, as such Attachment 1 may be amended from time to time.
(b) "Fund Web Site" means the collection of electronic documents,
electronic files and pages residing on any computer system(s) maintained on
behalf of the Fund, connected to the Internet and accessible by hypertext links
through the World Wide Web to and from PFPC's Web Site.
(c) "Online Internet Access Services" or "Internet Services" means the
services identified in Section 2 and any additional services set forth on the
Attachment 2 attached hereto and made a part hereof to be provided by PFPC
utilizing the Fund Web Site, the Internet and certain software, equipment and
systems provided by PFPC, telecommunications carriers and security providers
which have been certified by ICSA or a nationally-recognized audit firm
(including but not limited to firewalls and encryption), whereby Transactions
may be requested in the Fund by accessing the PFPC Web Site via hypertext link
from the Fund Web Site.
(d) "PFPC Web Site" means the collection of electronic documents,
electronic files and pages residing on PFPC's computer system(s) (or those
elements of the computer system of one or more Internet Service Providers
("ISPs") retained by PFPC and necessary for PFPC's services hereunder),
connected to the Internet and accessible by hypertext link from the Funds Web
Site through the World Wide Web, where the Transaction data fields and related
screens provided by PFPC may be viewed.
(e) "Phase I Transactions" means responding to requests through the Online
Internet Access Service for (i) Fund net asset values; (ii) most recent Fund
dividend information; (iii) shareholder account balance information; and (iv)
most recent shareholder account transactions.
(f) "Phase II Transactions" means Phase I Transactions plus those services
and transactions listed on PFPC's schedule of Phase II services, as PFPC shall
provide to the Fund from time to time (the "Phase II Schedule").
(g) "Service Commencement Date" means the first date upon which responses
to Phase I Transaction requests are available through PFPC's Online Internet
Access Service to Shareholders or to other visitors to the Fund Web Site.
(h) "Shareholder" means the record owner or authorized agent of the record
owner of shares of the Fund.
(i) "Transaction" means any Phase I Transaction or Phase II
Transaction.
2. PFPC Responsibilities. Subject to the provisions of this Exhibit B, PFPC
shall provide or perform, or shall retain other Persons to provide or perform,
the following, at PFPC's expense (unless otherwise provided herein):
(a) provide all computers, telecommunications equipment, encryption
technology and other materials and services reasonably necessary to develop and
maintain the PFPC Web Site to permit persons to be able to view information
about the Fund and to permit Shareholders with appropriate identification and
access codes (if required by the Phase II Schedule) to initiate Transactions;
(b) address and mail, at the Fund's expense, notification and promotional
mailings and other communications provided by the Fund to Shareholders regarding
the availability of Online Internet Access Services;
(c) provide e-mail services using at least 40-bit encryption between
Shareholders and PFPC's shareholder services representatives for communications
only (not to engage in Transactions) with risk disclosure in a form approved by
the Fund;
(d) prepare and process applications for Internet Services from
Shareholders determined by the Fund to be eligible for such services and issue
logon ID, PIN numbers and welcome letters to such Shareholders according to the
policies of the Fund;
(e) establish (and, as applicable, cooperate with the Fund to implement
and maintain) a hypertext link between the PFPC Web Site and the Fund Web Site;
(f) establish systems to guide, assist and permit Shareholders who access
the PFPC Web Site from the Fund Web Site to electronically create and transmit
Transaction requests to PFPC;
(g) deliver to the Fund three (3) copies of the PFPC Online Internet
Access Service User Guide, as well as all updates thereto on a timely basis;
(h) deliver a monthly billing report to the Fund, which shall include a
report of Transactions;
(i) provide a form of encryption as agreed by PFPC and the Fund from time
to time that is generally available to the public in the U.S. for standard
Internet browsers and establish, monitor and verify firewalls and other security
features (commercially reasonable for this type of information and data) and
exercise commercially reasonable efforts to attempt to maintain the security and
integrity of the PFPC Web Site;
(k) exercise reasonable efforts to maintain all on-screen disclaimers and
copyright, trademark and service mark notifications, if any, provided by the
Fund to PFPC in writing from time to time, and all "point and click" features of
the PFPC Web Site relating to Shareholder acknowledgment and acceptance of such
disclaimers and notifications;
(l) provide periodic site visitation (hit reports) and other information
regarding Shareholder/visitor activity under this Agreement as agreed by PFPC
and the Fund from time to time;
(m) monitor the telephone lines involved in providing the Internet
Services and inform the Fund promptly of any malfunctions or service
interruptions;
(n) PFPC shall periodically scan its Internet interfaces and the PFPC Web
Site for viruses and promptly remove any such viruses located thereon; and
3. Fund Responsibilities. Subject to the provisions of this Exhibit B and
---------------------
the Agreement, the Fund shall at its expense (unless otherwise provided
herein):
(a) provide, or retain other persons to provide, all computers,
telecommunications equipment, encryption technology and other materials,
services, equipment and software reasonably necessary to develop and maintain
the Fund Web Site, including the functionality necessary to maintain the
hypertext links to the PFPC Web Site;
(b) provide the Customer Options list to PFPC, in the format requested by
PFPC, for Phase I and Phase II Transactions, as the Fund shall authorize, and
promptly provide PFPC written notice of changes in Fund policies or procedures
requiring changes in the Customer Options;
(c) work with PFPC to develop Internet marketing materials for
Shareholders and forward a copy of appropriate marketing materials to PFPC;
(d) revise and update the applicable prospectus(es) and other pertinent
materials, such as User Agreements with Shareholders, to include the appropriate
consents, notices and disclosures for Internet Services, including disclaimers
and information reasonably requested by PFPC;
(e) maintain all on-screen disclaimers and copyright, trademark and
service mark notifications, if any, provided by PFPC to the Fund in writing from
time to time, and all "point and click" features of the Fund Web Site relating
to acknowledgment and acceptance of such disclaimers and notifications; and
(f) design and develop the Fund Web Site functionality necessary to
facilitate, implement and maintain the hypertext links to the PFPC Web Site and
the various Transaction web pages and otherwise make the Fund Web Site available
to Shareholders.
4. Standards of Care for Internet Services. Notwithstanding anything to
---------------------------------------
the contrary contained in the Agreement or this Exhibit B:
(a) Each of PFPC and the Fund shall exercise care and diligence, act in
good faith and use its best efforts, within reasonable limits and shall be
liable for any damages arising out of its failure to perform its duties and
obligations described in this Exhibit B to the extent such damages arise out of
its willful misfeasance, bad faith, negligence or reckless disregard of such
duties and obligations.
(b) Without limiting the generality of the foregoing or any other
provisions of this Exhibit B or the Agreement, neither party shall be liable for
(i) losses beyond its control, provided that such party has acted in accordance
with the standard of care set forth above, (ii) subject to Section 9 of this
Exhibit, delays or failures to perform any of its obligations hereunder or
errors or loss of data occurring by reason of circumstances beyond such party's
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, flood, catastrophe, acts of God, insurrections, war,
riots or failure of the mails, transportation, communication or power supply,
functions or malfunctions of the Internet or telecommunications services,
firewalls, encryption systems or security devices caused by any of the above, or
laws or regulations imposed after the date of this Exhibit.
(c) Although PFPC shall comply with the standard of care specified above
in providing the Internet Services, PFPC shall not be obligated to ensure or
verify the accuracy or actual receipt, or the transmission, of any data or
information contained in any transmission via the Internet Services or the
consummation of any Transaction request not actually received by PFPC. The Fund
shall advise Shareholders to promptly notify the Fund or PFPC of any errors or
inaccuracies in Shareholder data or information transmitted via the Internet
Services.
5. Additional Fees for Internet Services. As consideration for the
-------------------------------------
performance by PFPC of the Internet Services, the Fund will pay the fees set
forth in a separate fee letter as agreed between the parties from time to time.
6. Proprietary Rights.
(a) Each of the parties acknowledges and agrees that it obtains no rights
in or to any of the software, hardware, processes, trade secrets, proprietary
information or distribution and communication networks of the other under this
Exhibit. Any software, interfaces or other programs a party provides to the
other hereunder shall be used by such receiving party only during the term of
the Agreement and only in accordance with the provisions of this Exhibit B and
the Agreement. Any interfaces, other software or other programs developed by one
party shall not be used directly or indirectly by or for the other party or any
of its affiliates to connect such receiving party or any affiliate to any other
person, without the first party's prior written approval, which it may give or
withhold in its sole discretion. Except in the normal course of business and in
conformity with Federal copyright law or with the other party's consent, neither
party nor any of its affiliates shall disclose, use, copy, decompile or reverse
engineer any software or other programs provided to such party by the other in
connection herewith.
(b) The Fund Web Site and the PFPC Web Site may contain certain
intellectual property, including, but not limited to, rights in copyrighted
works, trademarks and trade dress that is the property of the other party. Each
party retains all rights in such intellectual property that may reside on the
other party's web site, not including any intellectual property provided by or
otherwise obtained from such other party. To the extent the intellectual
property of one party is cached to expedite communication, such party grants to
the other a limited, non-exclusive, non-transferable license to such
intellectual property for a period of time no longer than that reasonably
necessary for the communication. To the extent that the intellectual property of
one party is duplicated within the other party's web site to replicate the "look
and feel," trade dress or other aspect of the appearance or functionality of the
first site, that party grants to the other a limited, non-exclusive,
non-transferable license to such intellectual property for the duration of the
Agreement. This license is limited to the intellectual property needed to
replicate the appearance of the first site and does not extend to any other
intellectual property owned by the owner of the first site. Each party warrants
that it has sufficient right, title and interest in and to its web site and its
intellectual property to enter into these obligations, and that to its
knowledge, the license hereby granted to the other party does not and will not
infringe on any U.S. patent, U.S. copyright or other U.S. proprietary right of a
third party.
7. Term and Termination.
--------------------
(a) Upon a party's (the "Breaching Party") breach of any term of this Exhibit
the other party (the "Non-Breaching Party") shall provide to the breaching party
written notice detailing such breach and shall provide such Breaching Party a
period of thirty (30) days from the date of receipt of such notice to remedy or
cure such breach.
(b) In the event of a termination of the Agreement, the parties will have
no continuing obligations to one another for Internet Services, except for the
payment of fees for services rendered through the date of termination and the
obligations and agreements contained in Sections 4 through 9 hereof, which shall
survive termination of the Agreement.
8. Representation and Warranty. Neither party shall knowingly insert into any
interface, other software, or other program provided by such party to the other
hereunder, or accessible on the PFPC Web Site or Fund Web Site, as the case may
be, any "back door," "time bomb," "Trojan Horse," "worm," "drop dead device,"
"virus" or other computer software code or routines or hardware components
designed to disable, damage or impair the operation of any system, program or
operation hereunder. For failure to comply with this warranty, the non-complying
party shall immediately replace all copies of the affected work product, system
or software. All costs incurred with replacement including, but not limited to
cost of media, shipping, deliveries and installation shall be borne by such
party.
9. Liability Limitations; Indemnification.
--------------------------------------------
(a) The Internet. Each party acknowledges that the Internet is an
unsecured, unstable, unregulated, unorganized and unreliable network,
and that the ability of the other party to provide or perform services
or duties hereunder is dependent upon the Internet and equipment,
software, systems, data and services provided by various
telecommunications carriers, equipment manufacturers, firewall
providers, encryption system developers and other vendors and third
parties. Each party agrees that the other shall not be liable in any
respect for the functions or malfunctions of the Internet. Each party
agrees the other shall not be liable in any respect for the actions or
omissions of any third party wrongdoers (i.e., hackers not employed by
such party or its affiliates) or of any third parties involved in the
Internet Services and shall not be liable in any respect for the
selection of any such third party, unless such party breached the
standard of care specified herein with respect to that selection.
(b) PFPC's Explicit Disclaimer of Certain Warranties. EXCEPT AS PROVIDED
IN SECTIONS 2 AND 4, ALL SOFTWARE AND SYSTEMS DESCRIBED IN THIS
AGREEMENT ARE PROVIDED "AS-IS" ON AN "AS-AVAILABLE" BASIS, AND PFPC
HEREBY SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING
FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
(c) Cross-Indemnity. Each party hereby indemnifies and agrees to hold the
other party, its affiliates, successors, legal representatives and
assigns, and its officers, directors, agents, employees and
Shareholders harmless from and shall defend them against any and all
claims, actions, charges, demands, liabilities, damages, costs or
expenses, including but not limited to reasonable attorney's fees and
disbursements ("Liabilities") arising in connection with any claims
that any Internet Service or work product infringes any proprietary or
other rights or any infringement claim against any of such persons
based on a party's intellectual property licensed to the other party
hereunder (provided the other party has used such intellectual
property in conformity herewith), except to the extent such
Liabilities result directly from the negligence or knowing or willful
misconduct of the other party or its related indemnified parties under
this subsection 9(c).
10. Confidentiality.
(a) Each of the parties hereby acknowledges that in the course of
performing its obligations hereunder, the other may disclose to it
certain information and know-how of a technical, financial,
operational or other sort, that is nonpublic and otherwise
confidential or proprietary to the disclosing party. Confidential
information shall include, without limitation, all technology,
know-how, processes, software, databases, trade secrets, contracts,
proprietary information, all historical and projected financial
information, business strategies, operating data and organizational
and cost structures, product descriptions, pricing information,
received in connection with this Agreement, as well as compilations of
Fund data or Shareholder data ("Confidential Information").
Confidential Information shall include such information of any
affiliate of PFPC or the Fund. Each party acknowledges that any such
proprietary or confidential information disclosed to it is of
considerable commercial value and that the disclosing party would
likely be economically or otherwise disadvantaged or harmed by the
direct or indirect use or further disclosure thereof, except as
specifically authorized by the disclosing party. Each party therefore
agrees to keep in strict confidence all such information (whether
oral, written, via computer disk or electronic media or otherwise)
that may from time to time be disclosed to or accessed by it, and
agrees not to use such information except as expressly permitted
hereby or to disclose such information to any third party (other than
directors, officers, employees, affiliates, agents or representatives
of either party to the Agreement who have a need to know such
information) for any purpose without the prior written consent of the
other.
(b) The following shall not constitute Confidential Information:
information (i) independently developed by the receiving party as
evidenced by documentation in such party's possession; (ii) lawfully
received by the receiving party free of restrictions, from another
source having the right to furnish the same; (iii) generally known or
available to the public without breach of this Agreement by the
receiving party; or (iv) known to the receiving party free of
restriction at the time of such disclosure.
(c) Either party to this Agreement may disclose Confidential Information
pursuant to the requirement or request of a governmental agency or
pursuant to a court or administrative subpoena, order or other such
legal process or requirement of law, or in defense of any claims or
causes of action asserted against it; provided, however, that it shall
(i) first notify the other of such request or requirement, or use in
defense, unless such notice is prohibited by statute, rule or court
order, (ii) attempt to obtain the other's consent to such disclosure,
and (iii) in the event consent is not given, agree to permit a motion
to quash, or other similar procedural step, to frustrate the
production or publication of information. Nothing herein shall require
either party to fail to honor a legal requirement, subpoena, court or
administrative order, other legal process or request of a governmental
agency on a timely basis. Each of the parties shall cooperate with the
other in an effort to limit the nature and scope of any required
disclosure of Confidential Information.
(d) The parties agree that immediately upon termination of this Agreement,
without regard to the reason for such termination, the parties shall
forthwith return to one another all written materials and computer
software which are the property of the other party. The provisions in
this Section shall survive termination of this Agreement.
(e) Each of the parties agrees that the nonbreaching party would not have
an adequate remedy at law in the event of the other party's breach or
threatened breach of its obligations under Sections 6 or 10 and that
the nonbreaching party would suffer irreparable injury and damage as a
result of any such breach.
Accordingly, in the event either party breaches or threatens to breach the
obligations set forth in Sections 6 or 10, either party may seek a grant of
equitable relief against the other party, including the issuance of a temporary
restraining order, preliminary injunction or permanent injunction. Each party
hereby consents to the granting of equitable relief against it, prohibiting any
such breach or threatened breach, by a court of competent jurisdiction, pursuant
to a legal finding that such relief is necessary and appropriate under the
circumstances. Such relief may be granted without the necessity of proving
actual damages or posting any bond or other security therefor. Relief may be
granted in addition to any legal or other remedies such party may pursue
hereunder or under applicable law. In any proceeding upon a motion for such
equitable relief, a party's ability to answer in damages shall not be interposed
as a defense to the granting of such equitable relief.
11. Miscellaneous.
(a) Independent Contractor. The parties to this Agreement are and shall
remain independent contractors, and nothing herein shall be construed to create
a partnership or joint venture between them and none of them shall have the
power or authority to bind or obligate the other in any manner not expressly set
forth herein. Any contributions to the PFPC Web Site by the Fund and any
contributions to the Fund Web Site by PFPC shall be works for hire pursuant to
Section 101 of the Copyright Act.
(b) Conflict with Agreement. In the event of a conflict between specific
terms of this Exhibit B and the Agreement, this Exhibit B shall control as to
the Internet Services.
THE WORLD FUNDS, INC.
By:_______________________________
Name:
Title:
PFPC INC.
By:_______________________________
Name:
Title:
<PAGE>
ATTACHMENT 1
Additional Online Internet Access Services/Descriptions/Specifications
THIS ATTACHMENT 1, dated as of June 20, 2000, is Attachment 1 to Exhibit B to a
Transfer Agency Services Agreement dated as of June 20, 2000 between the
undersigned. This Attachment 1 shall supersede all previous forms of Attachment
1 as of the date hereof.
[List, if any]
THE WORLD FUNDS, INC.
By:_______________________________
Name:
Title:
PFPC INC.
By:_______________________________
Name:
Title:
<PAGE>
ATTACHMENT 2
Customer Options List
THIS ATTACHMENT 2, dated as of June 20, 2000 is Attachment 2 to Exhibit B to the
Transfer Agency Services Agreement dated as of June 20, 2000 between the
undersigned. This Attachment 2 shall supersede all previous forms of Attachment
2 as of the date hereof.
1. A logon I.D. and PIN are required to access PFPC's Online
Internet Access Services.
2. Shareholder's Web Browser and ISP must support Secure Sockets
Layer (SSL) encryption technology.
3. In order to use PFPC's Online Internet Access
Services, Shareholders will need the following:
a. An Internet service provider (which can be a national
provider such as America Online, CompuServe, Prodigy; or local
service provider).
b. At a minimum, an Intel 486 class machine with 16 MB RAM,
VGA monitor, and 14.4kbps modem running MS Windows 3.1 3.11,
Windows 95 or Windows NT.
c. Web Browser software supporting Secure Sockets Layer
(Netscape 3.0 and MS Internet Explorer 3.0 provide such support). For
best results, a Web Browser capable of supporting Java Script
(such as Netscape Navigator version 4.0 and higher or MS
Internet Explorer version 4.0 and higher) is recommended.
4. In order to use PFPC's Online Internet Access Services, Shareholders
will be required to complete a PFPC Online Application, which can be completed
over the phone or via U.S. mail.
5. PFPC will not provide any software for access to the Internet; software
must be acquired from a third-party vendor.
6. Items such as Shareholder name, address, tax identification numbers and
bank account numbers will not be displayed by PFPC on the PFPC Web Site
7. The following type of authentication will be required for Internet
Transaction access:
a. For Fund prices (NAV information) and distribution information
no security processing will be required; and
b. For account balances and account history information - a
valid Logon I.D. and PIN are required.
THE WORLD FUNDS, INC.
By:_______________________________
Name:
Title:
PFPC INC.
By:_______________________________
Name:
Title:
<PAGE>
EX-99.h(3)
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated July 1, 2000 (the "Agreement") between the World Funds,
Inc. (the "Fund") a corporation operating as an open-end management investment
company, duly organized and existing under the laws of the State of Maryland,
and Commonwealth Fund Accounting, Inc. (the "Company") a corporation duly
organized and existing under the laws of the State of Virginia.
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint the Company as its Accounting
Services Agent to maintain and keep current the books, accounts, records,
journals or other records of original entry relating to the business of the Fund
as set forth in Section 2 of this Agreement (the "Accounts and Records") and to
perform certain other functions in connection with such Accounts and Records;
and
WHEREAS, the Company is willing to perform such functions upon
the terms and conditions set forth below; and
WHEREAS, the Fund will cause to be provided certain
information to the Company as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto, intending to be legally bound, do
hereby agree as follows:
Section 1. Scope of the Engagement.
------------------------
(a) The Fund shall promptly turn over to the Company:
(i) originals or copies of any Accounts and Records
previously maintained by or for it or,
(ii) if such records have not been previously created or
maintained, any data required to establish and bring
current such Accounts and Records.
(b) Thereafter, the Fund shall promptly transmit to the Company, and instruct
any other agents for the Fund to promptly transmit to the Company, all
information required for the maintenance of correct and accurate Accounts
and Records for the Fund.
(c) The Fund acknowledges that such Accounts and Records, and information
related thereto, are necessary for the Company to perform its functions
under this Agreement.
<PAGE>
2
(d) The Fund authorizes the Company to rely on Accounts and
Records turned over to it, and information provided to it, by
the Fund or its agents. The Fund hereby indemnifies and holds
the Company, its successors and assigns harmless of and from
any and all expenses, damages, claims, suits, liabilities,
actions, demands and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other
deficiency of such Accounts and Records, or such information,
or due to the failure of the Fund to provide any portion of
such Accounts and Records, or to provide any additional
information needed by the Company to knowledgeably perform its
functions, within a reasonable time after requested by the
Company.
(e) The Company shall make reasonable efforts to isolate and
correct any inaccuracies, omissions, discrepancies, or other
deficiencies in the Accounts and Records delivered to the
Company, to the extent such matters are disclosed to the
Company or are discovered by it and are relevant to its
performance of its functions under this Agreement. The Fund
shall provide the Company with such assistance as it may
reasonably request in connection with its efforts to correct
such matters.
(f) The Fund agrees to pay Company on a current and ongoing basis
for the Company's reasonable time and costs required for the
correction of any errors or omissions in the Accounts and
Records delivered, or the information provided, to Company by
the Fund. Any such payment shall be in addition to the fees
and charges payable to the Company under this Agreement as set
forth in Schedule A attached hereto (which provides for
services normally contemplated to be rendered under this
Agreement), provided that approval of the amount of such
payments shall be obtained in advance by the Company from the
Fund if and when such additional charges would exceed five
percent of the usual charges payable for a period under this
Agreement.
Section 2. Identification of Services.
---------------------------
(a) Upon receipt of the necessary information from the Fund or its agents by
Written or Oral Instructions, the Company shall maintain and keep current
the following Accounts and Records relating to the business of the Fund,
in such form as may be mutually agreed to between the Fund and the
Company, and as may be required by the Investment Company Act of 1940 (the
"Act"):
(1) Cash Receipts Journal
(2) Cash Disbursements Journal
(3) Dividends Paid and Payable Schedule
(4) Purchase and Sales Journals - Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledgers - Transaction Report and Tax Lot Report
<PAGE>
3
(7) Broker Ledger - Commission Report
(8) Daily Expense Accruals
(9) Daily Interest Accruals
(10) Daily Trial Balance
(11) Portfolio Interest Receivable and Income Journal (12) Listing of
Portfolio Holdings showing cost, market value
and percentage of portfolio comprised of each security.
(b) Unless necessary information to perform the above functions is
furnished by Written or Oral Instructions to the Company to
enable the daily calculation of the Fund's net asset value at
the time set by the Fund pursuant to Rule 22c-1 under the Act,
(presently set at the close of trading on the New York Stock
Exchange), as provided below in accordance with the time frame
identified in Section 7, the Company shall incur no liability,
and the Fund shall indemnify and hold harmless the Company
from and against any liability arising from any failure to
provide complete information or from any discrepancy between
the information received by the Company and used in such
calculations and any subsequent information received from the
Fund or any of its designated Agents.
(c) The scope and quality of the services to be provided under
this Agreement are based upon, and specifically incorporate,
the assumptions (the "Basic Assumptions") appended to this
Agreement as Schedule B. The Fund agrees that material
deviations from the Basic Assumptions will be made only by
mutual agreement of the Fund and the Company, and deviations
from such Basic Assumptions may affect the ability of the
Company to provide the services called for under this
Agreement.
Section 3. Pricing.
--------
(a) The Company shall perform ministerial calculations necessary to calculate
the Fund's net asset value daily, in accordance with the Fund's current
prospectus and utilizing the information described in this Section.
(b) Portfolio investments for which market quotations are
available to the Company by use of an automated financial
service (a "Pricing Service") shall be valued based on the
closing prices of the portfolio investment reported by such
Pricing Service except where the Fund has given or caused to
be given specific Written or Oral Instructions to utilize a
different value. Notwithstanding any information obtained from
a Pricing Service, all portfolio securities shall be given
such values as the Fund shall direct by Written or Oral
Instructions, including all restricted securities and other
securities requiring valuation not readily ascertainable
solely by the use of such a Pricing Service.
<PAGE>
4
(c) The Company shall have no responsibility or liability for the
accuracy of prices quoted by any recognized Pricing Service
used by it pursuant to the preceding paragraph; for the
accuracy of the information supplied by the Fund; or for any
loss, liability, damage, or cost arising out of any inaccuracy
of such data, unless the Company is itself negligent with
respect thereto. The Company shall have no responsibility or
duty to include information or valuations to be provided by
the Fund in any computation unless and until it is timely
supplied to the Company in usable form. Unless the necessary
information to calculate the net asset value daily is
furnished by Written or Oral Instructions from the Fund, the
Company shall incur no liability, and the Fund shall indemnify
and hold harmless the Company from and against any liability
arising from any failure to provide complete information or
from any discrepancy between the information received by the
Company and used in such calculation and any subsequent
information received from the Fund or any of its designated
agents, provided the Company notifies the Fund promptly of its
need for additional information with which to calculate net
asset value.
Section 4. Reliance Upon Instructions.
---------------------------
(a) For all purposes under this Agreement, the Company is
authorized to act upon receipt of the first of any Written or
Oral Instructions it receives from the Fund or authorized
agents of the Fund. In cases where the first instruction is an
Oral Instruction that is not in the form of a document or
written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall
be delivered, and in cases where the Company receives an
Instruction, whether Written or Oral, to enter a portfolio
transaction on the records, the Fund shall cause the
Broker-Dealer to send a written confirmation to the Company.
(b) The Company shall be entitled to rely on the first Instruction
received by it, and for any act or omission undertaken in
compliance therewith shall be free of liability and fully
indemnified and held harmless by the Fund, provided however,
that in the event a Written or Oral Instruction received by
the Company is countermanded by a timely later Written or Oral
Instruction received by the Company prior to acting upon such
countermanded Instruction, the Company shall act upon such
later Written or Oral Instruction. The sole obligation of the
Company with respect to any follow-up or confirmatory Written
Instruction, Oral Instruction in documentary or written form,
or Broker-Dealer written confirmation shall be to make
reasonable efforts to detect any such discrepancy between the
original Instruction and such confirmation and to report such
discrepancy to the Fund. The Fund shall be responsible, at the
Fund's expense, for taking any action, including any
reprocessing, necessary to correct any discrepancy or error,
and to the extent such action requires the Company to act the
Fund shall give the Company to act the Fund shall give the
Company specific Written Instruction as to the action
required.
Section 5. Reconciliation with Fund's Custodian.
-------------------------------------
At the end of each month, the Fund shall cause its Custodian Bank to
forward to the Company a monthly statement of cash and portfolio transactions,
which will be reconciled with the Company's Accounts and Records maintained for
the Fund. The Company will report any discrepancies to the Custodian, and shall
report any unreconciled items to the Fund.
Section 6. Reports to Fund.
----------------
The Company shall promptly supply daily and periodic reports to the Fund
as requested by the Fund and agreed upon by the Company.
Section 7. Information from Fund.
----------------------
(a) The Fund, directly or by instructions to its agents (including
without limitations its Transfer Agent and its Custodian),
shall provide to the Company as of the close of each Business
Day (or on such other schedule as the Fund determines is
necessary), confirmed by Written or Oral Instructions
delivered to the Company by 10:00 a.m. on the next business
day) all data and information necessary for the Company to
maintain the Fund's Accounts and Records.
(b) The Company may conclusively assume that information it receives by
Written or Oral Instructions pursuant to the preceding paragraph is
complete and accurate. It is agreed that the information provided by the
Fund or its agents shall include reports of share purchases, redemptions
or repurchases, and total shares outstanding at the end of each business
day after the determination of the net asset value.
Section 8. Ownership of and Access to Fund Records.
----------------------------------------
(a) It is agreed that the Accounts and Records maintained by the Company for
the Fund are the property of the Fund, and shall be made available to the
Fund promptly upon request and shall be for the periods prescribed in Rule
31(a)-2 under the Act.
(b) The Company shall assist the Fund's independent auditors or, upon lawful
demand, any authorized regulatory body, in any authorized inspection or
review of the Fund's Accounts and Records.
(c) If the Company receives any request or order of a court or regulatory body
of competent jurisdiction, seeking access to the books and records of the Fund
in the possession of the Company, the Company shall seek to notify the Fund of
such request or order to the extent it may lawfully do so. The Company shall not
be required to oppose or defend against any such request or order. In connection
with any such request or order the Company may consult with counsel (whether its
counsel or counsel for the Fund) regarding same, and shall be reimbursed by the
Fund for any costs incurred thereby.
(d) The Company shall be reimbursed for all expenses and employee
time required to assist with any review of the Fund's Accounts
and Records outside of routine and normal periodic reviews and
audits. Upon receipt from the Fund, or its agents, of the
necessary information, the Company shall supply data to the
Fund's accountants to allow them to complete any necessary tax
returns, questionnaires, periodic reports to shareholders and
such other reports and information requests as the Fund and
the Company shall agree upon from time to time.
Section 9. Procedures and Compliance.
--------------------------
The Company and the Fund may from time to time adopt such procedures as
they agree upon in writing, and the Company may conclusively assume that any
procedure approved or directed by the Fund does not conflict with or violate any
requirements of its Prospectus, Articles of Incorporation, By-Laws, or any rule
or regulation of any regulatory body or governmental agency. The Fund shall be
responsible for notifying the Company of any changes in regulations or rules
which might necessitate changes in the Company's procedures, and for working out
such changes with the Company.
Section 10. Indemnification.
----------------
(a) The Company, its directors, officers, employees, shareholders
and agents shall not be liable for any error or judgement or
mistake of law or for any loss suffered by the Fund in
connection with the performance of this Agreement, except
losses resulting from willful malfeasance, bad faith, or gross
negligence on the part of the Company, or gross neglect by the
Company in the performance of its obligations and duties under
this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of the Company, who may be or become an
officer, trustee, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting on any
business of the Fund (other than services or business in
connection with the Company's duties hereunder), to be
rendering such services to or acting solely for the Fund and
not as a director, officer, employee, shareholder or agent of,
or one under the control or direction of the Company even
though paid by it.
<PAGE>
7
(c) Notwithstanding any other provision of this Agreement, the
Fund shall indemnify and hold harmless the Company, its
directors, officers, employees, shareholders and agents from
and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of
any and every nature which the Company may sustain or incur,
or which may be asserted against the Company by any person by
reason of, or as a result of: (i) any action taken or omitted
to be taken by the Company in good faith hereunder; (ii) in
reliance upon any certificate, instrument, order or stock
certificate or other document reasonably believed by it to be
genuine and to be signed, countersigned or executed by any
duly authorized person, upon the Oral instructions or Written
Instructions of an authorized person of the Fund or upon the
opinion of legal counsel for the Fund or its own counsel; or
(iii) any action taken or omitted to be taken by the Company
in connection with its appointment in good faith in reliance
upon any law, fact, regulation or interpretation of the same
even though the same may thereafter have been altered,
changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of
the Company or its directors, officers, employees,
shareholders or agents in cases of its or their own
negligence, willful misconduct, bad faith, or reckless
disregard of its or their own duties hereunder.
(d) The Company shall give written notice to the Fund within ten
(10) business days of receipt by the Company of a written
assertion or claim of any threatened or pending legal
proceeding which may be subject to this indemnification.
However, the failure to notify the Fund of such written
assertion or claim shall not operate in any manner whatsoever
to relieve the Fund of any liability arising from this Section
or otherwise.
(e) In connection with any legal proceeding giving rise to a
request for indemnification by the Company pursuant to this
provision, the Fund shall be entitled to defend or prosecute
any claim in the name of the Company at its own expense and
through counsel of its own choosing if it gives written notice
to the Company within ten (10) business days of receiving
notice of such claim. Notwithstanding the foregoing, the
Company may participate in the litigation at its own expense
through counsel of its choosing. If the Fund does choose to
defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall
furnish such records and other information as are reasonably
necessary for such purpose.
(f) The Fund shall not settle any claim without the Company's express written
consent, which consent shall not be unreasonably withheld. The Company
shall not settle any claim without the Fund's express written consent,
which consent shall not be unreasonably withheld.
<PAGE>
8
Section 11. Foreign currencies.
-------------------
All financial data provided to, processed by, and reported by the Company
under this Agreement shall be stated in United States dollars or currency. The
Company shall have no obligation to convert to, equate, or deal in foreign
currencies or values, and expressly assumes no liability for any currency
conversion or equation computations relating to the affairs of the Fund.
Section 12. Compensation of the Company.
----------------------------
The Fund agrees to pay the Company compensation for its services and to
reimburse it for expenses, as set forth in Schedule A attached hereto, or as
shall be set forth in amendments to such Schedule approved by the Fund and
Company from time to time. The Fund hereby instructs its Custodian Bank to debit
the Fund's custody account for invoices which are rendered by the Company for
the services performed for the Accounting agent function and to make payment on
such invoices in accordance with normal practices. Invoices for services
supplied or costs incurred by the Company will be sent to the Fund on or about
the first business day of each month, and payment thereon shall be made within
ten (10) days thereafter. The Fund agrees that the compensation payable
hereunder is predicated on the Basic Assumptions, and agrees that any
incremental work required to be provided by the Company due to deviation from
the Basic Assumptions by the Fund or its agents shall be payable to, or on
behalf of, the Company by the Fund.
Section 13. Holidays.
Nothing contained in this Agreement is intended to or shall require the
Company, in any capacity hereunder, to perform any functions or duties on any
holiday, day of special observance or any other day on which the Custodian or
the New York Stock Exchange is closed. Functions or duties normally scheduled to
be performed on such days shall be performed, and as of, the next succeeding
business day on which both the New York Stock Exchange and the Custodian are
open. Not withstanding the foregoing, the Company shall compute the net asset
value of the Fund on each day required pursuant to Rule 22c-1 promulgated under
the Act.
Section 14. Counterparts.
This Agreement may be executed in two or more counterparts, each of which,
when so executed shall be deemed to be an original, but such counterparts shall
together constitute but one and the same instrument.
<PAGE>
9
Section 15.Definitions.
For purposes of this Agreement, the terms Oral Instructions and Written
Instructions shall mean:
(a) Oral Instructions: The term Oral Instructions shall mean an
-------------------
authorization, instruction, approval, item or set of data, or
information of any kind transmitted to the Company in person
or by telephone, telegram, telecopy or other mechanical or
documentary means lacking an original signature, by a person
or persons believed in good faith by the Company to be a
person or persons authorized by a resolution of the Board of
Directors of the Fund, to give Oral Instructions on behalf of
the Fund.
(b) Written Instructions: The term Written Instruction shall mean
----------------------
an authorization, instruction, approval, item or set of data
or information of any kind transmitted to the Company bearing
an original signature of an authorized person, or a copy of
such document transmitted by telecopy including transmission
of such a signature believed in good faith by the Company to
be the signature of a person authorized by a resolution of the
Board of Directors of the Fund to given Written Instructions
on behalf of the Fund.
(c) The Fund shall file with the Company a certified copy of each resolution
of its Board of Directors authorizing execution of Written Instructions or
the transmittal of Oral Instructions as provided above.
Section 16.Termination.
(a) Either Party hereto may give written notice to the other party (the
"Termination Notice") of the termination of this Agreement. Such
Termination Notice shall state a date upon which the termination is
effective (the "Termination Date"), which shall be not less than sixty
(60) days after the date of the giving of the notice unless otherwise
agreed by the parties hereto in writing.
(b) Prior to the Termination Date, the Company shall provide to the Fund an
estimate of any anticipated fees, charges or expenses additional to the
normal fees, charges and expenses which would be payable under this
Agreement for the period from that time until the Termination Date, and
the Company may require a deposit on account of such estimate to be paid
by the Fund.
(c) Upon the Termination Date, subject to payment to the Company by the Fund
of all amounts due to the Company as of said date, the Company shall make
available to the Fund or its designated recordkeeping successor, all of
the records of the Fund maintained under this Agreement which are then in
the Company's possession.
<PAGE>
10
Section 17.Notice.
Any notice or other communication required by or permitted to be given in
connection with this Agreement shall be in writing, and shall be delivered in
person or sent by first class mail, postage prepaid to the respective parties as
follows:
If to the Fund:
World Funds, Inc.
1500 Forest Ave, #223
Richmond, VA
Attn: Darryl Peay
If to the Company:
Commonwealth Fund Accounting, Inc.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
Attention: W. R. Carmichael, Jr.
Section 18. Amendments to be in Writing.
----------------------------
This Agreement may be amended from time to time by a writing executed by
the Fund and the Company. The compensation stated in Schedule A attached hereto
may be adjusted from time to time by the execution of a new schedule signed by
both of the parties.
Section 19. Controlling law.
----------------
This Agreement shall be governed by the laws of the Commonwealth of
Virginia.
Section 20. Entire Agreement.
-----------------
This Agreement sets forth the entire understanding of the parties with
respect to the provisions contemplated hereby, and supersedes any and all prior
agreements, arrangements and understandings relating to such services.
Section 21. Separability of Provisions.
---------------------------
Any provision of this Agreement which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
and attested, as of the day and year first above written.
The World Funds,Inc.
Attest:
By:/s/ Darryl S. Peay
--------------------------
NAME: Darryl S. Peay
TITLE: Vice President
Attest:
COMMONWEALTH FUND ACCOUNTING, INC.
By:/s/ William R. Carmichael
---------------------------
NAME: William R. Charmichael
TITLE: President
<PAGE>
A-1
SCHEDULE A
COMMONWEALTH FUND ACCOUNTING, INC.
ACCOUNTING SERVICES FEES
1. Domestic and ADR Securities Annual Basic Fee per
------------------------------ ---
portfolio (1/12 payable monthly)
$9,000 Minimum for the first fiscal year $12,000 Minimum up to $5
Million Average Net Assets $18,000 Minimum up to $10 Million Average
Net Assets $24,000 Minimum up to $25 Million Average Net Assets .0002
on Next $75 Million of Average Net Assets
Should total assets exceed $100 Million/Fund the fee schedule will be
renegotiated.
2. Should the Fund's security trading activity exceed an average of 100
trades per month per portfolio, an additional fee of $2.50 will be charged per
trade after each portfolio reaches $25 million.
<PAGE>
B-1
SCHEDULE B
ACCOUNTING SERVICES AGREEMENT
COMMONWEALTH FUND ACCOUNTING, INC.
BASIC ASSUMPTIONS
1. The Fund will complete all necessary prospectus and compliance reports, as
well as monitoring the various limitations and restrictions.
2. Daily Transfer Agent information will be supplied to the
Company in the required format, and within the necessary time
constraints(i.e., by 11:00 a.m. EST on trade date plus one)
3. The Transfer Agent is responsible for reconciliation of Fund share balances
between the Transfer Agent reports and the Accounting share reports.
4. The Company will supply the Transfer Agent with daily NAV's
for each portfolio by 6:00 p.m. EST
5. The Fund's security trading activity will remain on average less than 100
trades per month, per portfolio.
6. The Company can, upon request, supply daily Portfolio Valuation Reports to
the Fund's investment advisor identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation and/or depreciation.
It will be the responsibility of the Fund's investment advisor to review
these reports upon receipt and to promptly notify the Company of any possible
"problems", incorrect security prices or capital change information that could
result in an incorrect Fund NAV.
<PAGE>
B-2
7. Specific deadlines and complete information will be identified for all
security trades in order to minimize any settlement problems or NAV errors.
Details of non-money market trades will be called or faxed to the Company
on trade date plus one, no later than 11:00 a.m. Trade Authorization Forms, with
the appropriate officer signature, should be faxed to the Company on all
security trades placed by the Fund as soon as available but no later trade date
for money market instruments, and trade plus one for non-money market
securities.
There is no assurance that security trades called in after the above
stated deadline can be included in that day's work.
8. Should the Fund participate in Security Lending additional
fees may apply.
9. Fund management will monitor the expense accrual procedures for accuracy and
adequacy based on outstanding liabilities monthly, and promptly communicate to
the Company any adjustment needed.
<PAGE>
EX-99.h(4)
Brown Brothers Harriman & Co.
The World Funds, Inc.
Globale-Fund
Investor Services Fee Schedule
April 2000
I. CUSTODY ASSET & TRANSACTION BASED CHARGES (continued)
A derivative transaction charge of $35 will be applied to, but not limited
to futures, options, currency hedges and third party foreign exchanges. A charge
of $15 will apply for all trades, cancelled, corrected or repaired. A charge of
$100 per proxy vote will apply. Annual Custody Minimum: $25,000 $15,000 first
six months
II. FUND ACCOUNTING CHARGES
Annual Fees Payable Monthly on Value of Assets:
.0009 on first $50 million
.0004 on next $100 million
.0003 on all above $150 million
Annual Fund Accounting Minimum per Account:
$45, 000
$35, 000 first six months
Multi Class Accounting:
$1,500 per month 1st additional class of capital stock
$750 per month afterwards each additional class of capital stock
<PAGE>
Brown Brothers Harriman & Co.
The World Funds, Inc.
Globale-Fund
Investor Services Fee Schedule
April 2000
III. FUND ACCOUNTING CHARGES
Out of pocket expenses may include, but are not limited to, postage, courier and
overnight mail charges, telephone and telecommunication charges including fax
charges, duplicating charges including those related to filings with federal and
state regulatory authorities and Board meeting materials, forms and supplies
including those relating to Board meeting materials, travel and lodging expenses
relating to travel to and from Board meetings, customized computer programming
requests, charges for Edgarizing documents, pricing service charges, record
retention, retrieval and destruction costs, locally mandated charges,
subcustodian communications expenses, telex expenses, audit reporting expenses,
legal expenses, direct expenses such as stamp duties, foreign investor
registration, commissions, dividend and income collection charges, proxy
charges, taxes, certificate fees, special handling, transfer, withdrawal,
Euroclear deposit and withdrawal charges, holding charges and registration fees,
and other expenses as agreed to by the parties from time to time would be
additional.
<PAGE>
EX-99.h(6)
EXPENSE LIMITATION AGREEMENT
THE WORLD FUNDS, INC.
This EXPENSE LIMITATIONAGREEMENT, effective as of ___________, 2000 is
by and between Global Assets Advisers, Inc. (the "Adviser") and The World
Funds, Inc. (the "Fund"), on behalf of The Global e-Fund series of the Fund
(the "Portfolio").
WHEREAS the Fund is a corporation organized under the Maryland General
Corporations Law, and is registered under the Investment Company Act of 1940
(the "1940 Act") as an open-end management company of the series type (the
Portfolio being a series of the Fund); and
WHEREAS the Fund and the Adviser have entered into an Advisory Agreement,
as amended ("Advisory Agreement"), pursuant to which the Adviser provides
Advisory services to the Portfolio for compensation based on the value of the
average daily net assets of the Portfolio; and
WHEREAS the Fund and the Adviser have determined that it is appropriate
and in the best interests of the Portfolio and its shareholders to maintain the
expenses of the Portfolio at a level below the level to which the Portfolio
might otherwise be subject;
NOW, THEREFORE, the parties to this Agreement acknowledge and agree to the
following:
1. Expense Limitation
1.1 Operating Expense Limit. The maximum Operating Expense Limit in any
year with respect to Class A shares of the Portfolio is 3.49% and
3.99% for Class B shares of the Portfolio of the average daily net
assets of the Portfolio.
1.2 Applicable Expense Limit. To the extent that the aggregate
expenses incurred by the Portfolio in any fiscal year (referred to
as "Portfolio Operating Expenses") exceed the Operating Expense
Limit, the excess amount ("Excess Amount") will be the liability of
the Adviser. Portfolio Operating Expenses may include, but are not
limited to, Advisory fees of the Adviser. Portfolio Operating
expenses do not include interest, taxes, brokerage commissions, other
expenditures capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred
in the ordinary course of the Portfolio's business.
1.3 Method of Computation. To determine the Adviser's liability with
respect to the Excess Amount, each month the Portfolio Operating
Expenses for the Portfolio will be annualized as of the last day of
the month. If the annualized Portfolio Operating expenses of the
Portfolio exceed the Operating Expense Limit of the Portfolio for the
month, the Adviser will remit to the Portfolio an amount sufficient
to reduce the annualized Portfolio Operating Expenses Limit.
1.4 Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an annual adjustment payment will be
made by the appropriate party in order that the amount of the
Advisory fees waived or reduced by the Adviser, as well as other
payments remitted by the Adviser to the Portfolio with respect to
adjustments made to the Portfolio Operating Expenses for the previous
fiscal year, shall equal the Excess Amount for the entire fiscal
year.
2. Reimbursement of Fee Waivers and Expense Reimbursements
2.1 Reimbursement. If during any quarter in which the Advisory Agreement
is still in effect, the estimated aggregate Portfolio Operating
Expenses of the Portfolio for the quarter are less than the Operating
Expense Limit for that quarter, the Adviser will be entitled to
reimbursement of fees waived or remitted by the Adviser to the
Portfolio pursuant to Section 1 of this Agreement. 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 Portfolio during any of the previous five (5) years, pursuant to
Section 1of this Agreement, less any reimbursement previously paid by
a Portfolio to the Adviser with respect to any waivers, reductions,
and payments made with respect to a Portfolio; provided, that the
amount payable to the Adviser pursuant to this
Section 2.1 is limited to not more than the difference between the
Operating Expense Limit for the quarter and the actual Portfolio
Operating Expenses for that quarter. The Reimbursement Amount may
not include any additional charges or fees, such as interest
accruable on the Reimbursement Amount.
2.2 Board Approval. No Reimbursement Amount will be paid to the
Adviser in any fiscal quarter unless the Fund's Board of
Directors has determined that a reimbursement is in the best
interest of the Portfolio and its shareholders. The Fund's Board
of Directors will determine quarterly in advance whether any
Reimbursement Amount may be paid to the Adviser during the
quarter.
3. Term and Termination of Agreement.
This Agreement will continue in effect until ________, ____, and from year
to year thereafter provided that each continuance is specifically approved by a
majority of the Directors of the Fund who (i) are not "interested persons" of
the Fund or any other party to this Agreement, as defined in the 1940 Act, and
(ii) have no direct or indirect financial interest in the operation of this
Agreement ("Independent Directors"). Nevertheless, this Agreement may be
terminated by either party to the Agreement, without payment of any penalty,
upon ninety (90) days prior written notice to the other party at its principal
place of business. Action to terminate the Agreement must be authorized by
resolution of a majority of the Independent Directors of the Fund or by a vote
of a majority of the outstanding voting securities of the Fund.
4. Miscellaneous.
4.1 Captions. The captions in this Agreement are included for convenience
of reference only and do not define or delineate any of the
provisions of the Agreement, or otherwise affect their construction
or effect.
4.2 Interpretation. Nothing in this Agreement requires the Fund or the
Portfolio to take any action contrary to the Fund's Articles of
Incorporation, Bylaws, or any applicable statutory or regulatory
requirement to which the Fund or Portfolio are subject, nor does this
Agreement relieve or deprive the Fund's Board of Directors of its
responsibility for and control of the conduct of the affairs of the
Fund or the Portfolio.
4.3 Definitions. Any questions of interpretation of any term or provision
of this Agreement has the same meaning and is to be resolved by
reference to, the 1940 Act and the Advisory Agreement between the
parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers, and have caused their respective
corporate seals to be affixed to this Agreement as of the day and year first
above written.
THE WORLD FUNDS, INC.
By: _____________________________
John Pasco, III
Chairman
GLOBAL ASSETS ADVISERS, INC.
By: ____________________________
Todd Boren
President
<PAGE>
EX-23.i
G R E E N B E R G
A T T O R N E Y S A T L
A W
T R A U R I G
2050 One Commerce Square
Philadelphia, Pennsylvania 19103
(215) 988-7800
Direct Dial: (215) 988-7837
August 18 , 2000
The World Funds, Inc.
Suite 223
1500 Forest Avenue
Richmond, Virginia 23226
Re: Consent to Use of Legal Opinion - Securities Act of 1933
--------------------------------------------------------
Ladies and Gentlemen:
I have previously provided to The World Funds, Inc. (the "Fund"), a
series corporation organized under Maryland law, an opinion dated May 12, 2000,
respecting shares of common stock of the Fund registered under the Securities
Act of 1933, as amended (the "Securities Act"). The Fund filed a copy of that
opinion with the U.S. Securities and Exchange Commission as an exhibit to a
registration statement (the "Registration Statement") under the Securities Act,
file number 333-29289, which Registration Statement registered an indefinite
number of shares of the Fund pursuant to the provisions of Rule 24f-2 under the
Investment Company Act of 1940. We hereby consent to the continued use of that
opinion as an exhibit to the current post-effective amendment to the
Registration Statement of the Fund, and we further consent to reference in the
Registration Statement to the fact that an opinion concerning the legality of
the issue has been rendered by us.
Very truly yours,
GREENBERG TRAURIG
By: /s/ Steven M. Felsenstein
-------------------------
Steven M. Felsenstein
<PAGE>
EX-99.m(1)(a)
THE WORLD FUNDS, INC.
Distribution Plan
Of
Global e-Fund
Class A Shares
This Plan of Distribution (the "Plan") has been adopted pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act") by The World Funds, Inc. (the "Fund") for the Class A Shares of the
Fund's Global e-Fund series (the "Series"). The Plan has been approved by a
majority of the Fund's Board of Directors, including a majority of the Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the "12b-1 Directors"), by
votes cast in person at a meeting called for the purpose of voting on the Plan.1
The Fund contemplates that the Plan shall operate as a compensation Plan.
The Plan provides that:
1. Subject to the limits on payments under the Plan set forth herein, or
in any annual budget approved by the Fund and the Distributor, the Fund shall
pay to the Distributor, or others through the Distributor, the amounts called
for under the Plan. Such payments shall be applied by the Distributor for all
expenses incurred by such parties in the promotion and distribution of the
Series' shares. For this purpose, expenses authorized under the Plan include,
but are not limited to, printing of prospectuses and reports used for sales
purposes, expenses of preparation of sales literature and related expenses,
advertisements, salaries and benefits of employees involved in sales of shares,
telephone expenses, meeting and space rental expenses, underwriter's spreads,
interest charges on funds used to finance activities under this Plan, and other
distribution-related expenses, as well as any service fees paid to securities
dealers or others who have executed an agreement with the Fund or its
affiliates.
2. The following agreements are deemed to be "agreements under the Plan"
and the form of each such agreement, and any material amendments thereto, shall
be approved as required under the Rule:
a. Any Distribution Agreement between the Fund and its
National Distributor, or any other distributor of shares
in privity with the Fund.
b. The National Distributor's Selling Dealer Agreement.
Purchase orders for goods and services acquired from persons who are not
affiliates of the Fund are not deemed to be agreements under this Plan.
3. The maximum aggregate amount which may be reimbursed by the Fund under
this Plan is 0.50% per annum of the average daily net assets of the Series'
shares. The amount so paid shall be accrued daily, and payment thereon shall be
made monthly by the Fund.
4. It is anticipated that amounts paid by the Fund under this Plan shall
be used to pay service and maintenance fees for shareholder servicing and
maintenance of shareholder accounts by other providers.
5. The Distributor shall collect and disburse payments made under this
Plan, and shall furnish to the Board of Directors of the Fund for its review on
a quarterly basis, a written report of the monies reimbursed to the Distributor
and others under the Plan, and shall furnish the Board of Directors of the Fund
with such other information as the Board may reasonably request in connection
with the payments made under the Plan in order to enable the Board to make an
informed determination of whether the Plan should be continued.
6. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually by
the Fund's Board of Directors, including the non-interested Directors, cast in
person at a meeting called for the purpose of voting on the Plan.
7. The Plan, or any agreements entered into pursuant to the Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Fund, or by vote of a majority of the
non-interested Directors, on not more than sixty (60) days' written notice, and
shall terminate automatically in the event of any act that constitutes an
assignment of the management agreement between the Fund and the Fund's
investment adviser.
8. The Plan and any agreements entered into pursuant to the Plan may not
be amended to increase materially the amount to be spent by the Fund for
distribution pursuant to paragraph 3 of this Plan without approval by a majority
of the Fund's outstanding voting securities.
9. All material amendments to the Plan, or any agreements entered into
pursuant to the Plan, shall be approved by the Board, including a majority of
the 12b-1 Directors, cast in person at a meeting called for the purpose of
voting on any such amendment.
10. So long as the Plan is in effect, the selection and nomination of
the Fund's 12b-1 Directors shall be committed to the discretion of such
12b-1 Directors.
11. This Plan shall take effect on the ____ day of ______, 2000.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Fund and the Distributor as evidenced by their execution
hereof.
The World Funds, Inc.
By:
---------------------------
John Pasco, III
Chairman
International Assets Advisory Corporation
By:
----------------------------
Todd Boren
Vice President
1 In its consideration of the Plan, the Board of Directors considered the
proposed schedule and nature of payments under the Plan. The Board of Directors
concluded that the proposed reimbursement of the series' principal underwriter,
International Assets Advisory Corporation (the "Distributor"), for distribution
expenses under the Plan is fair and not excessive. Accordingly, the Board
determined that the Plan should provide for such reimbursement and that adoption
of the Plan would be prudent and in the best interests of the Fund and the
Series' shareholders. Such approval included a determination that in the
exercise of their reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Fund,
the Series and the Series' shareholders.
<PAGE>
EX-99.m(1)(b)
THE WORLD FUNDS, INC.
Distribution Plan
Of
Global e-Fund
Class B Shares
This Plan of Distribution (the "Plan") has been adopted pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act") by The World Funds, Inc. (the "Fund") for the Class B Shares of the
Fund's Global e-Fund series (the "Series"). The Plan has been approved by a
majority of the Fund's Board of Directors, including a majority of the Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the "12b-1 Directors"), by
votes cast in person at a meeting called for the purpose of voting on the Plan.1
The Fund contemplates that the Plan shall operate as a compensation Plan.
The Plan provides that:
1. Subject to the limits on payments under the Plan set forth herein, or
in any annual budget approved by the Fund and the Distributor, the Fund shall
pay to the Distributor, or others through the Distributor, the amounts called
for under the Plan. Such payments shall be applied by the Distributor for all
expenses incurred by such parties in the promotion and distribution of the
Series' shares. For this purpose, expenses authorized under the Plan include,
but are not limited to, printing of prospectuses and reports used for sales
purposes, expenses of preparation of sales literature and related expenses,
advertisements, salaries and benefits of employees involved in sales of shares,
telephone expenses, meeting and space rental expenses, underwriter's spreads,
interest charges on funds used to finance activities under this Plan, and other
distribution-related expenses, as well as any service fees paid to securities
dealers or others who have executed an agreement with the Fund or its
affiliates.
2. The following agreements are deemed to be "agreements under the Plan"
and the form of each such agreement, and any material amendments thereto, shall
be approved as required under the Rule:
a. Any Distribution Agreement between the Fund and its
National Distributor, or any other distributor of shares
in privity with the Fund.
b. The National Distributor's Selling Dealer Agreement.
Purchase orders for goods and services acquired from persons who are not
affiliates of the Fund are not deemed to be agreements under this Plan.
3. The maximum aggregate amount which may be reimbursed by the Fund under
this Plan is 1.00% per annum of the average daily net assets of the Portfolio's
shares. Of the 1.00%, the Portfolio may pay a fee for distribution of Class B
Shares of 0.75%, and a service fee of 0.25%. The amount so paid shall be accrued
daily, and payment thereon shall be made monthly by the Fund.
4. It is anticipated that amounts paid by the Fund under this Plan shall
be used to pay service and maintenance fees for shareholder servicing and
maintenance of shareholder accounts by other providers.
5. The Distributor shall collect and disburse payments made under this
Plan, and shall furnish to the Board of Directors of the Fund for its review on
a quarterly basis, a written report of the monies reimbursed to the Distributor
and others under the Plan, and shall furnish the Board of Directors of the Fund
with such other information as the Board may reasonably request in connection
with the payments made under the Plan in order to enable the Board to make an
informed determination of whether the Plan should be continued.
6. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually by
the Fund's Board of Directors, including the non-interested Directors, cast in
person at a meeting called for the purpose of voting on the Plan.
7. The Plan, or any agreements entered into pursuant to the Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Fund, or by vote of a majority of the
non-interested Directors, on not more than sixty (60) days' written notice, and
shall terminate automatically in the event of any act that constitutes an
assignment of the management agreement between the Fund and the Fund's
investment adviser.
8. The Plan and any agreements entered into pursuant to the Plan may not
be amended to increase materially the amount to be spent by the Fund for
distribution pursuant to paragraph 3 of this Plan without approval by a majority
of the Fund's outstanding voting securities.
9. All material amendments to the Plan, or any agreements entered into
pursuant to the Plan, shall be approved by the Board, including a majority of
the 12b-1 Directors, cast in person at a meeting called for the purpose of
voting on any such amendment.
10. So long as the Plan is in effect, the selection and nomination of the
Fund's 12b-1 Directors shall be committed to the discretion of such 12b-1
Directors.
11. This Plan shall take effect on the ____ day of ______, 2000.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Fund and the Distributor as evidenced by their execution
hereof.
The World Funds, Inc.
By:
---------------------------
John Pasco, III
Chairman
First Dominion Capital Corp.
By:
----------------------------
John Pasco, III
President
1 In its consideration of the Plan, the Board of Directors considered the
proposed schedule and nature of payments under the Plan. The Board of Directors
concluded that the proposed reimbursement of the series' principal underwriter,
First Dominion Capital Corp. (the "Distributor"), for distribution expenses
under the Plan is fair and not excessive. Accordingly, the Board determined that
the Plan should provide for such reimbursement and that adoption of the Plan
would be prudent and in the best interests of the Fund and the Series'
shareholders. Such approval included a determination that in the exercise of
their reasonable business judgment and in light of their fiduciary duties, there
is a reasonable likelihood that the Plan will benefit the Fund, the Series and
the Series' shareholders.
<PAGE>
EX-99.n
RULE 18f-3
MULTIPLE CLASS PLAN
WHEREAS, The World Funds, Inc. (the "Company"), a Maryland corporation,
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Company is authorized to create separate series, each with
its own separate investment portfolio, and the beneficial interest in each such
series will be represented by a separate series of shares (each series is
hereinafter individually referred to as a "Fund" and collectively, the "Funds");
WHEREAS, the Company, on behalf of the Funds listed on Schedule A, as such
Schedule A may be amended from time to time, desires to adopt a Multiple Class
Plan pursuant to Rule 18f-3 under the 1940 Act ("Plan");
WHEREAS, the Company, on behalf of the Funds, employs Global Assets
Advisory Corp. ("the Adviser") as its investment adviser; Commonwealth
Shareholder Services, Inc. ("the Administrator") as its administrator; and
Fund Services, Inc. ("the Transfer Agent") as its transfer agent; and
International Assets Advisory Corp. (the "Distributor") as the distributor of
the securities of the Funds; and
WHEREAS, the Board of Directors of the Company, including a majority of
the Directors of the Board who are not "interested persons", as defined in the
1940 Act, of the Company, the Adviser, or the Distributors have found the Plan,
as proposed, to be in the best interests of each class of shares individually,
each Fund, and the Company as a whole;
NOW, THEREFORE, the Company, on behalf of the Funds, hereby adopts the
Plan, in accordance with Rule 18f-3 under the 1940 Act on the following terms
and conditions:
1. Features of the Classes. The Fund shall offer, at the discretion of the
Board and as indicated on Schedule A, up to four classes of shares: "
Class A Shares," "Class B Shares," "Class C Shares" and "Class Y
Shares." Shares of each class of the Fund shall represent an equal pro
rata interest in the Fund and, generally, shall have identical voting,
dividend, distribution, liquidation, and other rights, preferences,
powers, restrictions, limitations, qualifications, and terms and
conditions, except that: (a) each class shall have a different
designation; (b) each class of shares shall bear any Class Expenses, as
defined in Section 3 below; (c) each class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to
its distribution arrangements; and (d) each class shall have separate
voting rights on any matter submitted to shareholders in which the
interests of one class different from the interests of any other class.
In addition, Class A, Class B, Class C and Class Y Shares of the Fund
shall have the features described in Sections 2, 3, and 4 below.
2. Distribution Fee Structure.
(a) Class A Shares. Class A Shares of the Fund shall be offered at
their then current net asset value ("NAV") plus an initial sale
charge as set forth in the then-current prospectus. Pursuant to
Rule 12b-1 under the 1940 Act, on behalf of the Funds, the
Company has adopted a distribution plan ("Distribution Plan"), as
amended. The Distribution Plan authorizes a Fund to make payments
for distribution services at an annual rate of up to .50% of the
average daily net assets of a Fund's Class A Shares, which may
include a service fee up to 0.25%. Certain Class A Shares are
offered without an initial sales charge. If shares are purchased
without a sales charge and are redeemed within one year, those
shares are subject to a 1% charge upon redemption.
(b) Class B Shares. Class B Shares of the Fund shall be offered at
their then current NAV without the imposition of an initial sales
charge but are subject to a contingent deferred sales charge
("CDSC") payable upon certain redemptions as set forth in the
Fund's then-current prospectus. Class B Shares may be exchanged
for Class B Shares of another Fund of the company. Class B Shares
of a Fund will automatically convert to Class A Shares of the
Fund on the first business day of the month in which the eighth
anniversary of the issuance of the Class B Shares occurs. The
conversions will be effected at the relative net assets values
per share of the two classes. Class B Shares pay a Rule 12b-1 fee
of up to 0.75% (annualized) of the average daily net assets of a
Fund's Class B Shares, as described in the Distribution Plan, as
amended. Brokers, dealers and other institutions may maintain
Class B shareholder accounts and provide personal services to
Class B shareholders, and the Funds may pay up to 0.25% as a fee
for such services. Services related to the sale of Class B Shares
may include, but are not limited to, preparation, printing and
distribution of prospectuses, sales literature and advertising
materials by the Company's distributor, or, as applicable,
brokers, dealers or other institutions; commissions, incentive
compensation to, and expenses of, account executives or other
employees of the Company's distributor or brokers, dealers and
other institutions; overhead and other office expenses of the
Company's distributor attributable to distribution or sales
support activities; opportunity costs related to the foregoing
(which may be calculated as a carrying charge on the Company's
distributor unreimbursed expenses) incurred in connection with
distribution or sales support activities. The overhead and other
office expenses referenced above may include, without limitation,
(a) the expenses of operating the Company's distributor's offices
in connection with the sale of the Class B Shares of the Funds,
including lease costs, the salaries and employee benefit costs of
administrative, operations and support activities, (b) the costs
of client sales seminars and travel related to distribution and
sales support activities, and (c) other expenses relating to
distribution and sales support activities.
(c) Class C Shares. Class C Shares of the Fund shall be offered at
net asset value ("NAV") plus an initial sale charge as set forth
in the then-current prospectus. Pursuant to Rule 12b-1 under the
1940 Act, a Fund may make payments for distribution services at
an annual rate of up to 0.75% of the average daily net assets of
a Fund's Class C Shares, plus a service fee of up to 0.25%.
Shares redeemed within one year of purchase may be subject to a
1% charge upon redemption.
(d) Class Y Shares. Class Y Shares of the Fund shall be offered at
their then-current NAV without the imposition of an initial sales
charge, CDSC, asset-based sales or service fee under the
Distribution Plan (discussed above). Class Y Shares are only
offered to certain investors meeting the minimum investment as
described in the then-current prospectus offered to Class Y Share
investors.
3. Allocation of Income and Expenses.
(a) The net asset value of all outstanding shares representing
interests in the Fund shall be computed on the same days and at
the same time. For purposes of computing net asset value, the
gross investment income of the Fund shall be allocated to each
class on the basis of the relative net assets of each class at
the beginning of the day adjusted for capital share activity for
each class as of the prior day as reported by the Fund's transfer
agent. Realized and unrealized gains and losses for each class
will be allocated based on relative net assets at the beginning
of the day, adjusted for capital share activity for each class of
the prior day, as reported by the Fund's transfer agent. To the
extent practicable, certain expenses, (other than Class Expenses
as defined below, which shall be allocated more specifically),
shall be allocated to each class based on the relative net assets
of each class at the beginning of the day, adjusted for capital
share activity for each class as of the prior day, as reported by
the Fund's transfer agent. Allocated expenses to each class shall
be subtracted from allocated gross income. These expenses
include: (1) Expenses incurred by the Company (for example, fees
of Directors, auditors, insurance costs, and legal counsel) that
are not attributable to a particular class of shares of the Fund
("Company Level Expenses"); and (2) Expenses incurred by the Fund
that are not attributable to any particular class of the Fund's
shares (for example, advisory fees, custodial fees, banking
charges, organizational costs, federal and Blue Sky registration
fees, or other expenses relating to the management of the Fund's
assets) ("Fund Expenses").
(b) Class Expenses. Expenses attributable to a particular class
("Class Expenses") shall be limited to: (i) payments made
pursuant to the Distribution Plan; (ii) transfer agent fees
attributable to a specific class; (iii) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current
shareholders of a specific class; (iv) the expense of
administrative personnel and services to support the shareholders
of a specific class, including, but not limited to, fees and
expenses under an administrative service agreement; (v)
litigation or other legal expenses relating solely to one class;
and (vi) Directors' fees incurred as a result of issues relating
to one class. Expenses in category (i) above must be allocated to
the class for which such expenses are incurred. All other "Class
Expenses" listed in categories (ii)-(vi) above may be allocated
to a class but only if an officer of the Company has determined,
subject to Board approval or ratification, which of such
categories of expenses will be treated as Class Expenses
consistent with applicable legal principles under the 1940 Act
and the Internal Revenue Code of 1986 ("Code").
(c) Therefore, expenses of the Fund shall be apportioned to each
class of shares depending on the nature of the expense item.
Company Level Expenses and Fund Expenses shall be allocated among
the classes of shares based on their relative net asset values.
Approved Class Expenses shall be allocated to the particular
class to which they are attributable. In addition, certain
expenses may be allocated differently if their method of
imposition changes. Thus, if a Class Expense can no longer be
attributed to a class, it shall be charged to the Fund for
allocation among the classes, as determined by the Board of
Directors. Any additional Class Expenses not specifically
identified above that are subsequently identified and determined
to be properly allocated to one class of shares shall not be so
allocated until approved by the Board of Directors of the Company
in light of the requirements of the 1940 Act and the Code.
4. Exchange Privileges. The Class A, Class B, Class C and Class Y Shares
of the Fund may be exchanged at their relative NAVs for: (i) Class A,
Class B, Class C or Class Y Shares within the same Class of another
series of the Company according to the terms and conditions in the then
current Prospectus and SAI or, (ii) if the Company does not have
multiple classes of shares, the existing shares of another series of the
Company according to the terms and conditions in the then current
Prospectus and SAI. Purchases of Fund shares by exchange are subject to
the same minimum investment requirements and other criteria imposed for
purchases made in any other manner.
5. Conversion Features. Class B shares of the Fund will
automatically convert to Class A shares of the respective Fund,
based on the relative net asset values per share of the two
classes, no later than the month following the eighth anniversary
of the initial issuance of such Class B shares of the Fund. Class
A, Class C and Class Y Shares do not have conversion features.
6. Quarterly and Annual Report. The Directors shall receive
quarterly and annual written reports concerning all allocated
Class Expenses and expenditures under the Distribution Plan
complying with paragraph (b)(3)(ii) of Rule 12b-1. The reports,
including the allocations upon which they are based, shall be
subject to the review and approval of the Independent Directors
in the exercise of their fiduciary duties.
7. Waiver or Reimbursement of Expenses. Expenses may be waived or
reimbursed by the Adviser or any other provider of services to the Funds
without the prior approval of the Company's Board of Directors.
8. Effectiveness of Plan. The Plan shall not take effect until it
has been approved by votes of a majority of both (a) the
Directors of the Company and (b) those Directors of the Company
who are not "interested persons" of the Company, the Adviser, or
the Distributor (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this
Plan, cast in person at a meeting (or meetings) called for the
purpose of voting on this Plan.
9. Material Modifications. This Plan may not be amended to materially
modify its terms unless such amendment is approved in the manner
provided for initial approval in Paragraph 8 hereof.
10. Limitation of Liability. The Directors and the shareholders of the
Funds shall not be liable for any obligations of the Funds under this Plan,
and any person in asserting any rights or claims under this Plan shall
look only to the assets and property of the Funds in settlement of such
right or claim and not to such Directors or shareholders.
IN WITNESS WHEREOF, the Company, on behalf of the Funds, has adopted this
Multiple Class Plan effective as of the ___________ day of _________, 2000
The World Funds, Inc.
-----------------------
John Pasco, III
Chairman
<PAGE>
SCHEDULE A
The Funds of the Company currently subject to this Multiple Class Plan are
as follows:
Date of Addition
Fund/Class to this Multiple
Class Plan
Global e Fund
* Class A _____________,2000
* Class B _____________,2000
* Class C _____________,2000
* Class Y _____________,2000
<PAGE>
EX-99.p(1)
xGENx, LLC
CODE OF ETHICS
AND
STATEMENT ON INSIDER TRADING
<PAGE>
xGenX
CODE OF ETHICS
Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies, ("investment companies") and their investment
advisors, and principal underwriters to adopt written codes of ethics designed
to prevent fraudulent trading by those persons covered under Rule 17j-1. As the
investment adviser to the GenomicsFund.com series of The World Funds, Inc.,
xGENx is subject to this requirement. Rule 17j-1 also makes it unlawful for
certain persons, including any officer or director of an investment company, in
connection with the purchase or sale by such person of a security held or to be
acquired by an investment company to:
1. employ any device, scheme or artifice to defraud the
investment company;
2. make to the investment company any untrue statement of a
material fact or omit to state to the investment company a material
fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
3. engage in any act, practice or course of business which operates or
would operate as a f fraud or deceit upon the investment company; or
4. engage in any manipulative practice with respect to the investment
company.
Rule 17j-1 also requires that each investment company and its affiliates
use reasonable diligence, and institute procedures reasonably necessary, to
prevent violations of its code of ethics.
In addition to Rule 17j-1 of the Act, the Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer. Section 204A of the
Investment Advisors Act of 1940 (the "Advisors Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them.
Section 204A provides that every person subject to Section 204 of the Advisors
Act shall be required to establish procedures to prevent insider trading.
Attached to this Code of Ethics (the "Code"), as Exhibit A, is a Statement on
Insider Trading. As an investment advisor to The World Funds, Inc. (the "Fund"),
we must adopt a policy and procedures with respect to insider trading which are
determined by the Fund's Board of Directors to comply with ITSFEA's
requirements. This Code is substantially in accord with that adopted by the
Fund, except as modified to reflect specific aspects of the business of this
firm.
STATEMENT OF GENERAL PRINCIPLES
This Code is based on the principle that the officers, directors, and
employees of Fund's investment advisor owe a fiduciary duty to the shareholders
of the Fund and, therefore, our investment personnel must place the Fund
shareholders' interests ahead of their own. Our personnel must also avoid any
conduct which could create a potential conflict of interest, and must ensure
that their personal securities transactions do not in any way interfere with the
Fund's portfolio transactions and that they do not take inappropriate advantage
of their positions. Ail persons covered by this Code must adhere to these
general principles as well as the Code's specific provisions, procedures, and
restrictions.
DEFINITIONS
For purposes of this Code:
"Access Person" means any director officer, employee, or advisory person
of this firm that has an active part in the management, portfolio selection, or
underwriting functions of the Fund, or who, in the course of their normal
duties, obtain prior information about the Fund's purchases or sales of
securities (i.e. traders and analysts).
"Advisory Person". With respect to this firm, an Advisory Person means any
director, officer, general partner, or employee who, in connection with his/her
regular functions or duties, makes, participates in, or obtains current
information regarding the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales, including any natural person in a control relationship to
the Fund who obtains current information concerning recommendations made with
regard to the purchase or sale of a security by the Fund.
"Investment Personnel" shall mean any securities analyst, portfolio
manager, or a member of an investment committee who is directly involved in the
decision making process as to whether or not to purchase or sell a portfolio
security and those persons who provide information and advice to a Portfolio
Manager or who help execute a Portfolio Manager's decisions.
"Fund Personnel" shall mean an Access Person, Advisory Person, and/or
Investment Personnel.
"Portfolio Manager" shall mean an employee of an Investment Advisor
entrusted with the direct responsibility and authority to make investment
decisions affecting the Fund.
"Beneficial Ownership" shall be as defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, which, generally
speaking, encompass those situations where the beneficial owner has the right to
enjoy some economic benefits which are substantially equivalent to ownership
regardless of who is the registered owner. This would include:
(i) securities which a person holds for his or her own benefit either in
bearer form, registered in his or her own name or otherwise, regardless of
whether the securities are owned individually or jointly;
(ii) securities held in the name of a member of his or her immediate family
sharing the same household;
(iii)securities held by a trustee, executor, administrator, custodian or
broker;
(iv) securities owned by a general partnership of which the person is a
member or a limited partnership of which such person is a general partner;
(v) securities held by a corporation which can be regarded as a
personal holding company of a person; and
(vi) securities recently purchased by a person and awaiting transfer into
his or her name.
"Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States or by
Federal agencies which are direct obligations of the United States, bankers'
acceptances, bank certificates of deposits, and commercial paper. A future or an
option on a future will be deemed to be a security subject to this Code.
"Purchase or sale of a security" includes the writing of an option to
purchase or sell a security.
A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security has
been made by this firm and such determination has been communicated to the Fund,
or when an officer, director or employee of such Investment Advisor seriously
considers making such a recommendation.
Solely for purposes of this Code, any agent of the Fund charged with
arranging the execution of a transaction shall be subject to the reporting
requirements of this Code as to any such security as and from the time the
security is identified to such agent as though such agent was an Investment
Advisor hereunder.
NOTE: An officer or employee of this firm whose duties do not include the
advisory functions described above, who does not have access to the advisory
information contemplated above, and whose assigned place of employment is at a
location where no investment advisory services are performed for the Fund, is
not an "Advisory Person" or an "Access Person" unless actual advance knowledge
of a covered transaction is furnished to such person. PROHIBITED TRANSACTIONS
Fund Personnel shall not engage in any act, practice or course of conduct
which would violate the provisions of Rule 17j-1 set forth above. No Access
Person or Advisory Person shall purchase or sell, directly or indirectly any
security in which he/she has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which, to his/her actual knowledge,
at the time of such purchase or sale (i) is being considered for purchase or
sale by the Fund; or (ii) is being purchased or sold by the Fund; except that
the prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which the Access Person
or Advisory Person has no direct or indirect influence or control;
(2) purchases or sales which are non-volitional on the part of either the
Access Person, the Advisory Person, or the Fund;
(3) purchases which are part of an automatic dividend reinvestment or other
plan established by Fund Personnel prior to the time the security involved came
within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its Securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
PROHIBITED TRANSACTIONS BY INVESTMENT PERSONNEL
No Investment Personnel shall:
(a) acquire any securities in an initial public offering; or
(b) acquire securities in a private placement without prior written approval
of the Fund's compliance officer or other officer designated by the
Board of Directors.
In considering a request to invest in a private placement, the Fund's
compliance officer will take into account, among other factors, whether the
investment opportunity should be reserved for the Fund, and whether the
opportunity is being offered to Investment Personnel by virtue of their/his/her
position with the Fund. Should Investment Personnel be authorized to acquire
securities through a private placement, they/he/she shall, in addition to
reporting the transaction on the quarterly report to the Fund, disclose the
interest in that investment to other Investment Personnel participating in that
investment decision if and when they/he/she plays a part in the Fund's
subsequent consideration of an investment in that issuer. In such a case, the
Fund's decision to purchase securities of that issuer will be subject to an
independent review by Investment Personnel who have no personal interest in
the issuer.
BLACKOUT PERIODS
No Access Person or Advisory Person shall execute a securities transaction
on a day during which the Fund has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn. In addition, a Portfolio
Manager is expressly prohibited from purchasing or selling a security within
seven (7) calendar days before or after the Fund that he/she manages trades in
that security without the prior written approval of the a Principal of the firm.
Each such approval shall be reported to and recorded by the Compliance Officer
of the firm, and shall be reported to the Board f Directors of the Fund not less
than quarterly.
The foregoing prohibition of personal transactions during the seven day
period following the execution of a transaction for the Fund shall not apply
with respect to a security when the portfolio manager certifies in writing to
the Compliance Officer that the Fund's trading program in that security is
complete. Each transaction authorized by the Compliance Officer pursuant to this
provision shall be reported to the Board by the Compliance Officer at the
Board's next regular meeting.
Should Fund Personnel trade within the proscribed period without the
required approval, such trade should be canceled if possible. If it is not
possible to cancel the trade, all profits from the trade must be disgorged and
the profits will be paid to a charity selected by the Fund Personnel and
approved by the officers of the Fund.
The prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which the
Access Person or Advisory Person has no direct or indirect influence
or control if the person making the investment decision with respect
to such account has no actual knowledge about the Fund's pending
"buy" or "sell" order;
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the Fund;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Fund Personnel prior to the time
the security involved came within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer, and sales of such
rights so acquired.
SHORT-TERM TRADING
No Investment Personnel shall profit from the purchase and sale, or sale
and purchase, of the same (or equivalent) securities as those owned by the Fund
or which are of a type suitable for purchase by the Fund, within sixty (60)
calendar days. Any profits realized on such short-term trades must be disgorged
and the profits will be paid to the Fund or to a charity selected by the
Investment Personnel and approved by the officers of the Fund. The compliance
officer or other officer designated by the Board of Directors may permit in
writing exemptions to the prohibition of this section, on a case-by-case basis,
when no abuse is involved and the equities of the circumstances support an
exemption.
With respect to the conduct of the regular investment operations of this
firm, short-term trades in affected securities must be individually approved in
advance by the Compliance Officer. No transaction shall be approved until the
Compliance Officer is satisfied that the Fund's investment activity with respect
to such security has been completed as of that point in time. The Compliance
Officer shall thereafter report each approved transaction in writing to the
Board of Directors of the Fund not less than quarterly. Each report shall
identify the transactions covered, the terms of the transactions, and
transactions by the Fund in such security. The Compliance Officer shall certify
to the Board that he or she has evaluated each transaction so reported, and that
each such transaction does not represent an abuse of the Fund or of information
concerning the investment program of the Fund.
GIFTS
No Investment Personnel shall accept a gift or other thing of more than de
minimis value ("gift") from any person or entity that does business with or on
behalf of the Fund if such gift is in relation to the business of the employer
of the recipient of the gift. In addition, any Investment Personnel who receives
an unsolicited gift or a gift with an unclear status under this section shall
promptly notify the compliance officer and accept the gift only upon written
approval of the compliance officer.
SERVICE AS A DIRECTOR
No Investment Personnel shall serve as a director of a publicly traded
company absent prior written authorization from the Board of Directors based
upon a determination that such board service would not be inconsistent with the
interests of the Fund and its shareholders.
COMPLIANCE PROCEDURES
1. All Fund Personnel shall pre-clear their personal
securities transactions prior to executing an order. A written request
must be submitted to the Fund's compliance officer, and the
compliance officer must give his/her written authorization prior to
Fund Personnel placing a purchase or sell order with a broker.
Should the compliance officer deny the request, he/she will
give a reason for the denial.
Approved request will remain valid for two (2) business days from
the date of the approval.2
2. Fund Personnel shall instruct their broker(s) to supply
the compliance officer, on a timely basis, with duplicate copies
of confirmations of all personal securities transactions and
copies of all periodic statements for all securities accounts.
3. Fund Personnel, other than directors or officers required
to report their securities transactions to a registered
investment advisor pursuant to Rule 204-2(a)(12) or (13) under
the Investment Advisors Act, shall submit reports showing
all transactions in securities as defined herein in which the
person has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership.
4. Each director, who is not an interested person of the Fund
as defined in the Act, shall submit reports as required
under subparagraph 3 above, but only for transactions in
reportable securities where at the time of the transaction the
director knew, or in the ordinary course of fulfilling his/her
official duties as a director should have known, that during the seven
(7) day period immediately preceding the date of the transaction
by the director, such security was purchased or sold by the Fund
or was being considered for purchase or sale by the Fund.
5. Every report required to be made under subparagraphs 3
and 4 above shall be made not later than ten (10) days after the end
of the calendar quarter in which the transaction to which the
report relates was effected. The report shall contain the
following information concerning any transaction required to be
reported therein:
(a) the date of the transaction;
(b) the title and number of shares;
(c) the principal amount involved;
(d) the nature of the transaction (i.e. purchase, sale, or other
type of acquisition or disposition);
(e) the price at which the transaction was effected; and
(f) the name of the broker, dealer or bank with or through whom
the transaction was effected.
6. The compliance officer shall identify all firm Personnel who
have a duty to make the reports required hereunder and shall
inform each such person of such duty, and shall receive all
reports required hereunder.
7. The compliance officer shall promptly report to the
Fund's Compliance Officer for transmission to the Fund's Board
of Directors (a) any apparent violation of the
prohibitions contained in this Code, and (b) any reported transactions
in a security which was purchased or sold by the Fund within seven
(7)Days before or after the date of the reported transaction.
8. The Fund's Board of Directors, or a Committee of
Directors created by the Board of Directors for that purpose,
shall Consider reports made to the Board of Directors hereunder
and shall determine whether or not this Code has been violated
and What sanctions, if any, should be imposed.
9. This Code, a list of all persons required to make
reports hereunder from time to time, a copy of each report made by
Fund Personnel, each memorandum made by the compliance
officer hereunder, and a record of any violation hereof and any
action taken as a result of such violation, shall be maintained by
the Fund as required under Rule 17j-1.
10. Upon the commencement of employment of a person who would
be deemed to fall within the definition of "Fund Personnel",
that person must disclose all personal securities holdings to
the Compliance officer.
11. All Fund Personnel must report, on an annual basis, all
personal securities holdings.
12. At least annually, all Fund Personnel will be required to
certify that they (a) have read and understand the Code; (b)
recognize that they are subject to the requirements outlined therein;
(c) have complied with the requirements of the Code; (d)
have disclosed and reported all personal securities
transactions required to be disclosed; and (e) have disclosed all
personal securities holdings.
13. The Fund's compliance officer shall prepare an annual report
to the Fund's Board of Directors. Such report shall (a)
include a copy of the Fund's Code; (b) summarize existing
procedures concerning personal investing and any changes in the
Code's policies or procedures during the past year; (c) identify
any violations of the Code; and (d) identify any recommended
changes in existing restrictions, policies or procedures based upon
the Fund's experience under the Code, any evolving
industry practices, or developments in applicable laws or regulations.
<PAGE>
EXHIBIT A
STATEMENT ON INSIDER TRADING
The Insider Trading and Securities Fraud Enforcement Act of 1988
("ITSFEA") requires that all investment advisors and broker-dealers establish,
maintain, and enforce written policies and procedures designed to detect and
prevent the misuse of material non-public information by such investment advisor
and/or broker-dealer, or any person associated with the investment advisor
and/or broker-dealer.
Section 204A of the Investment Advisers Act of 1940 (the "Advisers Act")
states that an investment advisor must adopt and disseminate written policies
with respect to ITSFEA, and an investment advisor must also vigilantly review,
update, and enforce them. Section 204A provides that every person subject to
Section 204 of the Advisers Act shall be required to establish procedures to
prevent insider trading.
As an investment advisor for The World Funds, Inc. (the "Fund") the Firm
has adopted the following policy, procedures, and supervisory procedures in
addition to the Fund's Code of Ethics. Throughout this document the investment
advisor(s) and principal underwriter(s) shall collectively be called the
"Providers".
SECTION I - POLICY
The purpose of this Section 1 is to familiarize the officers, directors,
and employees of the Providers with issues concerning insider trading and to
assist them in putting into context the policy and procedures on insider
trading.
Policy Statement:
No person to whom this Statement on Insider Trading applies, including
officers, directors, and employees, may trade, either personally or on behalf of
others (such as mutual funds and private accounts managed by a Provider) while
in possession of material, non-public information; nor may any officer,
director, or employee of a Provider communicate material, non-public information
to others in violation of the law. This conduct is frequently referred to as
"insider trading." This policy applies to every officer, director, and employee
of a Provider and extends to activities within and outside their duties as a
Provider. It covers not only personal transactions of covered persons, but
indirect trading by family, friends and others, or the non-public distribution
of inside information from you to others. Every officer, director, and employee
must read and retain this policy statement. Any questions regarding the policy
and procedures should be referred to the compliance officer.
The term "insider trading" is not defined in the Federal securities laws,
but generally is used to refer to the use of material non-public information to
trade in securities (whether or not one is an "insider") or the communications
of material nonpublic information to others who may then seek to benefit from
such information.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
(a) trading by an insider, while in possession of material non-public
information, or
(b) trading by a non-insider, while in possession of material
non-public information, where the information either was
disclosed to the non-insider in violation of an insider's duty to
keep it confidential or was misappropriated, or
(c) communicating material non-public information to others.
The elements of insider trading and the penalties for such unlawful
conduct are discussed below.
1. Who is an Insider? The concept of "insider" is broad. It includes officers,
directors, and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to information
solely for the company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. In addition, an investment advisor may
become a temporary insider of a company it advises or for which it performs
other services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the basis
for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonably certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-Public Information? Information is non-public until it has been
effectively communicated to the market place. One must be able to point to some
fact to show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, the Wall Street Journal or other publications of general
circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme Court
found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory -
another basis for insider trading liability is the ,'misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties for trading on or communicating
material non-public information are severe, both for individuals and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the violation of up to three times
the profit gained or loss avoided, whether or not the person actually
benefited, and
o fines for the employer or other controlling person of up to the greater of
$1 million or three times the amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by a Provider, including dismissal of the persons
involved.
SECTION II - PROCEDURES
The following procedures have been established to aid the officers,
directors, and employees of a Provider in avoiding insider trading, and to aid
in preventing, detecting, and imposing sanctions against insider trading. Every
officer, director, and employee of a Provider must follow these procedures or
risk serious sanctions, including dismissal, substantial personal liability,
and/or criminal penalties. If you have any questions about these procedures you
should consult the compliance officer.
1. Identifying Inside Information. Before trading for yourself or others,
including investment companies or private accounts managed by a Provider, in the
securities of a company about which you may have potential inside information,
ask yourself the following questions:
i. Is the information material? Is this information that an investor
would consider important in making his or her investment
decisions? Is this information that would substantially affect
the market price of the securities if generally disclosed?
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to
the marketplace by being published in Reuters, The Wall Street
Journal or other publications of general circulation?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself or
others, including investment companies or private accounts
managed by a Provider.
(c) Do not communicate the information to anybody, other than to the
compliance official.
(d) After the compliance official has reviewed the issue, you will
be instructed to either continue the prohibitions against trading
and communication, or you will be allowed to communicate the
information and then trade.
2. Personal Security Trading. Ail officers, directors, and employees of a
Provider (other than officers, directors and employees who are required to
report their securities transactions to a registered investment company in
accordance with a Code of Ethics) shall submit to the compliance officer, on a
quarterly basis, a report of every securities transaction in which they, their
families (including the spouse, minor children, and adults living in the same
household as the officer, director, or employee), and trusts of which they are
trustees or in which they have a beneficial interest have participated, or at
such lesser intervals as may be required from time to time. The report shall
include the name of the security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. Ail officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information in
your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph I above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted.
4. Resolving Issues Concerning Insider Trading. If, after consideration of the
items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
SECTION III - SUPERVISION
The role of the compliance officer is critical to the implementation and
maintenance of this Statement on Insider Trading. These supervisory procedures
can be divided into two classifications, (1) the prevention of insider trading,
and (2) the detection of insider trading.
1. Prevention of Insider Trading:
------------------------------
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on Insider
Trading;
(b) resolve issues of whether information received by an officer,
director, or employee is material and nonpublic;
(c) review and ensure that officers, directors, and employees review,
at least annually, and update as necessary, the Statement on
Insider Trading; and
(d) when it has been determined that an officer, director, or
employee has material non-public information,
(i) implement measures to prevent dissemination of such
information, and
(ii) if necessary, restrict officers, directors, and
employees from trading the securities.
2. Detection of Insider Trading:
-----------------------------
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer,
director, and employee, to ensure no trading took place in securities in
which the Provider has material non-public information;
(b) review the trading activity of the mutual funds managed by
the investment advisor and the mutual funds which the broker-dealer
acts as principal underwriter;
(c) coordinate, if necessary, the review of such reports with
other appropriate officers, directors, or employees of a Provider and
The World Funds, Inc.
3. Special Reports to Management:
------------------------------
Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Compliance Officer must prepare a written report to
management of the Provider, and provide a copy of such report to the Board of
Directors of The World Funds, Inc., providing full details and recommendations
for further action.
4. Annual Reports:
---------------
On an annual basis, the Compliance Officer of each Provider will prepare a
written report to the management of the Provider, and provide a copy of such
report to the Board of Directors of The World Funds, Inc., setting forth the
following:
(a) a summary of the existing procedures to detect and prevent insider
trading;
(b) full details of any investigation, either internal or by
a regulatory agency, of any suspected insider trading and the
results of such investigation;
(c) an evaluation of the current procedures and any recommendations for
improvement.
<PAGE>
EXHIBIT B
XGENX, LLC.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of xGENx, LLC.:
1. I hereby acknowledged receipt of a copy of the Code of Ethics
for xGENx, LLC.
2. I have read and understand the Code and recognize that I am
subject thereto in the capacity of "Fund Personnel."
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
4. As of the date below I had a direct or indirect beneficial
ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:______________________________________
Signature:________________________________
-------------------------------------------
Print Name
<PAGE>
EXHIBIT C
XGENX, LLC.
CODE OF ETHICS
ANNUAL REPORT
TO the Compliance Officer of xGENx, LLC.:
1. I have read and understand the Code and recognize that I am
subject thereto in the capacity of "Fund Personnel."
2. I hereby certify that, during the year ended December 31, 19___ , I
have complied with the requirements of the Code and I have reported all
securities transactions required to be reported pursuant to the Code.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
4. As of December 31, 19___ , I had a direct or indirect
beneficial ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:___________________________________
Signature:___________________________
-----------------------------------------
Print Name
<PAGE>
EXHIBIT D
XGENX, LLC.
Securities Transactions Report
For the Calendar Quarter
Ended:___________________________________________________________
To the Compliance officer of xGENx, LLC.:
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership and which are required to be
reported pursuant to the Code of Ethics adopted by xGENx, LLC.
SECURITY DATE OF NO. OF DOLLAR NATURE OF PRICE
BROKER-DEALER
TRANS. SHARES AMOUNT OF TRANSACTION OR BANK
TRANS.
(Purchase, THROUGH
Sale, WHOM
Other) EFFECTED
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Fund, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
the Fund.
Date:________________________________
Signature:_______________________________________
------------------------------------
Print Name
<PAGE>
EX-99.p(2)
INTERNATIONAL ASSETS ADVISORY CORP.
CODE OF ETHICS
AND
STATEMENT ON INSIDER TRADING
<PAGE>
CODE OF ETHICS
INTERNATIONAL ASSETS ADVISORY CORP.
Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies, ("investment companies") and their investment
advisors, and principal underwriters to adopt written codes of ethics designed
to prevent fraudulent trading by those persons covered under Rule 17j-1. Rule
17j-1 also makes it unlawful for certain persons, including any officer or
director of an advisor, in connection with the purchase or sale by such person
of a security held or to be acquired by an investment company to:
1. employ any device, scheme or artifice to defraud the
investment company;
2. make to the investment company any untrue statement of a
material fact or omit to state to the investment company a material
fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
3. engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the
investment company; or
4. engage in any manipulative practice with respect to
the investment company.
Rule 17j-1 also requires that each investment company and its affiliates
use reasonable diligence, and institute procedures reasonably necessary, to
prevent violations of its code of ethics.
In addition to Rule 17j-1 of the Act, the Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer. Section 204A of the
Investment Advisors Act of 1940 (the "Advisors Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them.
Section 204A provides that every person subject to Section 204 of the Advisors
Act shall be required to establish procedures to prevent insider trading.
Attached to this Code of Ethics (the "Code"), as Exhibit A, is a Statement
on Insider Trading from The World Funds, Inc. Any underwriter who acts as such
for any series of The World Funds, Inc. (the "Investment Company") must comply
with the policy and procedures outlined in the Statement on Insider Trading
unless such underwriter has adopted a similar policy and procedures with respect
to insider trading which are determined by the Investment Company's Board of
Directors to comply with ITSFEA's requirements. International Assets Advisory
Corp. (the "Underwriter") believes its Statement on Insider Trading has similar
polices and procedures and has submitted such to the Investment Company's Board
of Directors. The Underwriter's Statement is attached as Exhibit B.
This Code is being adopted by the Underwriter, (1) for implementation with
respect to covered persons of the Underwriter and as they relate to an
investment company.
STATEMENT OF GENERAL PRINCIPLES
This Code is based on the principle that the officers, directors, and
employees of the Underwriter owe a fiduciary duty to the shareholders of the
Investment Company and, therefore, the Underwriter's personnel must place the
shareholders' interests ahead of their own. The Underwriter's personnel must
also avoid any conduct which could create a potential conflict of interest, and
must ensure that their personal securities transactions do not in any way
interfere with the Investment Company's portfolio transactions and that they do
not take inappropriate advantage of their positions. All persons covered by this
Code must adhere to these general principles as well as the Code's specific
provisions, procedures, and restrictions.
DEFINITIONS
For purposes of this Code:
"Underwriter" means International Assets Advisory Corp.
"Advisor" means Global Assets Advisors, Inc.
"Investment Company" means a company registered as such under
the Investment Company Act of 1940 and for which the Adviser is the
investment advisor.
"Access Person" means any director, officer, or advisory person of the
Advisor who, with respect to an investment company, makes any recommendations
regarding the purchase of sale of a security by such investment company,
participates in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination of which
recommendation shall be made to an investment company; or who, in connection
with his or her duties, obtains any information concerning securities
recommendations being made by the Adviser to an investment company.
"Advisory Person" means any director, officer, general partner, or
employee who, in connection with his/her regular functions or duties, makes,
participates in, or obtains current information regarding the purchase or sale
of a security by the Investment Company, or whose functions relate to the making
of any recommendations with respect to such purchases or sales, including any
natural person in a control relationship to the Investment Company who obtains
current information concerning recommendations made with regard to the purchase
or sale of a security by the Investment Company.
"Investment Personnel" shall mean any securities analyst, portfolio
manager, or a member of an investment committee who is directly involved in the
decision making process as to whether or not to purchase or sell a portfolio
security and those persons who provide information and advice to an Investment
Company Portfolio Manager or who help execute an Investment Company Portfolio
Manager's decisions.
"Portfolio Manager" shall mean an employee of the Advisor entrusted with
the direct responsibility and authority to make investment decisions affecting
the Investment Company.
"Beneficial Ownership" shall be as defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, which, generally
speaking, encompass those situations where the beneficial owner has the right to
enjoy some economic benefits which are substantially equivalent to ownership
regardless of who is the registered owner. This would include:
(i) securities which a person holds for his or her own benefit
either in bearer form, registered in his or her own name or
otherwise, regardless of whether the securities are owned individually
or jointly;
(ii) securities held in the name of a member of his or her
immediate family sharing the same household;
(iii)securities held by a trustee, executor, administrator,
custodian or broker;
(iv) securities owned by a general partnership of which the person
is a member or a limited partnership of which such person
is a general partner;
(v) securities held by a corporation which can be regarded
as a personal holding company of a person; and
(vi) securities recently purchased by a person and awaiting
transfer into his or her name.
"Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States or by
Federal agencies which are direct obligations of the United States, bankers'
acceptances, bank certificates of deposits, and commercial paper. A future or an
option on a future will be deemed to be a security subject to this Code.
"Purchase or sale of a security" includes the writing of an option to
purchase or sell a security.
A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security has
been made by an the Advisor and such determination has been communicated to the
Investment Company. With respect to the Investment Advisor making the
recommendation, a security is being considered for purchase or sale when an
officer, director or employee of such Investment Advisor seriously considers
making such a recommendation.
PROHIBITED TRANSACTIONS
Underwriter Personnel shall not engage in any act, practice or course of
conduct which would violate the provisions of Rule 17j-1 set forth above. No
employee of the Underwriter who is also an Access Person or Advisory Person
through the Advisor shall purchase or sell, directly or indirectly any security
in which he/she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which, to his/her actual knowledge, at the
time of such purchase or sale (i) is being considered for purchase or sale by
the Investment Company; or (ii) is being purchased or sold by the Investment
Company; except that the prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which the
Access Person or Advisory Person has no direct or indirect influence
or control;
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the Investment Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Advisor Personnel prior to the time
the security involved came within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from such issuer, and sales of such
rights so acquired.
PROHIBITED TRANSACTIONS BY INVESTMENT PERSONNEL
The Underwriter has no employees identified as Investment Personnel other
than those previously identified through the Advisor which is an affiliated
entity.
BLACKOUT PERIODS
No officer of the Underwriter who is also an officer of and identified as
an Advisory Person of the Advisor or officer of the Investment Company or any
Access Person of the affiliated Advisor shall execute a securities transaction
on a day during which the Advisor has a pending "buy" or "sell" order in that
same security until that order is executed or withdrawn. In addition, a
Portfolio Manager is expressly prohibited from purchasing or selling a security
within seven (7) calendar days before or after the Investment Company that
he/she manages trades in that security.
The foregoing prohibition of personal transactions during the seven day
period following the execution of a transaction for the Investment Company shall
not apply with respect to a security when the portfolio manager certifies in
writing to the Compliance Officer that the Investment Company's trading program
in that security is complete. Each transaction authorized by the Compliance
Officer pursuant to this provision shall be reported to the Board by the
Compliance Officer for review at the Board's next regular meeting.
Should prohibited Underwriter Personnel trade within the proscribed
period, such trade should be canceled if possible. If it is not possible to
cancel the trade, all profits from the trade must be disgorged and the profits
will be paid to a charity selected by the Underwriter personnel and approved by
the officers of the Investment Company.
The prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which
the Underwriter personnel has no direct or indirect influence
or control if the person making the investment decision with
respect to such account has no actual knowledge about the
Investment Company's pending "buy" or "sell" order;
(2) purchases or sales which are non-volitional on the part of
either the Underwriter Person, Access Person, the Advisory Person,
or the Investment Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Underwriter Personnel prior to the
time the security involved came within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
SHORT-TERM TRADING
N/A
GIFTS
N/A
SERVICE AS A DIRECTOR
N/A
COMPLIANCE PROCEDURES
1. All Underwriter Personnel who are identified as such shall pre-clear
their personal securities transactions prior to executing an order. A
-
written request must be submitted to the Underwriter's compliance officer,
and the compliance officer must give his/her written authorization prior
to Underwriter Personnel placing a purchase or sell order with a broker.
Should the compliance officer deny the request, he/she will give a reason
for the denial. Approved request will remain valid for two (2) business
days from the date of the approval.3
2. Underwriter Personnel shall instruct their broker(s) to supply
the compliance officer, on a timely basis, with duplicate copies
of confirmations of all personal securities transactions and copies of
all periodic statements for all securities accounts.
3. Underwriter Personnel, other than Advisor Personnel required to
report their securities transactions to a registered investment advisor
pursuant to Rule 204-2(a)(12) or(13) under the Investment Advisors Act,
shall submit reports showing all transactions in securities as defined
hereinin which the person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership.
4. Every report required to be made under subparagraph 3 above shall be
made not later than ten (10) days after the end of the calendar quarter
in which the transaction to which the report relates was effected. The
report shall contain the following information concerning any
transaction required to be reported therein:
(a) the date of the transaction;
(b) the title and number of shares;
(c) the principal amount involved;
(d) the nature of the transaction (i.e. purchase, sale, or other
type of acquisition or disposition);
(e) the price at which the transaction was effected; and
(f) the name of the broker, dealer or bank with or through whom
the transaction was effected.
5. The compliance officer shall identify all Underwriter Personnel who
have a duty to make the reports required hereunder and shall inform each
such person of such duty, and shall receive all reports required hereunder.
6. The compliance officer shall promptly report to the Investment
Company's Board of Directors (a) any apparent violation of the
prohibitions contained in this Code, and (b) any reported transactions in a
security which was purchased or sold by the Investment Company within seven
(7) days before or after the date of the reported transaction.
7. The Investment Company's Board of Directors, or a Committee of
Directors created by the Board of Directors for that purpose, shall consider
reports made to the Board of Directors hereunder and shall determine whether
or not this Code has been violated and what sanctions, if any, should
be imposed.
8. This Code, a list of all persons required to make reports hereunder
from time to time, a copy of each report made by Underwriter Personnel,
each memorandum made by the compliance officer hereunder, and a record of
any violation hereof and any action taken as a result of such violation,
shall be maintained by the Underwriter as required under Rule 17j-1.
9. Upon the commencement of employment of a person who would be deemed
to fall within the definition of "Underwriter Personnel", that person
must disclose all personal securities holdings to the compliance officer.
10. All Underwriter Personnel subject to this Code must report, on an
annual basis, all personal securities holdings.
11. At least annually, all Underwriter Personnel subject to this Code will
be required to certify that they (a) have read and understand the Code;
(b) recognize that they are subject to the requirements outlined therein;
(c) have complied with the requirements of the Code; (d) have disclosed
and reported all personal securities transactions required to be
disclosed; and (e) have disclosed all personal securities holdings.
12. The Underwriter's compliance officer shall prepare an annual report to
the Investment Company's Board of Directors. Such report shall (a) include a
copy of the Underwriter's Code; (b) summarize existing procedures concerning
personal investing and any changes in the Code's policies or procedures during
the past year; (c) identify any violations of the Code; and (d) identify any
recommended changes in existing restrictions, policies or procedures based upon
the Underwriter's experience under the Code, any evolving industry practices, or
developments in applicable laws or regulations.
13. Notwithstanding the procedures in this Section, Underwriter Personnel
need not make a report where the report would duplicate information recorded
pursuant to Rules 204-2(a) (12) pr 204-2 (a) (13) under the
Investment Advisers Act of 1940.
4 The Board has determined that placement of a limit order constitutes a
transaction requiring approval, and the limit order must be placed within two
days from the date of approval. Implementation of a limit order in accordance
with its approved terms is a ministerial act which occurs in the future by the
terms of the limit order, and does not require approval. A change of terms in,
or withdrawal of, a standing limit order is an investment decision for which
clearance must be obtained.
<PAGE>
EXHIBIT A
STATEMENT ON INSIDER TRADING
The Insider Trading and Securities Fraud Enforcement Act of 1988
("ITSFEA") requires that all investment advisors and broker-dealers establish,
maintain, and enforce written policies and procedures designed to detect and
prevent the misuse of material non-public information by such investment advisor
and/or broker-dealer, or any person associated with the investment advisor
and/or broker-dealer.
Section 204A of the Investment Advisers Act of 1940 (the "Advisers Act")
states that an investment advisor must adopt and disseminate written policies
with respect to ITSFEA, and an investment advisor must also vigilantly review,
update, and enforce them. Section 204A provides that every person subject to
Section 204 of the Advisers Act shall be required to establish procedures to
prevent insider trading.
Each investment advisor who acts as such for any series of The World
Funds, Inc. (the "Investment Company") and each broker-dealer which acts as
principal underwriter to any series of the Investment Company has adopted the
following policy, procedures, and supervisory procedures in addition to the
Investment Company's Code of Ethics. Throughout this document the investment
advisor(s) and principal underwriter(s) shall collectively be called the
"Providers".
SECTION I - POLICY
The purpose of this Section 1 is to familiarize the officers, directors,
and employees of the Providers with issues concerning insider trading and to
assist them in putting into context the policy and procedures on insider
trading.
Policy Statement:
No person to whom this Statement on Insider Trading applies, including
officers, directors, and employees, may trade, either personally or on behalf of
others (such as mutual funds and private accounts managed by a Provider) while
in possession of material, non-public information; nor may any officer,
director, or employee of a Provider communicate material, non-public information
to others in violation of the law. This conduct is frequently referred to as
"insider trading." This policy applies to every officer, director, and employee
of a Provider and extends to activities within and outside their duties as a
Provider. It covers not only personal transactions of covered persons, but
indirect trading by family, friends and others, or the non-public distribution
of inside information from you to others. Every officer, director, and employee
must read and retain this policy statement. Any questions regarding the policy
and procedures should be referred to the compliance officer.
The term "insider trading" is not defined in the Federal securities laws,
but generally is used to refer to the use of material non-public information to
trade in securities (whether or not one is an "insider") or the communications
of material nonpublic information to others who may then seek to benefit from
such information.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
(a) trading by an insider, while in possession of material
non-public information, or
(b) trading by a non-insider, while in possession of
material non-public information, where the information either
was disclosed to the non-insider in violation of an insider's duty
to keep it confidential or was misappropriated, or
(c) communicating material non-public information to others.
The elements of insider trading and the penalties for such unlawful
conduct are discussed below.
1. Who is an Insider? The concept of "insider" is broad. It includes officers,
directors, and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to information
solely for the company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. In addition, an investment advisor may
become a temporary insider of a company it advises or for which it performs
other services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the basis
for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonably certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-Public Information? Information is non-public until it has been
effectively communicated to the market place. One must be able to point to some
fact to show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, the Wall Street Journal or other publications of general
circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme Court
found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory -
another basis for insider trading liability is the ,'misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties for trading on or communicating
material non-public information are severe, both for individuals and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the violation of up to three times
the profit gained or loss avoided, whether or not the person actually
benefited, and
o fines for the employer or other controlling person of up to the greater of
$1 million or three times the amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by a Provider, including dismissal of the persons
involved.
SECTION II - PROCEDURES
The following procedures have been established to aid the officers,
directors, and employees of a Provider in avoiding insider trading, and to aid
in preventing, detecting, and imposing sanctions against insider trading. Every
officer, director, and employee of a Provider must follow these procedures or
risk serious sanctions, including dismissal, substantial personal liability,
and/or criminal penalties. If you have any questions about these procedures you
should consult the compliance officer.
1. Identifying Inside Information. Before trading for yourself or others,
including investment companies or private accounts managed by a Provider, in the
securities of a company about which you may have potential inside information,
ask yourself the following questions:
i. Is the information material? Is this information that an investor
would consider important in making his or her investment
decisions? Is this information that would substantially affect the
market price of the securities if generally disclosed?
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace by being published in Reuters, The Wall Street Journal or
other publications of general circulation?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself
or others, including investment companies or private
accounts managed by a Provider.
(c) Do not communicate the information to anybody, other than to
the compliance official.
(d) After the compliance official has reviewed the issue, you will
be instructed to either continue the prohibitions against
trading and communication, or you will be allowed to communicate
the information and then trade.
2. Personal Security Trading. Ail officers, directors, and employees of a
Provider (other than officers, directors and employees who are required to
report their securities transactions to a registered investment company in
accordance with a Code of Ethics) shall submit to the compliance officer, on a
quarterly basis, a report of every securities transaction in which they, their
families (including the spouse, minor children, and adults living in the same
household as the officer, director, or employee), and trusts of which they are
trustees or in which they have a beneficial interest have participated, or at
such lesser intervals as may be required from time to time. The report shall
include the name of the security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. Ail officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information in
your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph I above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted.
4. Resolving Issues Concerning Insider Trading. If, after consideration of the
items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
SECTION III - SUPERVISION
The role of the compliance officer is critical to the implementation and
maintenance of this Statement on Insider Trading. These supervisory procedures
can be divided into two classifications, (1) the prevention of insider trading,
and (2) the detection of insider trading.
1. Prevention of Insider Trading:
------------------------------
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on
Insider Trading;
(b) resolve issues of whether information received by an
officer, director, or employee is material and nonpublic;
(c) review and ensure that officers, directors, and employees
review, at least annually, and update as necessary, the Statement
on Insider Trading; and
(d) when it has been determined that an officer, director,
or employee has material non-public information, (i)
implement measures to prevent dissemination of such information, and
(ii) if necessary, restrict officers, directors, and employees
from trading the securities.
2. Detection of Insider Trading:
-----------------------------
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer,
director, and employee, to ensure no trading took place in securities in
which the Provider has material non-public information;
(b) review the trading activity of the mutual funds managed by
the investment advisor and the mutual funds which the broker-dealer
acts as principal underwriter;
(c) coordinate, if necessary, the review of such reports with
other appropriate officers, directors, or employees of a Provider and
The World Funds, Inc.
3. Special Reports to Management:
------------------------------
Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Compliance Officer must prepare a written report to
management of the Provider, and provide a copy of such report to the Board of
Directors of The World Funds, Inc., providing full details and recommendations
for further action.
4. Annual Reports:
---------------
On an annual basis, the Compliance Officer of each Provider will prepare a
written report to the management of the Provider, and provide a copy of such
report to the Board of Directors of The World Funds, Inc., setting forth the
following:
(a) a summary of the existing procedures to detect and
prevent insider trading;
(b) full details of any investigation, either internal or
by a regulatory agency, of any suspected insider trading and
the results of such investigation;
(c) an evaluation of the current procedures and any
recommendations for improvement.
<PAGE>
EXHIBIT B
POLICY AND PROCEDURES TO DETECT AND PREVENT INSIDER TRADING
for
INTERNATIONAL ASSETS HOLDING CORPORATION
INTERNATIONAL ASSETS ADVISORY CORP.
INTLTRADER.COM, INC.
GLOBAL ASSETS ADVISORS, INC.
REVISED November, 1999
Table of Contents
Table of Contents 2
POLICY AND PROCEDURES 3
SECTION I POLICY STATEMENT ON INSIDER TRADING 3
SECTION II PROCEDURES TO IMPLEMENT INTERNATIONAL ASSETS
POLICY TO PREVENT INSIDER TRADING 6
SECTION III PROCEDURES REGARDING TRADING SHARES OF
INTERNATIONAL ASSETS HOLDING CORPORATION 7
SECTION IV SUPERVISORY PROCEDURES 10
<PAGE>
POLICY AND PROCEDURES OF INTERNATIONAL ASSETS HOLDING CORPORATION AND ITS
SUBSIDIARIES DESIGNED TO DETECT AND PREVENT INSIDER TRADING
Congress passed and the President signed into law the Insider Trading and
Securities Fraud Enforcement Act of 1988 that requires every Broker/Dealer and
its related companies to institute, maintain and enforce a policy with
accompanying procedures to detect and prevent insider trading. International
Assets has addressed this requirement in the three sections that follow.
Sections I and II are intended for all employees. Section III is directed to
Supervisors who are responsible for maintenance of the policy and procedures.
SECTION I. POLICY STATEMENT ON INSIDER TRADING
International Assets Holding Corporation, International Assets Advisory
Corp., INTLTRADER.COM, INC. and Global Assets Advisors forbid any officer,
director, or employee from trading, either personally or on behalf of others, on
material, nonpublic information or communicating material, nonpublic information
to others in violation of the law. This conduct is frequently referred to as
"insider trading". International Assets' policy applies to every officer,
director and employee and extends to activities within and outside their duties
at these firms. Every officer, director and employee must read and retain this
policy statement. Any questions regarding this policy should be referred to
Nancey McMurtry. The term "insider trading" is not defined in the federal
securities laws, but generally is used to refer to the use of material,
non-public information to trade in securities (whether or not one is an
"insider") or to the communication of material, non-public information to
others. While the law concerning insider trading is continually changing, it is
generally understood that the law prohibits:
(1) Trading by an insider, while in possession of material,
non-public information, or;
(2) Trading by a non-insider, while in possession of material
non-public information, where the information either was
disclosed to the non-insider in violation of an insiders duty to keep
it confidential or as misappropriated, or;
(3) Communicating material, non-public information to others.
The elements of insider trading and the penalties for such
unlawful conduct are discussed below.
1. Who is an Insider?
The concept of insider is broad. It includes officers, directors,
and employees of a company. In addition, a person can be a temporary
insider if he/she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to
information solely for the company's purposes. A temporary insider can
include a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. According to the Supreme Court,
the company must expect the outsider to keep the disclosed
non-public information confidential and the relationship must at least imply
such a duty before the outsider will be considered an insider.
2. What is Material Information?
Trading on inside information is not a basis for liability unless
the information is material. "Material information" is generally defined
as information for which there is a substantial likelihood that a
reasonable investor would consider it important in making his or her
investment decisions, or information that is reasonably certain to
have a substantial effect on the price of a company's securities.
Information that officers, directors, and employees should consider
material includes, but is not limited to: dividend changes, earnings
estimates, changes in previously released earnings estimates, significant
merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
Material information does not have to relate to a company's business.
For example, information about the contents of a forthcoming newspaper
column which could have an effect on the market price of the security is
material. In just such a case, a WALL STREET JOURNAL reporter was found
criminally liable for disclosing to others the dates and names of companies that
would appear in the JOURNAL and whether or not the reports were favorable.
3. What is Non-public Information?
Information is non-public until it has been communicated to the market
place. One must be able to point to some fact to show that the information is
generally public. For example, information filed with the SEC, or appearing in a
newspaper or reported on a news broadcast would be considered public.
4. Penalties for Insider Trading
Penalties for trading on or communicating material, non-public information
are severe, both for the individuals involved and their employers. A person can
be subject to some or all of the penalties below even if he/she does not
personally benefit from the violation. Penalties include:
Civil injunctions
Treble damages
Disgorgement of profits
Jail sentences
Fines for the persons who committed the violation of up to three times the
profit gained or loss avoided, whether or not the person actually benefited, and
Fines for the employer or other controlling persons of up to the greater of
$1,000,000 or three times the amount of the profit gained or loss avoided. In
addition, any violation of this policy statement can be expected to result in
serious sanctions by International Assets companies, including dismissal of the
persons involved. Remember, it is not a violation to possess inside information.
It is a violation to act on it or pass it to someone else.
SECTION II. PROCEDURES TO IMPLEMENT INTERNATIONAL ASSETS' POLICY AGAINST
---------- ------------------------------------- -----------------------
INSIDER TRADING
---------------
The following procedures have been established to aid the officers,
directors and employees of International Assets companies in avoiding insider
trading, and to aid these companies in preventing, detecting, and imposing
sanctions against insider trading. Every officer, director, and employee of this
firm must follow these procedures or risk serious liability. If you have any
questions about these procedures you should consult Nancey McMurtry.
1. Identifying Inside Information
Before trading for yourself or others, in the securities of a company about
which you have potential inside information, ask yourself the following
questions:
A. Is the information material? Is this information that an investor would
consider important in making an investment decision? Is this information that
could change his investment decision? Is this information that would
substantially affect the market price of the security?
B. Is the information non-public? To whom has this information been
provided? Has it been communicated by broadcast or printed publication? If,
after consideration of the above, you believe that the information is material
and non-public, or if you have questions as to whether the information is
"inside", you should take the following steps.
a. Report the matter immediately to Nancey McMurtry, Brent
Bessire or Diego Veitia, as appropriate.
b. Do not purchase or sell the securities on behalf of
yourself or others.
c. Do not communicate the information inside or outside of
any International Assets company other than to the individuals
name above.
d. After the issue has been reviewed, you will be advised to
continue the restriction against trading or you will be allowed to
trade and communicate the information.
2. Personal Securities Trading
All officers, directors, and employees of International Assets
companies who maintain a securities account with International
Assets Advisory Corp. or INTLTRADER.COM, INC. shall maintain that
account under an "employee" number. Trades shall be reviewed on a
monthly basis for compliance purposes.
3. Securities Traded Outside of IAAC or INTL
All officers, directors, and employees of International Assets companies
who maintain a securities account with a firm other than IAAC or INTL must make
a request in writing prior to opening or to maintain this account. The
Compliance Department must receive duplicate confirmations and statements of all
trading activity.
4. Restricting Access to Material Non-public Information Information in
your possession that you identify as material and non-public may not be
communicated to anyone, including persons within IAHC companies, except as
identified above. In addition, care should be taken that such information is
secure. For example, files containing inside information should be locked;
access to computer files should be restricted.
5. Dealing with Clients Who May Possess Inside Information
Be alert to unusual trading patterns of established clients. Question why a
client who normally relies on brokerage recommendations or normally purchases
1,000 share lots now wants to buy 10,000 shares of a particular company
unsolicited. If you receive a large order from a client who is an employee of
the company whose stock he is buying, question his reasons. If you determine
that the client is probably trading on inside information, you must refuse the
trade. Report the matter to Nancey McMurtry, Brent Bessire or Diego Veitia, as
appropriate.
SECTION III. PROCEDURES REGARDING TRADING SHARES OF
INTERNATIONAL ASSETS HOLDING CORPORATION
There are additional considerations for individuals who are employed by
companies which are publicly owned and traded. The SEC, in its attempt to assure
a fair and open market for members of the investing public, have added a number
of regulations to its books which particularly affect directors, officers and
employees of publicly traded companies. It is essential for the company to adopt
internal procedures relating to these requirements.
1. Communications to shareholders or other individuals in the
investing public who are not insiders.
The Company is required to file quarterly reports with the SEC which
include financial data from the previous quarter. Until this information is
filed with the SEC it is inside information which may not be disclosed and the
Company should be certain that there are no leaks or inadvertent disclosures
when release of this information is inappropriate. The Company is required to
file an annual report on Form 10-K within 90 days after each fiscal year-end.
Until such report is filed, much of the information contained therein may be
considered inside information and should not be released without due
consideration.
2. Individual responsibility regarding insider trading.
No individual, regardless of his position with the Company, should purchase
or sell the Company's stock while in possession of material information which is
not yet publicly disseminated. This prohibition applies to anyone in the Company
at any level, and even to persons not employed by the Company if they have
access by any means to material non-public information about the Company. Thus,
inside information may not be disclosed to friends, relatives or others even
though the insider does not share in the profits realized by another. As part of
its procedures to prohibit insider trading, the Company will employ a
"restricted period". A restricted notice will be distributed to all employees
and directors advising them that during the time period announced no employee or
employee -related account may buy or sell the Company's stock. This period will
usually encompass seven days prior to the anticipation of a news release and
seven days following the release. No trades by employees or directors will be
allowed during this time period.
3. Short-Swing Profit Recapture
There are special provisions which apply to every director, officer
and beneficial owner of 10% of the outstanding securities of the Company.
Any profit realized on a purchase and sale of stock within a six-month period is
recoverable by the Company. For this provision, it does not matter whether the
purchase or sale occurs first. Transactions are paired so as to match the lowest
purchase price and the highest sale price within a six-month period. The profit
must be given up to the Company regardless of whether such person actually was
in possession of material non-public information. Good faith on part of the
shareholder is no defense. These provisions require advance planning on the part
of the individuals involved. If you have any doubts, please seek advice prior to
the purchase or sale of any Company stock.
4. Prohibition on Short Sales
Section 16(c) of the 1934 Act prohibits the Company's directors, officers,
and 10% shareholders from making short sales of any security of the Company. A
short sale is purely a trading activity and is presumed to have such an inherent
potential for speculative abuse by an insider as to require absolute
prohibition. As part of the procedures, IAAC and INTL will require that all
transactions for shares of International Assets Holding Corporation be
acknowledged by a principal of the firm by initialing the order ticket for
accounts of employees and directors.
<PAGE>
CERTIFICATION AND ACKNOWLEDGMENT
By signing below, I hereby certify that:
I have read and understand the International Assets Holding Corporation Policy
and Procedures to Detect and Prevent Insider Trading which applies to all
subsidiaries. I agree to conduct my future activities in compliance with insider
trading laws and the company's policies and procedures relating thereto.
In the last twelve months I have not effected securities transactions which were
based on inside information, nor have I improperly transmitted, or otherwise
misused, inside information in my possession.
------------------------------------- ----------------------
NAME DATE
SECTION IV. SUPERVISORY PROCEDURES
The role of the supervisor is critical to the implementation and
maintenance of International Assets' policy and procedures against insider
trading. Procedures can be divided into two classifications -- prevention of
insider trading and detection of insider trading.
1. Prevention of Insider Trading
To prevent insider trading, IAAC, INTL and GAA will:
A. Provide continuing education programs concerning insider
trading.
(1) Every officer, director, and employee must annually read
the firms insider trading policy and acknowledge in writing that he has
done so.
(2) The subject of insider trading will be discussed during
the firm's annual compliance meeting.
(3) Current news items and changing legislation will
be discussed at IAAC and INTL sales meetings.
B. Answer questions regarding policy and procedures.
C. Resolve issues of whether information received by an
officer, director or employee of this firm is material and
non-public.
D. Review on a continuing basis and update when necessary
policy and procedures.
E. When it has been determined that an officer, director,
or employee of IAAC, INTL or GAA has material nonpublic
information,
(1) Implement measures to prevent dissemination of
such information, and
(2) If necessary, restrict officers, directors and
employees from trading the securities.
F. Restrict access to files most likely to contain inside
information.
(1) Trading Department of IAAC
(2) Research Department of IAAC
(3) Underwriting Department of IAAC
(when pertinent)
(4) Accounting Department
(5) Access persons of GAA
G. Require all employee trades over $10,000 to be approved
in advance.
H. Require all employee and director trades of
International Assets Holding Corporation stock to be initialed in
advance of the transaction.
H. Instruct account representatives to question unusually
large orders or a series of orders placed by a client for a
particular security.
I. Any employee accounts with other firms must be
requested in writing and approved. If approved, duplicate
confirmations and statements must be received and reviewed by
our firm.
2. Detection of Insider Trading
To detect insider trading, IAAC , INTL, and GAA will:
A. Review the trading activity of all employees, officers
and directors.
B. Review trading activity in the IAAC trading account.
C. Question any unusual trading activity in employee
accounts.
D. Review clients' trading activity on a periodic basis.
3. Reports to Management
Upon learning of a potential violation of the Policy and Procedures to
Detect and Prevent Insider Trading, the Compliance Department will prepare a
written report to Diego Veitia, President, providing full details and
recommendations for further action.
4. Annual Report to Management
On an annual basis, the Compliance Department will prepare a written report
to Diego Veitia, President, giving (1) a review of any instance of suspected
insider trading and the results of such investigation, 2) an evaluation of the
current procedures and any recommendations for changes, (3) a current status of
the education program.
<PAGE>
EXHIBIT C
INTERNATIONAL ASSETS ADVISORY CORP.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of International Assets Advisory Corp.:
1. I hereby acknowledged receipt of a copy of the Code of Ethics
for International Assets Advisory Corp.
2. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Underwriter Personnel."
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Underwriter or the Investment Company, such as any economic relationship
between my transactions and securities held or to be acquired by the Investment
Company.
4. As of the date below I had a direct or indirect beneficial
ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:______________________________________
Signature:________________________________
-------------------------------------------
Print Name
<PAGE>
EXHIBIT D
INTERNATIONAL ASSETS ADVISORY CORP.
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer of International Assets Advisory Corp.:
1. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Underwriter Personnel."
2. I hereby certify that, during the year ended December 31, 2___ , I have
complied with the requirements of the Code and I have reported all securities
transactions required to be reported pursuant to the Code.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Underwriter or the Investment Company, such as any economic relationship
between my transactions and securities held or to be acquired by the Investment
Company.
4. As of December 31, 2___ , I had a direct or indirect
beneficial
ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:___________________________________
Signature:___________________________
-----------------------------------------
Print Name
<PAGE>
1
EXHIBIT E
INTERNATIONAL ASSETS ADVISORY CORP.
Securities Transactions Report
For the Calendar Quarter
Ended:___________________________________________________________
To the Compliance officer of International Assets Advisory Corp.:
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership and which are required to be
reported pursuant to the Code of Ethics adopted by International Assets Advisory
Corp.:
SECURITY DATE OF NO. OF DOLLAR NATURE OF PRICE
BROKER-DEALER
TRANS. SHARES AMOUNT OF TRANSACTION OR BANK
TRANS. (Purchase, THROUGH
Sale, WHOM
Other) EFFECTED
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Investment Company, such as the existence of
any economic relationship between my transactions and securities held or to be
acquired by the Investment Company.
Date:________________________________
Signature:_______________________________________
------------------------------------
Print Name
<PAGE>
EX-99.p(3)
GLOBAL ASSETS ADVISORS, INC.
CODE OF ETHICS
AND
STATEMENT ON INSIDER TRADING
Adopted 5/4/00
<PAGE>
CODE OF ETHICS
GLOBAL ASSETS ADVISORS, INC.
Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies, ("investment companies") and their investment
advisors, and principal underwriters to adopt written codes of ethics designed
to prevent fraudulent trading by those persons covered under Rule 17j-1. Rule
17j-1 also makes it unlawful for certain persons, including any officer or
director of an advisor, in connection with the purchase or sale by such person
of a security held or to be acquired by an investment company to:
1. employ any device, scheme or artifice to defraud the
investment company;
2. make to the investment company any untrue statement of a
material fact or omit to state to the investment company a material
fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
3. engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the
investment company; or
4. engage in any manipulative practice with respect to
the investment company.
Rule 17j-1 also requires that each investment company and its affiliates
use reasonable diligence, and institute procedures reasonably necessary, to
prevent violations of its code of ethics.
In addition to Rule 17j-1 of the Act, the Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer. Section 204A of the
Investment Advisors Act of 1940 (the "Advisors Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them.
Section 204A provides that every person subject to Section 204 of the Advisors
Act shall be required to establish procedures to prevent insider trading.
Attached to this Code of Ethics (the "Code"), as Exhibit A, is a Statement
on Insider Trading from The World Funds, Inc. Any investment advisor who acts as
such for any series of The World Funds, Inc. (the "Investment Company") must
comply with the policy and procedures outlined in the Statement on Insider
Trading unless such investment advisor has adopted a similar policy and
procedures with respect to insider trading which are determined by the
Investment Company's Board of Directors to comply with ITSFEA's requirements.
Global Assets Advisors, Inc. (the "Advisor") believes its Statement on
Insider Trading has similar polices and procedures and has submitted such to the
Investment Company's Board of Directors. The Advisor's Statement is attached as
Exhibit B.
This Code is being adopted by the Advisor, (1) for implementation with respect
to covered persons of the Advisor and as they relate to an Investment Company.
STATEMENT OF GENERAL PRINCIPLES
This Code is based on the principle that the officers, directors, and
employees of the Advisor owe a fiduciary duty to the shareholders of the
Investment Company and, therefore, the Advisor's personnel must place the
shareholders' interests ahead of their own. The Advisor's personnel must also
avoid any conduct which could create a potential conflict of interest, and must
ensure that their personal securities transactions do not in any way interfere
with the Investment Company's portfolio transactions and that they do not take
inappropriate advantage of their positions. All persons covered by this Code
must adhere to these general principles as well as the Code's specific
provisions, procedures, and restrictions.
DEFINITIONS
For purposes of this Code:
"Advisor" means Global Assets Advisors, Inc.
"Investment Company" means a company registered as such under
the Investment Company Act of 1940 and for which the Adviser is the
investment advisor.
"Access Person" means any director, officer, or advisory person of the
Advisor who, with respect to an investment company, makes any recommendation
regarding the purchase or sale of a security by such investment company,
participates in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination of which
recommendation shall be made to an investment company; or who, in connection
with his or her duties, obtains any information concerning securities
recommendations being made by the Adviser to an investment company.
"Advisory Person" With respect to an Investment Advisor, an Advisory
Person means any director, officer, general partner, or employee who, in
connection with his/her regular functions or duties, makes, participates in, or
obtains current information regarding the purchase or sale of a security by the
Investment Company, or whose functions relate to the making of any
recommendations with respect to such purchases or sales, including any natural
person in a control relationship to the Investment Company who obtains current
information concerning recommendations made with regard to the purchase or sale
of a security by the Investment Company.
"Investment Personnel" shall mean any securities analyst, portfolio
manager, or a member of an investment committee who is directly involved in the
decision making process as to whether or not to purchase or sell a portfolio
security and those persons who provide information and advice to an Investment
Company Portfolio Manager or who help execute an Investment Company Portfolio
Manager's decisions.
"Portfolio Manager" shall mean an employee of the Advisor entrusted with
the direct responsibility and authority to make investment decisions affecting
the Investment Company.
"Beneficial Ownership" shall be as defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, which, generally
speaking, encompass those situations where the beneficial owner has the right to
enjoy some economic benefits which are substantially equivalent to ownership
regardless of who is the registered owner. This would include:
(i) securities which a person holds for his or her own benefit
either in bearer form, registered in his or her own name or
otherwise, regardless of whether the securities are owned individually
or jointly;
(ii) securities held in the name of a member of his or her
immediate family sharing the same household;
(iii)securities held by a trustee, executor, administrator,
custodian or broker;
(iv) securities owned by a general partnership of which the person
is a member or a limited partnership of which such person
is a general partner;
(v) securities held by a corporation which can be regarded
as a personal holding company of a person; and
(vii)securities recently purchased by a person and awaiting
transfer into his or her name.
"Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States or by
Federal agencies which are direct obligations of the United States, bankers'
acceptances, bank certificates of deposits, and commercial paper. A future or an
option on a future will be deemed to be a security subject to this Code.
"Purchase or sale of a security" includes the writing of an option to
purchase or sell a security.
A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security has
been made by the Advisor and such determination has been communicated to the
Investment Company. With respect to the Investment Advisor making the
recommendation, a security is being considered for purchase or sale when an
officer, director or employee of such Investment Advisor seriously considers
making such a recommendation.
Solely for purposes of this Code, any agent of the Advisor charged with
arranging the execution of a transaction shall be subject to the reporting
requirements of this Code as to any such security as and from the time the
security is identified to such agent as though such agent was an Investment
Advisor hereunder.
NOTE: An officer or employee of the Investment Advisor whose duties do
not include the advisory functions described above, who does not have
access to the advisory information contemplated above, and whose assigned
place of employment is at a location where no investment advisory services
are performed for the Investment Company, is not an "Advisory Person" or
an "Access Person" unless actual advance knowledge of a covered
transaction is furnished to such person.
PROHIBITED TRANSACTIONS
Advisor Personnel shall not engage in any act, practice or course of
conduct which would violate the provisions of Rule 17j-1 set forth above. No
Access Person or Advisory Person shall purchase or sell, directly or indirectly
any security in which he/she has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which, to his/her actual knowledge,
at the time of such purchase or sale (i) is being considered for purchase or
sale by the Investment Company; or (ii) is being purchased or sold by the
Investment Company; except that the prohibitions of this section shall not apply
to:
(1) purchases or sales affected in any account over which the
Access Person or Advisory Person has no direct or indirect influence
or control;
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the Investment Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Advisor Personnel prior to the time
the security involved came within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from such issuer, and sales of such
rights so acquired.
PROHIBITED TRANSACTIONS BY INVESTMENT PERSONNEL
No Investment Personnel shall:
(c) acquire any securities in an initial public offering; or
(d) acquire securities in a private placement without prior written approval
of the Advisor's compliance officer or other officer designated by the
Board of Directors.
In considering a request to invest in a private placement, the Advisor's
compliance officer will take into account, among other factors, whether the
investment opportunity should be reserved for the Investment Company, and
whether the opportunity is being offered to Investment Personnel by virtue of
their/his/her position with the Advisor. Should Investment Personnel be
authorized to acquire securities through a private placement, they/he/she shall,
in addition to reporting the transaction on the quarterly report to the
Investment Company, disclose the interest in that investment to other Investment
Personnel participating in that investment decision if and when they/he/she
plays a part in the Advisor's subsequent consideration of an investment in that
issuer. In such a case, the Advisor's decision to purchase securities of that
issuer will be subject to an independent review by Investment Personnel who have
no personal interest in the issuer.
BLACKOUT PERIODS
No Access Person or Advisory Person shall execute a securities transaction
on a day during which the Advisor has a pending "buy" or "sell" order in that
same security until that order is executed or withdrawn. In addition, a
Portfolio Manager is expressly prohibited from purchasing or selling a security
within seven (7) calendar days before or after the Investment Company that
he/she manages trades in that security.
The foregoing prohibition of personal transactions during the seven day
period following the execution of a transaction for the Investment Company shall
not apply with respect to a security when the portfolio manager certifies in
writing to the Compliance Officer that the Investment Company's trading program
in that security is complete. Each transaction authorized by the Compliance
Officer pursuant to this provision shall be reported to the Board by the
Compliance Officer for review at the Board's next regular meeting.
Should Advisor Personnel trade within the proscribed period, such trade
should be canceled if possible. If it is not possible to cancel the trade, all
profits from the trade must be disgorged and the profits will be paid to a
charity selected by the Advisor Personnel and approved by the officers of the
Investment Company.
The prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which the
Access Person or Advisory Person has no direct or indirect influence
or control if the person making the investment decision with
respect to such account has no actual knowledge about the
Investment Company's pending "buy" or "sell" order;
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the
Investment Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Advisor Personnel prior to the time
the security involved came within the purview of this Code; and
(4) purchases effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
SHORT-TERM TRADING
No Investment Personnel shall profit from the purchase and sale, or sale
and purchase, of the same (or equivalent) securities which are owned by the
Investment Company or which are of a type suitable for purchase by the
Investment Company, within sixty (60) calendar days. Any profits realized on
such short-term trades must be disgorged and the profits will be paid to a
charity selected by the Investment Personnel and approved by the officers of the
Investment Company. The compliance officer may permit in writing exemptions to
the prohibition of this section, on a case-by-case basis, when no abuse is
involved and the equities of the circumstances support an exemption.
GIFTS
No Investment Personnel shall accept a gift or other thing of more than de
minimis value ("gift") from any person or entity that does business with or on
behalf of the Advisor or the Investment Company if such gift is in relation to
the business of the employer of the recipient of the gift. In addition, any
Investment Personnel who receives an unsolicited gift or a gift with an unclear
status under this section shall promptly notify the compliance officer and
accept the gift only upon written approval of the compliance officer.
SERVICE AS A DIRECTOR
No Investment Personnel shall serve as a director of a publicly traded
company absent prior written authorization from the Board of Directors based
upon a determination that such board service would not be inconsistent with the
interests of the Investment Company and its shareholders.
COMPLIANCE PROCEDURES
1. All Advisory Personnel shall pre-clear their personal foreign
securities transactions prior to executing an order. A written request
must be submitted to the Advisor's compliance officer, and the compliance
officer must give his/her written authorization prior to Advisory
Personnel placing a purchase or sell order with a broker. Should the
compliance officer deny the request, he/she will give a reason for the denial.
Approved request will remain valid for two (2) business days from
the date of the approval.5
2. Advisory Personnel shall instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations
of all personal securities transactions and copies of all periodic statements
for all securities accounts.
3. Advisory Personnel, other than directors or officers required to
report their securities transactions to a registered investment advisor
pursuant to Rule 204-2(a)(12) or (13) under the Investment Advisors Act,
shall submit reports showing all transactions in securities as defined herein
in which the person has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership.
4. Every report required to be made under subparagraph 3 above shall be
made not later than ten (10) days after the end of the calendar quarter
in which the transaction to which the report relates was effected. The
report shall contain the following information concerning any
transaction required to be reported therein:
(a) the date of the transaction;
(b) the title and number of shares;
(c) the principal amount involved;
(d) the nature of the transaction (i.e. purchase, sale, or other
type of acquisition or disposition);
(e) the price at which the transaction was effected; and
(f) the name of the broker, dealer or bank with or through whom
the transaction was effected.
5. The compliance officer shall identify all Advisory Personnel who
have a duty to make the reports required hereunder and shall inform each
such person of such duty, and shall receive all reports required hereunder.
6. The compliance officer shall promptly report to the Investment
Company's Board of Directors (a) any apparent violation of the
prohibitions contained in this Code, and (b) any reported transactions in a
security which was purchased or sold by the Investment Company within seven
(7) days before or after the date of the reported transaction.
7. The Investment Company's Board of Directors, or a Committee of
Directors created by the Board of Directors for that purpose, shall consider
reports made to the Board of Directors hereunder and shall determine whether
or not this Code has been violated and what sanctions, if any, should
be imposed.
8. This Code, a list of all persons required to make reports hereunder from
time to time, a copy of each report made by Advisor Personnel, each memorandum
made by the compliance officer hereunder, and a record of any violation hereof
and any action taken as a result of such violation, shall be maintained by the
Advisor as required under Rule 17j-1.
9. Upon the commencement of employment of a person who would be deemed to
fall within the definition of "Advisor Personnel", that person must disclose all
personal securities holdings to the compliance officer.
10. All Advisor Personnel must report, on an annual basis, all personal
securities holdings.
11. At least annually, all Advisor Personnel will be required to certify
that they (a) have read and understand the Code; (b) recognize that they are
subject to the requirements outlined therein; (c) have complied with the
requirements of the Code; (d) have disclosed and reported all personal
securities transactions required to be disclosed; and (e) have disclosed all
personal securities holdings.
12. The Advisor's compliance officer shall prepare an annual report to the
Investment Company's Board of Directors. Such report shall (a) include a copy of
the Advisor's Code; (b) summarize existing procedures concerning personal
investing and any changes in the Code's policies or procedures during the past
year; (c) identify any violations of the Code; and (d) identify any recommended
changes in existing restrictions, policies or procedures based upon the
Advisor's experience under the Code, any evolving industry practices, or
developments in applicable laws or regulations.
13. Notwithstanding the procedures in this Section, an access person need
not make a report where the report would duplicate information recorded pursuant
to Rules 204-2(a) (12) pr 204-2 (a) (13) under the Investment Advisers Act of
1940.
6 The Board has determined that placement of a limit order constitutes a
transaction requiring approval, and the limit order must be placed within two
days from the date of approval. Implementation of a limit order in accordance
with its approved terms is a ministerial act which occurs in the future by the
terms of the limit order, and does not require approval. A change of terms in,
or withdrawal of, a standing limit order is an investment decision for which
clearance must be obtained.
<PAGE>
EXHIBIT A
STATEMENT ON INSIDER TRADING
The Insider Trading and Securities Fraud Enforcement Act of 1988
("ITSFEA") requires that all investment advisors and broker-dealers establish,
maintain, and enforce written policies and procedures designed to detect and
prevent the misuse of material non-public information by such investment advisor
and/or broker-dealer, or any person associated with the investment advisor
and/or broker-dealer.
Section 204A of the Investment Advisers Act of 1940 (the "Advisers Act")
states that an investment advisor must adopt and disseminate written policies
with respect to ITSFEA, and an investment advisor must also vigilantly review,
update, and enforce them. Section 204A provides that every person subject to
Section 204 of the Advisers Act shall be required to establish procedures to
prevent insider trading.
Each investment advisor who acts as such for any series of The World
Funds, Inc. (the "Investment Company") and each broker-dealer which acts as
principal underwriter to any series of the Investment Company has adopted the
following policy, procedures, and supervisory procedures in addition to the
Investment Company's Code of Ethics. Throughout this document the investment
advisor(s) and principal underwriter(s) shall collectively be called the
"Providers".
SECTION I - POLICY
The purpose of this Section 1 is to familiarize the officers, directors,
and employees of the Providers with issues concerning insider trading and to
assist them in putting into context the policy and procedures on insider
trading.
Policy Statement:
No person to whom this Statement on Insider Trading applies, including
officers, directors, and employees, may trade, either personally or on behalf of
others (such as mutual funds and private accounts managed by a Provider) while
in possession of material, non-public information; nor may any officer,
director, or employee of a Provider communicate material, non-public information
to others in violation of the law. This conduct is frequently referred to as
"insider trading." This policy applies to every officer, director, and employee
of a Provider and extends to activities within and outside their duties as a
Provider. It covers not only personal transactions of covered persons, but
indirect trading by family, friends and others, or the non-public distribution
of inside information from you to others. Every officer, director, and employee
must read and retain this policy statement. Any questions regarding the policy
and procedures should be referred to the compliance officer.
The term "insider trading" is not defined in the Federal securities laws,
but generally is used to refer to the use of material non-public information to
trade in securities (whether or not one is an "insider") or the communications
of material nonpublic information to others who may then seek to benefit from
such information.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
(a) trading by an insider, while in possession of material non-public
information, or
(b) trading by a non-insider, while in possession of material non-public
information, where the information either was disclosed to the non-insider in
violation of an insider's duty to keep it confidential or was misappropriated,
or
(c) communicating material non-public information to others.
The elements of insider trading and the penalties for such unlawful
conduct are discussed below.
1. Who is an Insider? The concept of "insider" is broad. It includes officers,
directors, and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to information
solely for the company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. In addition, an investment advisor may
become a temporary insider of a company it advises or for which it performs
other services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the basis
for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonably certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-Public Information? Information is non-public until it has been
effectively communicated to the market place. One must be able to point to some
fact to show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, the Wall Street Journal or other publications of general
circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme Court
found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory -
another basis for insider trading liability is the ,'misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties for trading on or communicating
material non-public information are severe, both for individuals and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the violation of up to three times
the profit gained or loss avoided, whether or not the person actually
benefited, and
o fines for the employer or other controlling person of up to the greater of
$1 million or three times the amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by a Provider, including dismissal of the persons
involved.
SECTION II - PROCEDURES
The following procedures have been established to aid the officers,
directors, and employees of a Provider in avoiding insider trading, and to aid
in preventing, detecting, and imposing sanctions against insider trading. Every
officer, director, and employee of a Provider must follow these procedures or
risk serious sanctions, including dismissal, substantial personal liability,
and/or criminal penalties. If you have any questions about these procedures you
should consult the compliance officer.
1. Identifying Inside Information. Before trading for yourself or others,
inluding investment companies or private accounts managed by a Provider, in the
securities of a company about which you may have potential inside information,
ask yourself the following questions:
i. Is the information material? Is this information that an investor would
consider important in making his or her investment decisions? Is this
information that would substantially affect the market price of the securities
if generally disclosed?
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the marketplace
by being published in Reuters, The Wall Street Journal or other publications of
general circulation?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself or
others, including investment companies or private accounts managed
by a Provider.
(c) Do not communicate the information to anybody, other than to the
compliance official.
(d) After the compliance official has reviewed the issue, you will
be instructed to either continue the prohibitions against trading
and communication, or you will be allowed to communicate the
information and then trade.
2. Personal Security Trading. Ail officers, directors, and employees of a
Provider (other than officers, directors and employees who are required to
report their securities transactions to a registered investment company in
accordance with a Code of Ethics) shall submit to the compliance officer, on a
quarterly basis, a report of every securities transaction in which they, their
families (including the spouse, minor children, and adults living in the same
household as the officer, director, or employee), and trusts of which they are
trustees or in which they have a beneficial interest have participated, or at
such lesser intervals as may be required from time to time. The report shall
include the name of the security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. Ail officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information in
your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph I above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted.
4. Resolving Issues Concerning Insider Trading. If, after consideration of the
items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
SECTION III - SUPERVISION
The role of the compliance officer is critical to the implementation and
maintenance of this Statement on Insider Trading. These supervisory procedures
can be divided into two classifications, (1) the prevention of insider trading,
and (2) the detection of insider trading.
1. Prevention of Insider Trading:
------------------------------
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on Insider
Trading;
(b) resolve issues of whether information received by an officer,
director, or employee is material and nonpublic;
(c) review and ensure that officers, directors, and employees review,
at least annually, and update as necessary, the Statement on
Insider Trading; and
(d) when it has been determined that an officer, director, or employee
has material non-public information,
(i) implement measures to prevent dissemination of such
information, and
(ii) if necessary, restrict officers, directors, and employees from
trading the securities.
2. Detection of Insider Trading:
-----------------------------
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer,
director, and employee, to ensure no trading took place in securities in
which the Provider has material non-public information;
(b) review the trading activity of the mutual funds managed by
the investment advisor and the mutual funds which the broker-dealer
acts as principal underwriter;
(c) coordinate, if necessary, the review of such reports with
other appropriate officers, directors, or employees of a Provider and
The World Funds, Inc.
3. Special Reports to Management:
------------------------------
Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Compliance Officer must prepare a written report to
management of the Provider, and provide a copy of such report to the Board of
Directors of The World Funds, Inc., providing full details and recommendations
for further action.
4. Annual Reports:
---------------
On an annual basis, the Compliance Officer of each Provider will prepare a
written report to the management of the Provider, and provide a copy of such
report to the Board of Directors of The World Funds, Inc., setting forth the
following:
(a) a summary of the existing procedures to detect and prevent insider
trading;
(b) full details of any investigation, either internal or by
a regulatory agency, of any suspected insider trading and the
results of such investigation;
(c) an evaluation of the current procedures and any recommendations for
improvement.
<PAGE>
EXHIBIT B
POLICY AND PROCEDURES TO DETECT AND PREVENT INSIDER TRADING
for
INTERNATIONAL ASSETS HOLDING CORPORATION
INTERNATIONAL ASSETS ADVISORY CORP.
INTLTRADER.COM, INC.
GLOBAL ASSETS ADVISORS, INC.
REVISED November, 1999
Table of Contents
Table of Contents 2
POLICY AND PROCEDURES 3
SECTION I POLICY STATEMENT ON INSIDER TRADING 3
SECTION II PROCEDURES TO IMPLEMENT INTERNATIONAL ASSETS
POLICY TO PREVENT INSIDER TRADING 6
SECTION III PROCEDURES REGARDING TRADING SHARES OF
INTERNATIONAL ASSETS HOLDING CORPORATION 7
SECTION IV SUPERVISORY PROCEDURES 10
<PAGE>
POLICY AND PROCEDURES OF INTERNATIONAL ASSETS HOLDING CORPORATION AND ITS
SUBSIDIARIES DESIGNED TO DETECT AND PREVENT INSIDER TRADING
Congress passed and the President signed into law the Insider Trading and
Securities Fraud Enforcement Act of 1988 that requires every Broker/Dealer and
its related companies to institute, maintain and enforce a policy with
accompanying procedures to detect and prevent insider trading. International
Assets has addressed this requirement in the three sections that follow.
Sections I and II are intended for all employees. Section III is directed to
Supervisors who are responsible for maintenance of the policy and procedures.
SECTION I. POLICY STATEMENT ON INSIDER TRADING
International Assets Holding Corporation, International Assets Advisory
Corp., INTLTRADER.COM, INC. and Global Assets Advisors forbid any officer,
director, or employee from trading, either personally or on behalf of others, on
material, nonpublic information or communicating material, nonpublic information
to others in violation of the law. This conduct is frequently referred to as
"insider trading". International Assets' policy applies to every officer,
director and employee and extends to activities within and outside their duties
at these firms. Every officer, director and employee must read and retain this
policy statement. Any questions regarding this policy should be referred to
Nancey McMurtry. The term "insider trading" is not defined in the federal
securities laws, but generally is used to refer to the use of material,
non-public information to trade in securities (whether or not one is an
"insider") or to the communication of material, non-public information to
others. While the law concerning insider trading is continually changing, it is
generally understood that the law prohibits:
(1) Trading by an insider, while in possession of material, non-public
information, or;
(2) Trading by a non-insider, while in possession of material non-public
information, where the information either was disclosed to the non-insider in
violation of an insiders duty to keep it confidential or was misappropriated,
or;
(3) Communicating material, non-public information to others.
The elements of insider trading and the penalties for such
unlawful conduct are discussed below.
1. Who is an Insider?
The concept of insider is broad. It includes officers, directors, and
employees of a company. In addition, a person can be a temporary insider if
he/she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include a company's attorneys,
accountants, consultants, bank lending officers, and the employees of such
organizations. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" is generally defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect on the
price of a company's securities. Information that officers, directors, and
employees should consider material includes, but is not limited to: dividend
changes, earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments. Material
information does not have to relate to a company's business. For example,
information about the contents of a forthcoming newspaper column which could
have an effect on the market price of the security is material. In just such a
case, a WALL STREET JOURNAL reporter was found criminally liable for disclosing
to others the dates and names of companies that would appear in the JOURNAL and
whether or not the reports were favorable.
3. What is Non-public Information?
Information is non-public until it has been communicated to the market
place. One must be able to point to some fact to show that the information is
generally public. For example, information filed with the SEC, or appearing in a
newspaper or reported on a news broadcast would be considered public.
4. Penalties for Insider Trading
Penalties for trading on or communicating material, non-public information
are severe, both for the individuals involved and their employers. A person can
be subject to some or all of the penalties below even if he/she does not
personally benefit from the violation. Penalties include:
Civil injunctions
Treble damages
Disgorgement of profits
Jail sentences
Fines for the persons who committed the violation of up to three
times the profit gained or loss avoided, whether or not the
person actually benefited, and
Fines for the employer or other controlling persons of up to
the greater of $1,000,000 or three times the amount of the profit
gained or loss avoided.
In addition, any violation of this policy statement can be expected
to result in serious sanctions by International Assets companies,
including dismissal of the persons involved.
Remember, it is not a violation to possess inside information. It is a
violation to act on it or pass it to someone else.
SECTION II. PROCEDURES TO IMPLEMENT INTERNATIONAL ASSETS' POLICY AGAINST
---------- ------------------------------------- -----------------------
INSIDER TRADING
---------------
The following procedures have been established to aid the officers,
directors and employees of International Assets companies in avoiding insider
trading, and to aid these companies in preventing, detecting, and imposing
sanctions against insider trading. Every officer, director, and employee of this
firm must follow these procedures or risk serious liability. If you have any
questions about these procedures you should consult Nancey McMurtry.
1. Identifying Inside Information
Before trading for yourself or others, in the securities of a company about
which you have potential inside information, ask yourself the following
questions:
A. Is the information material? Is this information that an investor would
consider important in making an investment decision? Is this information that
could change his investment decision? Is this information that would
substantially affect the market price of the security?
B. Is the information non-public? To whom has this information been
provided? Has it been communicated by broadcast or printed publication? If,
after consideration of the above, you believe that the information is material
and non-public, or if you have questions as to whether the information is
"inside", you should take the following steps.
a. Report the matter immediately to Nancey McMurtry, Brent
Bessire or Diego Veitia, as appropriate.
b. Do not purchase or sell the securities on behalf of
yourself or others.
c. Do not communicate the information inside or outside of
any International Assets company other than to the individuals
name above.
d. After the issue has been reviewed, you will be advised to
continue the restriction against trading or you will be allowed to
trade and communicate the information.
2. Personal Securities Trading
All officers, directors, and employees of International Assets
companies who maintain a securities account with International
Assets Advisory Corp. or INTLTRADER.COM, INC. shall maintain that
account under an "employee" number. Trades shall be reviewed on a
monthly basis for compliance purposes.
3. Securities Traded Outside of IAAC or INTL
All officers, directors, and employees of International Assets
companies who maintain a securities account with a firm other than IAAC or
INTL must make a request in writing prior to opening or to maintain
this account. The Compliance Department must receive duplicate
confirmations and statements of all trading activity.
4. Restricting Access to Material Non-public Information
Information in your possession that you identify as material
and non-public may not be communicated to anyone, including persons
within IAHC companies, except as identified above. In addition, care should
be taken that such information is secure. For example, files
containing inside information should be locked; access to computer files should
be restricted.
5. Dealing with Clients Who May Possess Inside Information
Be alert to unusual trading patterns of established clients. Question
why client who normally relies on brokerage recommendations or
normally purchases 1,000 share lots now wants to buy 10,000 shares of a
particular company unsolicited.
If you receive a large order from a client who is an employee of
the company whose stock he is buying, question his reasons.
If you determine that the client is probably trading on
inside information, you must refuse the trade. Report the matter to
Nancey McMurtry, Brent Bessire or Diego Veitia, as appropriate.
SECTION III. PROCEDURES REGARDING TRADING SHARES OF
INTERNATIONAL ASSETS HOLDING CORPORATION
There are additional considerations for individuals who are employed by
companies which are publicly owned and traded. The SEC, in its attempt to assure
a fair and open market for members of the investing public, have added a number
of regulations to its books which particularly affect directors, officers and
employees of publicly traded companies. It is essential for the company to adopt
internal procedures relating to these requirements.
1. Communications to shareholders or other individuals in the investing
public who are not insiders. The Company is required to file quarterly reports
with the SEC which include financial data from the previous quarter. Until this
information is filed with the SEC it is inside information which may not be
disclosed and the Company should be certain that there are no leaks or
inadvertent disclosures when release of this information is inappropriate. The
Company is required to file an annual report on Form 10-K within 90 days after
each fiscal year-end. Until such report is filed, much of the information
contained therein may be considered inside information and should not be
released without due consideration.
2. Individual responsibility regarding insider trading. No individual,
regardless of his position with the Company, should purchase or sell the
Company's stock while in possession of material information which is not yet
publicly disseminated. This prohibition applies to anyone in the Company at any
level, and even to persons not employed by the Company if they have access by
any means to material non-public information about the Company. Thus, inside
information may not be disclosed to friends, relatives or others even though the
insider does not share in the profits realized by another. As part of its
procedures to prohibit insider trading, the Company will employ a "restricted
period". A restricted notice will be distributed to all employees and directors
advising them that during the time period announced no employee or employee
-related account may buy or sell the Company's stock. This period will usually
encompass seven days prior to the anticipation of a news release and seven days
following the release. No trades by employees or directors will be allowed
during this time period.
3. Short-Swing Profit Recapture There are special provisions which apply to
every director, officer and beneficial owner of 10% of the outstanding
securities of the Company. Any profit realized on a purchase and sale of stock
within a six-month period is recoverable by the Company. For this provision, it
does not matter whether the purchase or sale occurs first. Transactions are
paired so as to match the lowest purchase price and the highest sale price
within a six-month period. The profit must be given up to the Company regardless
of whether such person actually was in possession of material non-public
information. Good faith on part of the shareholder is no defense. These
provisions require advance planning on the part of the individuals involved. If
you have any doubts, please seek advice prior to the purchase or sale of any
Company stock.
4. Prohibition on Short Sales
Section 16(c) of the 1934 Act prohibits the Company's directors, officers,
and 10% shareholders from making short sales of any security of the Company. A
short sale is purely a trading activity and is presumed to have such an inherent
potential for speculative abuse by an insider as to require absolute
prohibition. As part of the procedures, IAAC and INTL will require that all
transactions for shares of International Assets Holding Corporation be
acknowledged by a principal of the firm by initialing the order ticket for
accounts of employees and directors.
<PAGE>
CERTIFICATION AND ACKNOWLEDGMENT
By signing below, I hereby certify that:
I have read and understand the International Assets Holding Corporation Policy
and Procedures to Detect and Prevent Insider Trading which applies to all
subsidiaries. I agree to conduct my future activities in compliance with insider
trading laws and the company's policies and procedures relating thereto.
In the last twelve months I have not effected securities transactions which were
based on inside information, nor have I improperly transmitted, or otherwise
misused, inside information in my possession.
------------------------------------- ----------------------
NAME DATE
SECTION IV. SUPERVISORY PROCEDURES
The role of the supervisor is critical to the implementation and
maintenance of International Assets' policy and procedures against insider
trading. Procedures can be divided into two classifications -- prevention of
insider trading and detection of insider trading.
1. Prevention of Insider Trading
To prevent insider trading, IAAC, INTL and GAA will:
A. Provide continuing education programs concerning insider
trading.
(1) Every officer, director, and employee must annually read
the firms insider trading policy and acknowledge in writing that he has
done so.
(2) The subject of insider trading will be discussed during
the firm's annual compliance meeting.
(3) Current news items and changing legislation will
be discussed at IAAC and INTL sales meetings.
B. Answer questions regarding policy and procedures.
C. Resolve issues of whether information received by an
officer, director or employee of this firm is material and
non-public.
D. Review on a continuing basis and update when necessary
policy and procedures.
E. When it has been determined that an officer, director,
or employee of IAAC, INTL or GAA has material nonpublic
information,
(1) Implement measures to prevent dissemination of
such information, and
(2) If necessary, restrict officers, directors and
employees from trading the securities.
F. Restrict access to files most likely to contain inside
information.
(1) Trading Department of IAAC
(2) Research Department of IAAC
(3) Underwriting Department of IAAC
(when pertinent)
(4) Accounting Department
(5) Access persons of GAA
G. Require all employee trades over $10,000 to be approved
in advance.
H. Require all employee and director trades of
International Assets Holding Corporation stock to be initialed in
advance of the transaction.
H. Instruct account representatives to question unusually
large orders or a series of orders placed by a client for a
particular security.
I. Any employee accounts with other firms must be
requested in writing and approved. If approved, duplicate
confirmations and statements must be received and reviewed by
our firm.
2. Detection of Insider Trading
To detect insider trading, IAAC , INTL, and GAA will:
A. Review the trading activity of all employees, officers
and directors.
B. Review trading activity in the IAAC trading account.
C. Question any unusual trading activity in employee
accounts.
D. Review clients' trading activity on a periodic basis.
3. Reports to Management
Upon learning of a potential violation of the Policy and
Procedures to Detect and Prevent Insider Trading, the Compliance Department
will prepare a written report to Diego Veitia, President, providing
full details and recommendations for further action.
4. Annual Report to Management
On an annual basis, the Compliance Department will prepare a
written report to Diego Veitia, President, giving (1) a review of any instance
of suspected insider trading and the results of such investigation, 2)
an evaluation of the current procedures and any recommendations for
changes, (3) a current status of the education program.
<PAGE>
EXHIBIT C
GLOBAL ASSETS ADVISORS, INC.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of Global Assets Advisors, Inc.:
1. I hereby acknowledged receipt of a copy of the Code of Ethics
for Global Assets Advisors, Inc.
2. I have read and understand the Code and recognize that I am
subject thereto in the capacity of "Advisor Personnel."
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Advisor or the Investment Company, such as any economic relationship between
my transactions and securities held or to be acquired by the Investment Company.
4. As of the date below I had a direct or indirect beneficial
ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:______________________________________
Signature:________________________________
-------------------------------------------
Print Name
<PAGE>
EXHIBIT D
GLOBAL ASSETS ADVISORS, INC.
CODE OF ETHICS
ANNUAL REPORT
TO the Compliance Officer of Global Assets Advisors, Inc.:
1. I have read and understand the Code and recognize that I am
subject thereto in the capacity of "Advisor Personnel."
2. I hereby certify that, during the year ended December 31, 2___ , I have
complied with the requirements of the Code and I have reported all securities
transactions required to be reported pursuant to the Code.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Advisor or the Investment Company, such as any economic relationship between
my transactions and securities held or to be acquired by the Investment Company.
4. As of December 31, 2___ , I had a direct or indirect
beneficial ownership in the following securities:
Name of Security Number of Shares Type of Interest
(Direct or Indirect)
Date:___________________________________
Signature:___________________________
-----------------------------------------
Print Name
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
EXHIBIT E
GLOBAL ASSETS ADVISORS, INC.
Securities Transactions Report
For the Calendar Quarter
Ended:___________________________________________________________
To the Compliance officer of Global Assets Advisors, Inc.:
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership and which are required to be
reported pursuant to the Code of Ethics adopted by Global Assets Advisors, Inc.
SECURITY DATE OF NO. OF DOLLAR NATURE OF PRICE
BROKER-DEALER
TRANS. SHARES AMOUNT OF TRANSACTION OR BANK
TRANS. (Purchase, THROUGH
Sale, WHOM
Other) EFFECTED
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Investment Company, such as the existence of
any economic relationship between my transactions and securities held or to be
acquired by the Investment Company.
Date:________________________________
Signature:_______________________________________
------------------------------------
Print Name
-------------------------------------------------------------------------------
<PAGE>
EX-99.p(4)
-------------------------------------------------------------------------------
[OBJECT OMITTED]
Code of Ethics and Statement on Insider
Trading
<PAGE>
Contents
Section I INTRODUCTION...................................1
Section II CODE OF ETHICS.................................2
Statement of General Principals.............3
Definitions.................................3
Prohibited Transactions.....................5
Prohibited Transactions by Investment Personnel 5
Blackout Periods............................6
Short-Term Trading..........................6
Gifts.......................................7
Service as a Director.......................7
Compliance Procedures.......................7
Exhibit A Statement on Insider Trading..................10
Section I - Policy.........................10
Section II - Procedures....................12
Section III - Supervision..................14
Exhibit B Initial Report................................16
Exhibit C Annual Report.................................17
Exhibit D Securities Transactions Report................18
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Introduction
The Board of Directors of Sand Hill Advisors, Inc.
("SHA") adopted the Code of Ethics and Statement on Insider Trading
of The World Funds, Inc., dated January 1, 1995, on December
30, 1994. The Code of Ethics and Statement on Insider Trading
has been given to all officers, directors, and associated
persons of the Firm.
<PAGE>
Code of Ethics
Rule 17j-1 under the Investment Company Act of 1940 (the "Act") requires
registered investment companies, ("investment companies") and their investment
advisors, and principal underwriters to adopt written codes of ethics designed
to prevent fraudulent trading by those persons covered under Rule 17j-1. Rule
17j-1 also makes it unlawful for certain persons, including any officer or
director of an investment company, in connection with the purchase or sale by
such person of a security held or to be acquired by an investment company to:
1. Employ any device, scheme or artifice to defraud the investment company;
2. Make to the investment company any untrue statement of a material fact
or omit to state to the investment company a material fact necessary in order to
make the statements made, in light of the circumstances under which they are
made, not misleading;
3. Engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon the investment company; or
4. Engage in any manipulative practice with respect to the investment
company.
Rule 17j-1 also requires that each investment company and its affiliates
use reasonable diligence, and institute procedures reasonably necessary, to
prevent violations of its code of ethics. In addition to Rule 17j-1 of the Act,
the Insider Trading and Securities Fraud Enforcement Act of 1988 ("ITSFEA")
requires that all investment advisors and broker-dealers establish, maintain,
and enforce written policies and procedures designed to detect and prevent the
misuse of material non-public information by such investment advisor and/or
broker-dealer. Section 204A of the Investment Advisors Act of 1940 (the
"Advisors Act") states that an investment advisor must adopt and disseminate
written policies with respect to ITSFEA, "and an investment advisor must also
vigilantly review, update, and enforce them." Section 204A provides that every
person subject to Section 204 of the Advisors Act shall be required to establish
procedures to prevent insider trading. Attached to this Code of Ethics (the
"Code"), as Exhibit A, is a Statement on Insider Trading. Any investment advisor
who acts as such for any series of The World Funds, Inc. (the "Fund") and any
broker-dealer who acts as the principal underwriter for any series of the Fund
must comply with the policy and procedures outlined in the Statement on Insider
Trading unless such investment advisor or principal underwriter has adopted a
similar policy and procedures with respect to insider trading which are
determined by the Fund's Board of Directors to comply with ITSFEA's
requirements. Code of Ethics (continued) This Code is being adopted by the Fund,
(1) for implementation with respect to covered persons of the Fund; and (2) for
implementation by any investment advisor to the Fund as that term is defined
under the Act (each such investment advisor being deemed an "Investment Advisor"
for purposes of this Code), and for any principal underwriter for the Fund,
unless such investment advisor or principal underwriter has adopted a code of
ethics and plan of implementation thereof which is determined by the Fund's
Board of Directors to comply with the requirements of Rule 17j-1 and to be
sufficient to effectuate the purpose and objectives of Rule 17j-1. Statement of
This Code is based on the principle that the General officers, directors, and
employees of the Fund and Principles the officers, directors, and employees of
the Fund's investment advisor(s) owe a fiduciary duty to the shareholders of the
Fund and, therefore, the Fund's and investment advisor's personnel must place
the shareholders' interests ahead of their own. The Fund's and investment
advisor's personnel must also avoid any conduct which could create a potential
conflict of interest, and must ensure that their personal securities
transactions do not in any way interfere with the Fund's portfolio transactions
and that they do not take inappropriate advantage of their positions. All
persons covered by this Code must adhere to these general principles as well as
the Code's specific provisions, procedures, and restrictions. Definitions For
purposes of this Code: "Access Person" shall mean any director, officer,
employee, or advisory person of the Fund, or those persons who have an active
part in the management, portfolio selection, or underwriting functions of the
Fund, or who, in the course of their normal duties, obtain prior information
about the Fund's purchases or sales of securities (i.e. traders and analysts).
"Advisory Person" With respect to an Investment Advisor, an Advisory Person
means any director, officer, general partner, or employee who, in connection
with his/her regular functions or duties, makes, participates in, or obtains
current information regarding the purchase or sale of a security by the Fund, or
whose functions relate to the making of any recommendations with respect to such
purchases or sales, including any natural person in a control relationship to
the Fund who obtains current information concerning recommendations made with
regard to the purchase or sale of a security by the Fund. "Investment Personnel"
shall mean any securities analyst, portfolio manager, or a member of an
investment committee who is directly involved in the decision making process as
to whether or not to purchase or sell a portfolio security and those persons who
provide information and advice to a Portfolio Manager or who help execute a
Portfolio Manager's decisions. "Fund Personnel" shall mean an Access Person,
Advisory Person, and/or Investment Personnel. "Portfolio Manager" shall mean an
employee of an Investment Advisor entrusted with the direct responsibility and
authority to make investment decisions affecting the Fund. Code of Ethics
(continued) "Beneficial Ownership" shall be as defined in Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder, which,
generally speaking, encompass those situations where the beneficial owner has
the right to enjoy some economic benefits which are substantially equivalent to
ownership regardless of who is the registered owner. This would include:
(i) securities which a person holds for his or her
own benefit either in bearer form, registered in his or her own name or
otherwise, regardless of whether the securities are owned individually or
jointly;
(ii) securities held in the name of a member of his or her immediate family
sharing the same household;
(iii) securities held by a trustee, executor, administrator, custodian or
broker;
(iv) securities owned by a general partnership of which the person is a
member or a limited partnership of which such person is a general partner;
(v) securities held by a corporation which can be regarded as a personal
holding company of a person; and
(vi) securities recently purchased by a person and awaiting transfer into
his or her name.
"Security" shall have the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States or by
Federal agencies which are direct obligations of the United States, bankers'
acceptances, bank certificates of deposits, and commercial paper. A future or an
option on a future will be deemed to be a security subject to this Code.
"Purchase or sale of a security" includes the writing of an option to purchase
or sell a security. A security is "being considered for purchase or sale" or is
"being purchased or sold" when a recommendation to purchase or sell the security
has been made by an Investment Advisor and such determination has been
communicated to the Fund. With respect to the Investment Advisor making the
recommendation, a security is being considered for purchase or sale when an
officer, director or employee of such Investment Advisor seriously considers
making such a recommendation. Solely for purposes of this Code, any agent of the
Fund charged with arranging the execution of a transaction shall be subject to
the reporting requirements of this Code as to any such security as and from the
time the security is identified to such agent as though such agent was an
Investment Advisor hereunder. Code of Ethics (continued) NOTE: An officer or
employee of the Fund or an Investment Advisor whose duties do not include the
advisory functions described above, who does not have access to the advisory
information contemplated above, and whose assigned place of employment is at a
location where no investment advisory services are performed for the Fund, is
not an "Advisory Person" or an "Access Person" unless actual advance knowledge
of a covered transaction is furnished to such person. Prohibited Fund Personnel
shall not engage in any act, Transactions practice or course of conduct which
would violate the provisions of Rule 17j-1 set forth above. No Access Person or
Advisory Person shall purchase or sell, directly or indirectly any security in
which he/she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which, to his/her actual knowledge, at the
time of such purchase or sale (i) is being considered for purchase or sale by
the Fund; or (ii) is being purchased or sold by the Fund; except that the
prohibitions of this section shall not apply to:
1. Purchases or sales affected in any account over which the Access Person
or Advisory Person has no direct or indirect influence or control;
2. Purchases or sales which are non-volitional on the part of either the
Access Person, the Advisory Person, or the Fund;
3. Purchases which are part of an automatic dividend reinvestment or other
plan established by Fund Personnel prior to the time the security involved came
within the purview of this Code; and
4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
Prohibited No Investment Personnel shall:
Transactions by Investment Personnel
(a) acquire any securities in an initial public Personnel offering; or
(b) acquire securities in a private placement without prior written
approval of the Fund's compliance officer or other officer designated by the
Board of Directors. In considering a request to invest in a private placement,
the Fund's compliance officer will take into account, among other factors,
whether the investment opportunity should be reserved for the Fund, and whether
the opportunity is being offered to Investment Personnel by virtue of
their/his/her position with the Fund. Should Investment Personnel be authorized
to acquire securities through a private placement, they/he/she shall, in
addition to reporting the transaction on the quarterly report to the Fund,
disclose the interest in that investment to other Investment Personnel
participating in that investment decision if and when they/he/she plays a part
in the Fund's subsequent consideration of an investment in that issuer. In such
a case, the Fund's decision to Code of Ethics (continued) purchase securities of
that issuer will be subject to an independent review by Investment Personnel who
have no personal interest in the issuer. Blackout Periods No Access Person or
Advisory Person shall execute a securities transaction on a day during which the
Fund has a pending "buy" or "sell" order in that same security until that order
is executed or withdrawn. In addition, a Portfolio Manager is expressly
prohibited from purchasing or selling a security within seven (7) calendar days
before or after the Fund that he/she manages trades in that security. The
foregoing prohibition of personal transactions during the seven day period
following the execution of a transaction for the Fund shall not apply with
respect to a security when the portfolio manager certifies in writing to the
Compliance Officer that the Fund's trading program in that security is complete.
Each transaction authorized by the Compliance Officer pursuant to this provision
shall be reported to the Board by the Compliance Officer at the Board's next
regular meeting. Should Fund Personnel trade within the proscribed period, such
trade should be canceled if possible. If it is not possible to cancel the trade,
all profits from the trade must be disgorged and the profits will be paid to a
charity selected by the Fund Personnel and approved by the officers of the Fund.
<PAGE>
The prohibitions of this section shall not apply to:
1. Purchases or sales affected in any account over which the Access Person
or Advisory Person has no direct or indirect influence or control if the person
making the investment decision with respect to such account has no actual
knowledge about the Fund's pending "buy" or "sell" order;
2. Purchases or sales which are non-volitional on the part of either the
Access Person, the Advisory Person, or the Fund;
3. Purchases which are part of an automatic dividend reinvestment or other
plan established by Fund Personnel prior to the time the security involved came
within the purview of this Code; and
4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
Short-Term No Investment Personnel shall profit from the Trading purchase
and sale, or sale and purchase, of the same (or equivalent) securities which are
owned by the Fund or which are of a type suitable for purchase by the Fund,
within sixty (60) calendar days. Any profits realized on such short-term trades
must be disgorged and the profits will be paid to a charity selected by the
Investment Personnel and approved by the officers of the Fund. The compliance
officer or other officer designated by the Board of Directors may permit in
writing exemptions to the prohibition of this section, on a case-by-case basis,
when no abuse is involved and the equities of the circumstances support an
exemption. Code of Ethics (continued) Gifts No Investment Personnel shall accept
a gift or other thing of more than de minimis value ("gift") from any person or
entity that does business with or on behalf of the Fund if such gift is in
relation to the business of the employer of the recipient of the gift. In
addition, any Investment Personnel who receives an unsolicited gift or a gift
with an unclear status under this section shall promptly notify the compliance
officer and accept the gift only upon written approval of the compliance
officer. Service as a No Investment Personnel shall serve as a director Director
of a publicly traded company absent prior written authorization from the Board
of Directors based upon a determination that such board service would not be
inconsistent with the interests of the Fund and its shareholders.
Compliance 1. All Fund Personnel shall preclear their Procedures personal
securities transactions prior to executing an order. A written request must be
submitted to the Fund's compliance officer, and the compliance officer must give
his/her written authorization prior to Fund Personnel placing a purchase or sell
order with a broker. Should the compliance officer deny the request, he/she will
give a reason for the denial. Approval of a request will remain valid for two
(2) business days from the date of the approval.1
2. Fund Personnel shall instruct their broker(s) to supply the compliance
officer, on a timely basis, with duplicate copies of confirmations of all
personal securities transactions and copies of all periodic statements for all
securities accounts.
3. Fund Personnel, other than directors or officers required to report
their securities transactions to a registered investment advisor pursuant to
Rule 204-2(a)(12) or (13) under the Investment Advisors Act, shall submit
reports showing all transactions in securities as defined herein in which the
person has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership.
4. Each director, who is not an interested person of the Fund as defined in
the Act, shall submit reports as required under subparagraph 3 above, but only
for transactions in reportable securities where at the time of the transaction
the director knew, or in the ordinary course of fulfilling his/her official
duties as a director should have known, that during the seven (7) day period
immediately preceding the date of the transaction by the director, such security
was purchased or sold by the Fund or was being considered for purchase or sale
by the Fund.
1 The Board has determined that placement of a limit order constitutes a
transaction requiring approval, and the limit order must be placed within two
days from the date of approval. Implementation of a limit order in accordance
with its approved terms is a ministerial act which occurs in the future by the
terms of the limit order, and does not require approval. A change of terms in,
or withdrawal of, a standing limit order is an investment decision for which
clearance must be obtained. Code of Ethics (continued) 5. Every report required
to be made under subparagraphs 3 and 4 above shall be made not later than ten
(10) days after the end of the calendar quarter in which the transaction to
which the report relates was effected. The report shall contain the following
information concerning any transaction required to be reported therein: (a) the
date of the transaction; (b) the title and number of shares; (c) the principal
amount involved; (d) the nature of the transaction (i.e. purchase, sale, or
other type of acquisition or disposition); (e) the price at which the
transaction was effected; and (f) the name of the broker, dealer or bank with or
through whom the transaction was effected. 6. The compliance officer shall
identify all Fund Personnel who have a duty to make the reports required
hereunder and shall inform each such person of such duty, and shall receive all
reports required hereunder. 7. The compliance officer shall promptly report to
the Fund's Board of Directors (a) any apparent violation of the prohibitions
contained in this Code, and (b) any reported transactions in a security which
was purchased or sold by the Fund within seven (7) days before or after the date
of the reported transaction. 8. The Fund's Board of Directors, or a Committee of
Directors created by the Board of Directors for that purpose, shall consider
reports made to the Board of Directors hereunder and shall determine whether or
not this Code has been violated and what sanctions, if any, should be imposed.
9. This Code, a list of all persons required to make reports hereunder from time
to time, a copy of each report made by Fund Personnel, each memorandum made by
the compliance officer hereunder, and a record of any violation hereof and any
action taken as a result of such violation, shall be maintained by the Fund as
required under Rule 17j-1. 10. Upon the commencement of employment of a person
who would be deemed to fall within the definition of "Fund Personnel", that
person must disclose all personal securities holdings to the compliance officer.
11. All Fund Personnel must report, on an annual basis, all personal securities
holdings. Code of Ethics (continued) 12. At least annually, all Fund Personnel
will be required to certify that they (a) have read and understand the Code; (b)
recognize that they are subject to the requirements outlined therein; (c) have
complied with the requirements of the Code; (d) have disclosed and reported all
personal securities transactions required to be disclosed; and (e) have
disclosed all personal securities holdings.
13. The Fund's compliance officer shall prepare an annual report to the
Fund's Board of Directors. Such report shall (a) include a copy of the Fund's
Code; (b) summarize existing procedures concerning personal investing and any
changes in the Code's policies or procedures during the past year; (c) identify
any violations of the Code; and (d) identify any recommended changes in existing
restrictions, policies or procedures based upon the Fund's experience under the
Code, any evolving industry practices, or developments in applicable laws or
regulations. Statement on Insider Trading The Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer, or any person
associated with the investment advisor and/or broker-dealer. Section 204A of the
Investment Advisers Act of 1940 (the "Advisers Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them."
Section 204A provides that every person subject to Section 204 of the Advisers
Act shall be required to establish procedures to prevent insider trading. Each
investment advisor who acts as such for any series of The World Funds, Inc. (the
"Fund") and each broker-dealer which acts as principal underwriter to any series
of the Fund has adopted the following policy, procedures, and supervisory
procedures in addition to the Fund's Code of Ethics. Throughout this document
the investment advisor(s) and principal underwriter(s) shall collectively be
called the "Providers".
Section I - The purpose of this Section 1 is to familiarize Policy the
officers, directors, and employees of the Providers with issues concerning
insider trading and to assist them in putting into context the policy and
procedures on insider trading. Policy Statement: No person to whom this
Statement on Insider Trading applies, including officers, directors, and
employees, may trade, either personally or on behalf of others (such as mutual
funds and private accounts managed by a Provider) while in possession of
material, non-public information; nor may any officer, director, or employee of
a Provider communicate material, non-public information to others in violation
of the law. This conduct is frequently referred to as "insider trading." This
policy applies to every officer, director, and employee of a Provider and
extends to activities within and outside their duties as a Provider. It covers
not only personal transactions of covered persons, but indirect trading by
family, friends and others, or the non-public distribution of inside information
from you to others. Every officer, director, and employee must read and retain
this policy statement. Any questions regarding the policy and procedures should
be referred to the compliance officer. The term "insider trading" is not defined
in the Federal securities laws, but generally is used to refer to the use of
material non-public information to trade in securities (whether or not one is an
"insider") or the communications of material non-public information to others
who may then seek to benefit from such information. Statement on Insider Trading
(continued) While the law concerning insider trading is not static, it is
generally understood that the law prohibits:
(a) trading by an insider, while in possession of material non-public
information, or
(b) trading by a non-insider, while in possession of material non-public
information, where the information either was disclosed to the non-insider in
violation of an insider's duty to keep it confidential or was misappropriated,
or
(c) communicating material non-public information to others. The elements
of insider trading and the penalties for such unlawful conduct are discussed
below.
1. Who is an Insider? The concept of "insider" is broad. It includes
officers, directors, and employees of a company. In addition, a person can be a
"temporary insider" if he or she enters into a special confidential relationship
in the conduct of a company's affairs and as a result is given access to
information solely for the company's purposes. A temporary insider can include,
among others, a company's attorneys, accountants, consultants, bank lending
officers, and the employees of such organizations. In addition, an investment
advisor may become a temporary insider of a company it advises or for which it
performs other services. According to the Supreme Court, the company must expect
the outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the
basis for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonably certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-public Information? Information is non-public until it has
been effectively communicated to the market place. One must be able to point to
some fact to show that the information is generally public. For example,
information found in a report filed with the SEC, or appearing in Dow Jones,
Reuters Economic Services, the Wall Street Journal or other publications of
general circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.) Statement on Insider Trading (continued)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme
Court found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory -
another basis for insider trading liability is the "misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties
--------------------------------- for trading on or communicating material
non-public information are severe, both for individuals and their employers. A
person can be subject to some or all of the penalties below even if he or she
does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the
violation of up to three times the profit
gained or loss avoided, whether or not the
person actually benefited, and
o fines for the employer or other controlling person of
up to the greater of $1 million or three times the
amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by a Provider, including dismissal of the persons
involved.
Section II - The following procedures have been established to Procedures
aid the officers, directors, and employees of a Provider in avoiding insider
trading, and to aid in preventing, detecting, and imposing sanctions against
insider trading. Every officer, director, and employee of a Provider must follow
these procedures or risk serious sanctions, including dismissal, substantial
personal liability, and/or criminal penalties. If you have any questions about
these procedures you should consult the compliance officer.
1. Identifying Inside Information. Before
----------------------------------- trading for yourself or others, including
investment companies or private accounts managed by a Provider, in the
securities of a company about which you may have potential inside information,
ask yourself the following questions:
i. Is the information material? Is this information that an investor would
consider important in making his or her investment decisions? Is this
information that would substantially affect the market price of the securities
if generally disclosed? Statement on Insider Trading (continued)
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the marketplace
by being published in Reuters, The Wall Street Journal or other publications of
general circulation? If, after consideration of the above, you believe that the
information is material and non-public, or if you have questions as to whether
the information is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself or others,
including investment companies or private accounts managed by a Provider.
(c) Do not communicate the information to anybody, other than to the
compliance official.
(d) After the compliance official has reviewed the issue, you will be
instructed to either continue the prohibitions against trading and
communication, or you will be allowed to communicate the information and then
trade.
2. Personal Security Trading. All officers, directors, and employees of a
Provider (other than officers, directors and employees who are required to
report their securities transactions to a registered investment company in
accordance with a Code of Ethics) shall submit to the compliance officer, on a
quarterly basis, a report of every securities transaction in which they, their
families (including the spouse, minor children, and adults living in the same
household as the officer, director, or employee), and trusts of which they are
trustees or in which they have a beneficial interest have participated, or at
such lesser intervals as may be required from time to time. The report shall
include the name of the security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. All officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information
in your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph 1 above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted. Statement on Insider Trading (continued)
4. Resolving Issues Concerning Insider Trading. If, after consideration of
the items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
Section III - The role of the compliance officer is critical to Supervision
the implementation and maintenance of this Statement on Insider Trading. These
supervisory procedures can be divided into two classifications, (1) the
prevention of insider trading, and (2) the detection of insider trading.
1. Prevention of Insider Trading:
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on Insider
Trading;
(b) resolve issues of whether information received by an officer, director,
or employee is material and non-public;
(c) review and ensure that officers, directors, and mployees review, at
least annually, and update as necessary, the Statement on Insider Trading; and
(d) when it has been determined that an officer, director, or employee has
material non-public information, (i) implement measures to prevent dissemination
of such information, and
(ii) if necessary, restrict officers, directors, and employees from trading
the securities.
2. Detection of Insider Trading:
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer, director,
and employee, to ensure no trading took place in securities in which the
Provider has material non-public information;
(b) review the trading activity of the mutual funds managed by the
investment advisor and the mutual funds which the broker-dealer acts as
principal underwriter; Statement on Insider Trading (continued)
(c) coordinate, if necessary, the review of such reports with other
appropriate officers, directors, or employees of a Provider and The World Funds,
Inc.
3. Special Reports to Management: ------------------------------ Promptly,
upon learning of a potential violation of the Statement on Insider Trading, the
Compliance Officer must prepare a written report to management of the Provider,
and provide a copy of such report to the Board of Directors of The World Funds,
Inc., providing full details and recommendations for further action.
4. Annual Reports: --------------- On an annual basis, the Compliance
Officer of each Provider will prepare a written report to the management of the
Provider, and provide a copy of such report to the Board of Directors of The
World Funds, Inc., setting forth the following:
(a) a summary of the existing procedures to detect and prevent insider
trading;
(b) full details of any investigation, either internal or by a regulatory
agency, of any suspected insider trading and the results of such investigation;
(c) an evaluation of the current procedures and any recommendations for
improvement.
<PAGE>
Exhibit B
THE WORLD FUNDS, INC.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of The World Funds, Inc.:
1. I hereby acknowledged receipt of a copy of the Code of Ethics for The
World Funds, Inc.
2. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Fund Personnel."
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
4. As of the date below I had a direct or indirect beneficial ownership in
the following securities:
----------------------------------------------------------------------
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
<PAGE>
Exhibit C
THE WORLD FUNDS, INC.
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer of The World Funds, Inc.:
1. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Fund Personnel."
2. I hereby certify that, during the year ended December 31, 19____, I have
complied with the requirements of the Code and I have reported all securities
transactions required to be reported pursuant to the Code.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
4. As of December 31, 19____, I had a direct or indirect beneficial
ownership in the following securities:
----------------------------------------------------------------------
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
<PAGE>
Exhibit D
THE WORLD FUNDS, INC.
Securities Transactions Report
For the Calendar Quarter Ended: ______________________, 19____
To the Compliance Officer of The World Funds, Inc.:
During the quarter referred to above, the following transactions were effected
in securities of which I had, or by reason of such transaction acquired, direct
or indirect beneficial ownership and which are required to be reported pursuant
to the Code of Ethics adopted by The World Funds, Inc.
------------------------------------------------------------------------
Nature of Broker
Dealer
Date of No. of Dollar Transaction or Bank
Amt of thru
Security Transaction Shares Transactio(Buy/Sell) Price Whom
Effected
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) other transactions not required to be
reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that I have
no knowledge of the existence of any personal conflict of interest relationship
which may involve the Fund, such as the existence of any economic relationship
between my transactions and securities held or to be acquired by the Fund.
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
-------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
[OBJECT OMITTED]
Code of Ethics and Statement on Insider
Trading
<PAGE>
Contents
Section I INTRODUCTION...................................1
Section II CODE OF ETHICS.................................2
Statement of General Principals.............3
Definitions.................................3
Prohibited Transactions.....................5
Prohibited Transactions by Investment Personnel 5
Blackout Periods............................6
Short-Term Trading..........................6
Gifts.......................................7
Service as a Director.......................7
Compliance Procedures.......................7
Exhibit A Statement on Insider Trading..................10
Section I - Policy.........................10
Section II - Procedures....................12
Section III - Supervision..................14
Exhibit B Initial Report................................16
Exhibit C Annual Report.................................17
Exhibit D Securities Transactions Report................18
<PAGE>
Introduction
The Board of Directors of Sand Hill Advisors, Inc. ("SHA") adopted the Code
of Ethics and Statement on Insider Trading of The World Funds, Inc., dated
January 1, 1995, on December 30, 1994. The Code of Ethics and Statement on
Insider Trading has been given to all officers, directors, and associated
persons of the Firm.
<PAGE>
Code of Ethics
Rule 17j-1 under the Investment Company Act of 1940
(the "Act") requires registered investment companies, ("investment
companies") and their investment advisors, and principal underwriters to adopt
written codes of ethics designed to prevent fraudulent trading by those persons
covered under Rule 17j-1. Rule 17j-1 also makes it unlawful for certain persons,
including any officer or director of an investment company, in connection with
the purchase or sale by such person of a security held or to be acquired by an
investment company to:
5. Employ any device, scheme or artifice to defraud the investment company;
6. Make to the investment company any untrue statement of a material fact
or omit to state to the investment company a material fact necessary in order to
make the statements made, in light of the circumstances under which they are
made, not misleading;
7. Engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon the investment company; or
8. Engage in any manipulative practice with respect to the investment
company. Rule 17j-1 also requires that each investment company and its
affiliates use reasonable diligence, and institute procedures reasonably
necessary, to prevent violations of its code of ethics.
In addition to Rule 17j-1 of the Act, the Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer. Section 204A of the
Investment Advisors Act of 1940 (the "Advisors Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, "and
an investment advisor must also vigilantly review, update, and enforce them."
Section 204A provides that every person subject to Section 204 of the Advisors
Act shall be required to establish procedures to prevent insider trading.
Attached to this Code of Ethics (the "Code"), as Exhibit A, is a Statement on
Insider Trading. Any investment advisor who acts as such for any series of The
World Funds, Inc. (the "Fund") and any broker-dealer who acts as the principal
underwriter for any series of the Fund must comply with the policy and
procedures outlined in the Statement on Insider Trading unless such investment
advisor or principal underwriter has adopted a similar policy and procedures
with respect to insider trading which are determined by the Fund's Board of
Directors to comply with ITSFEA's requirements. Code of Ethics (continued) This
Code is being adopted by the Fund, (1) for implementation with respect to
covered persons of the Fund; and (2) for implementation by any investment
advisor to the Fund as that term is defined under the Act (each such investment
advisor being deemed an "Investment Advisor" for purposes of this Code), and for
any principal underwriter for the Fund, unless such investment advisor or
principal underwriter has adopted a code of ethics and plan of implementation
thereof which is determined by the Fund's Board of Directors to comply with the
requirements of Rule 17j-1 and to be sufficient to effectuate the purpose and
objectives of Rule 17j-1. Statement of This Code is based on the principle that
the General officers, directors, and employees of the Fund and Principles the
officers, directors, and employees of the Fund's investment advisor(s) owe a
fiduciary duty to the shareholders of the Fund and, therefore, the Fund's and
investment advisor's personnel must place the shareholders' interests ahead of
their own. The Fund's and investment advisor's personnel must also avoid any
conduct which could create a potential conflict of interest, and must ensure
that their personal securities transactions do not in any way interfere with the
Fund's portfolio transactions and that they do not take inappropriate advantage
of their positions. All persons covered by this Code must adhere to these
general principles as well as the Code's specific provisions, procedures, and
restrictions.
Definitions For purposes of this Code:
"Access Person" shall mean any director, officer, employee, or advisory
person of the Fund, or those persons who have an active part in the management,
portfolio selection, or underwriting functions of the Fund, or who, in the
course of their normal duties, obtain prior information about the Fund's
purchases or sales of securities (i.e. traders and analysts).
"Advisory Person" With respect to an Investment Advisor, an Advisory Person
means any director, officer, general partner, or employee who, in connection
with his/her regular functions or duties, makes, participates in, or obtains
current information regarding the purchase or sale of a security by the Fund, or
whose functions relate to the making of any recommendations with respect to such
purchases or sales, including any natural person in a control relationship to
the Fund who obtains current information concerning recommendations made with
regard to the purchase or sale of a security by the Fund.
"Investment Personnel" shall mean any securities analyst, portfolio
manager, or a member of an investment committee who is directly involved in the
decision making process as to whether or not to purchase or sell a portfolio
security and those persons who provide information and advice to a Portfolio
Manager or who help execute a Portfolio Manager's decisions.
"Fund Personnel" shall mean an Access Person, Advisory Person, and/or
Investment Personnel.
"Portfolio Manager" shall mean an employee of an Investment Advisor
entrusted with the direct responsibility and authority to make investment
decisions affecting the Fund. Code of Ethics (continued)
"Beneficial Ownership" shall be as defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, which, generally
speaking, encompass those situations where the beneficial owner has the right to
enjoy some economic benefits which are substantially equivalent to ownership
regardless of who is the registered owner. This would include: (i) securities
which a person holds for his or her own benefit either in bearer form,
registered in his or her own name or otherwise, regardless of whether the
securities are owned individually or jointly; (ii) securities held in the name
of a member of his or her immediate family sharing the same household; (iii)
securities held by a trustee, executor, administrator, custodian or broker; (iv)
securities owned by a general partnership of which the person is a member or a
limited partnership of which such person is a general partner; (v) securities
held by a corporation which can be regarded as a personal holding company of a
person; and (vi) securities recently purchased by a person and awaiting transfer
into his or her name.
"Security" shall have the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States or by
Federal agencies which are direct obligations of the United States, bankers'
acceptances, bank certificates of deposits, and commercial paper. A future or an
option on a future will be deemed to be a security subject to this Code.
"Purchase or sale of a security" includes the writing of an option to
purchase or sell a security. A security is "being considered for purchase or
sale" or is "being purchased or sold" when a recommendation to purchase or sell
the security has been made by an Investment Advisor and such determination has
been communicated to the Fund. With respect to the Investment Advisor making the
recommendation, a security is being considered for purchase or sale when an
officer, director or employee of such Investment Advisor seriously considers
making such a recommendation. Solely for purposes of this Code, any agent of the
Fund charged with arranging the execution of a transaction shall be subject to
the reporting requirements of this Code as to any such security as and from the
time the security is identified to such agent as though such agent was an
Investment Advisor hereunder. Code of Ethics (continued) NOTE: An officer or
employee of the Fund or an Investment Advisor whose duties do not include the
advisory functions described above, who does not have access to the advisory
information contemplated above, and whose assigned place of employment is at a
location where no investment advisory services are performed for the Fund, is
not an "Advisory Person" or an "Access Person" unless actual advance knowledge
of a covered transaction is furnished to such person. Prohibited Fund Personnel
shall not engage in any act, Transactions practice or course of conduct which
would violate the provisions of Rule 17j-1 set forth above. No Access Person or
Advisory Person shall purchase or sell, directly or indirectly any security in
which he/she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which, to his/her actual knowledge, at the
time of such purchase or sale (i) is being considered for purchase or sale by
the Fund; or (ii) is being purchased or sold by the Fund; except that the
prohibitions of this section shall not apply to:
5. Purchases or sales affected in any account over which the Access Person
or Advisory Person has no direct or indirect influence or control;
6. Purchases or sales which are non-volitional on the part of either the
Access Person, the Advisory Person, or the Fund;
7. Purchases which are part of an automatic dividend reinvestment or other
plan established by Fund Personnel prior to the time the security involved came
within the purview of this Code; and
8. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
Prohibited No Investment Personnel shall: Transactions by Investment (a)
acquire any securities in an initial public Personnel offering; or (b) acquire
securities in a private placement without prior written approval of the Fund's
compliance officer or other officer designated by the Board of Directors. In
considering a request to invest in a private placement, the Fund's compliance
officer will take into account, among other factors, whether the investment
opportunity should be reserved for the Fund, and whether the opportunity is
being offered to Investment Personnel by virtue of their/his/her position with
the Fund. Should Investment Personnel be authorized to acquire securities
through a private placement, they/he/she shall, in addition to reporting the
transaction on the quarterly report to the Fund, disclose the interest in that
investment to other Investment Personnel participating in that investment
decision if and when they/he/she plays a part in the Fund's subsequent
consideration of an investment in that issuer. In such a case, the Fund's
decision to Code of Ethics (continued) purchase securities of that issuer will
be subject to an independent review by Investment Personnel who have no personal
interest in the issuer. Blackout Periods No Access Person or Advisory Person
shall execute a securities transaction on a day during which the Fund has a
pending "buy" or "sell" order in that same security until that order is executed
or withdrawn. In addition, a Portfolio Manager is expressly prohibited from
purchasing or selling a security within seven (7) calendar days before or after
the Fund that he/she manages trades in that security. The foregoing prohibition
of personal transactions during the seven day period following the execution of
a transaction for the Fund shall not apply with respect to a security when the
portfolio manager certifies in writing to the Compliance Officer that the Fund's
trading program in that security is complete. Each transaction authorized by the
Compliance Officer pursuant to this provision shall be reported to the Board by
the Compliance Officer at the Board's next regular meeting. Should Fund
Personnel trade within the proscribed period, such trade should be canceled if
possible. If it is not possible to cancel the trade, all profits from the trade
must be disgorged and the profits will be paid to a charity selected by the Fund
Personnel and approved by the officers of the Fund. <PAGE>
The prohibitions of this section shall not apply to:
5. Purchases or sales affected in any account over which the Access Person
or Advisory Person has no direct or indirect influence or control if the person
making the investment decision with respect to such account has no actual
knowledge about the Fund's pending "buy" or "sell" order;
6. Purchases or sales which are non-volitional on the part of either the
Access Person, the Advisory Person, or the Fund;
7. Purchases which are part of an automatic dividend reinvestment or other
plan established by Fund Personnel prior to the time the security involved came
within the purview of this Code; and
8. Purchases effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer, and sales of such rights so
acquired. Short-Term No Investment Personnel shall profit from the Trading
purchase and sale, or sale and purchase, of the same (or equivalent) securities
which are owned by the Fund or which are of a type suitable for purchase by the
Fund, within sixty (60) calendar days. Any profits realized on such short-term
trades must be disgorged and the profits will be paid to a charity selected by
the Investment Personnel and approved by the officers of the Fund. The
compliance officer or other officer designated by the Board of Directors may
permit in writing exemptions to the prohibition of this section, on a
case-by-case basis, when no abuse is involved and the equities of the
circumstances support an exemption. Code of Ethics (continued) Gifts No
Investment Personnel shall accept a gift or other thing of more than de minimis
value ("gift") from any person or entity that does business with or on behalf of
the Fund if such gift is in relation to the business of the employer of the
recipient of the gift. In addition, any Investment Personnel who receives an
unsolicited gift or a gift with an unclear status under this section shall
promptly notify the compliance officer and accept the gift only upon written
approval of the compliance officer. Service as a No Investment Personnel shall
serve as a director Director of a publicly traded company absent prior written
authorization from the Board of Directors based upon a determination that such
board service would not be inconsistent with the interests of the Fund and its
shareholders.
Compliance 1. All Fund Personnel shall preclear their Procedures personal
securities transactions prior to executing an order. A written request must be
submitted to the Fund's compliance officer, and the compliance officer must give
his/her written authorization prior to Fund Personnel placing a purchase or sell
order with a broker. Should the compliance officer deny the request, he/she will
give a reason for the denial. Approval of a request will remain valid for two
(2) business days from the date of the approval.1
2. Fund Personnel shall instruct their broker(s) to supply the compliance
officer, on a timely basis, with duplicate copies of confirmations of all
personal securities transactions and copies of all periodic statements for all
securities accounts.
3. Fund Personnel, other than directors or officers required to report
their securities transactions to a registered investment advisor pursuant to
Rule 204-2(a)(12) or (13) under the Investment Advisors Act, shall submit
reports showing all transactions in securities as defined herein in which the
person has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership.
4. Each director, who is not an interested person of the Fund as defined in
the Act, shall submit reports as required under subparagraph 3 above, but only
for transactions in reportable securities where at the time of the transaction
the director knew, or in the ordinary course of fulfilling his/her official
duties as a director should have known, that during the seven (7) day period
immediately preceding the date of the transaction by the director, such security
was purchased or sold by the Fund or was being considered for purchase or sale
by the Fund.
1 The Board has determined that placement of a limit order constitutes a
transaction requiring approval, and the limit order must be placed within two
days from the date of approval. Implementation of a limit order in accordance
with its approved terms is a ministerial act which occurs in the future by the
terms of the limit order, and does not require approval. A change of terms in,
or withdrawal of, a standing limit order is an investment decision for which
clearance must be obtained. Code of Ethics (continued)
5. Every report required to be made under subparagraphs 3 and 4 above shall
be made not later than ten (10) days after the end of the calendar quarter in
which the transaction to which the report relates was effected. The report shall
contain the following information concerning any transaction required to be
reported therein:
(a) the date of the transaction;
(b) the title and number of shares;
(c) the principal amount involved;
(d) the nature of the transaction (i.e. purchase, sale, or other type of
acquisition or disposition);
(e) the price at which the transaction was effected; and
(f) the name of the broker, dealer or bank with or through whom the
transaction was effected.
6. The compliance officer shall identify all Fund Personnel who have a duty
to make the reports required hereunder and shall inform each such person of such
duty, and shall receive all reports required hereunder.
7. The compliance officer shall promptly report to the Fund's Board of
Directors (a) any apparent violation of the prohibitions contained in this Code,
and (b) any reported transactions in a security which was purchased or sold by
the Fund within seven (7) days before or after the date of the reported
transaction.
8. The Fund's Board of Directors, or a Committee of Directors created by
the Board of Directors for that purpose, shall consider reports made to the
Board of Directors hereunder and shall determine whether or not this Code has
been violated and what sanctions, if any, should be imposed.
9. This Code, a list of all persons required to make reports hereunder from
time to time, a copy of each report made by Fund Personnel, each memorandum made
by the compliance officer hereunder, and a record of any violation hereof and
any action taken as a result of such violation, shall be maintained by the Fund
as required under Rule 17j-1.
10. Upon the commencement of employment of a person who would be deemed to
fall within the definition of "Fund Personnel", that person must disclose all
personal securities holdings to the compliance officer.
11. All Fund Personnel must report, on an annual basis, all personal
securities holdings.
Code of Ethics (continued)
12. At least annually, all Fund Personnel will be required to certify that
they (a) have read and understand the Code; (b) recognize that they are subject
to the requirements outlined therein; (c) have complied with the requirements of
the Code; (d) have disclosed and reported all personal securities transactions
required to be disclosed; and (e) have disclosed all personal securities
holdings.
13. The Fund's compliance officer shall prepare an annual report to the
Fund's Board of Directors. Such report shall (a) include a copy of the Fund's
Code; (b) summarize existing procedures concerning personal investing and any
changes in the Code's policies or procedures during the past year; (c) identify
any violations of the Code; and (d) identify any recommended changes in existing
restrictions, policies or procedures based upon the Fund's experience under the
Code, any evolving industry practices, or developments in applicable laws or
regulations. Statement on Insider Trading The Insider Trading and Securities
Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment advisors
and broker-dealers establish, maintain, and enforce written policies and
procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer, or any person
associated with the investment advisor and/or broker-dealer. Section 204A of the
Investment Advisers Act of 1940 (the "Advisers Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them."
Section 204A provides that every person subject to Section 204 of the Advisers
Act shall be required to establish procedures to prevent insider trading. Each
investment advisor who acts as such for any series of The World Funds, Inc. (the
"Fund") and each broker-dealer which acts as principal underwriter to any series
of the Fund has adopted the following policy, procedures, and supervisory
procedures in addition to the Fund's Code of Ethics. Throughout this document
the investment advisor(s) and principal underwriter(s) shall collectively be
called the "Providers".
Section I - The purpose of this Section 1 is to familiarize Policy the
officers, directors, and employees of the Providers with issues concerning
insider trading and to assist them in putting into context the policy and
procedures on insider trading. Policy Statement: No person to whom this
Statement on Insider Trading applies, including officers, directors, and
employees, may trade, either personally or on behalf of others (such as mutual
funds and private accounts managed by a Provider) while in possession of
material, non-public information; nor may any officer, director, or employee of
a Provider communicate material, non-public information to others in violation
of the law. This conduct is frequently referred to as "insider trading." This
policy applies to every officer, director, and employee of a Provider and
extends to activities within and outside their duties as a Provider. It covers
not only personal transactions of covered persons, but indirect trading by
family, friends and others, or the non-public distribution of inside information
from you to others. Every officer, director, and employee must read and retain
this policy statement. Any questions regarding the policy and procedures should
be referred to the compliance officer. The term "insider trading" is not defined
in the Federal securities laws, but generally is used to refer to the use of
material non-public information to trade in securities (whether or not one is an
"insider") or the communications of material non-public information to others
who may then seek to benefit from such information. Statement on Insider Trading
(continued) While the law concerning insider trading is not static, it is
generally understood that the law prohibits: (a) trading by an insider, while in
possession of material non-public information, or (b) trading by a non-insider,
while in possession of material non-public information, where the information
either was disclosed to the non-insider in violation of an insider's duty to
keep it confidential or was misappropriated, or (c) communicating material
non-public information to others. The elements of insider trading and the
penalties for such unlawful conduct are discussed below.
1. Who is an Insider? The concept of "insider" is broad. It includes
officers, directors, and employees of a company. In addition, a person can be a
"temporary insider" if he or she enters into a special confidential relationship
in the conduct of a company's affairs and as a result is given access to
information solely for the company's purposes. A temporary insider can include,
among others, a company's attorneys, accountants, consultants, bank lending
officers, and the employees of such organizations. In addition, an investment
advisor may become a temporary insider of a company it advises or for which it
performs other services. According to the Supreme Court, the company must expect
the outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the
basis for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonably certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-public Information? Information is non-public until it has
been effectively communicated to the market place. One must be able to point to
some fact to show that the information is generally public. For example,
information found in a report filed with the SEC, or appearing in Dow Jones,
Reuters Economic Services, the Wall Street Journal or other publications of
general circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.) Statement on Insider Trading (continued)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme
Court found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory -
another basis for insider trading liability is the "misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties
--------------------------------- for trading on or communicating material
non-public information are severe, both for individuals and their employers. A
person can be subject to some or all of the penalties below even if he or she
does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
o disgorgement of profits
o jail sentences
o fines for the person who committed the
violation of up to three times the profit
gained or loss avoided, whether or not the
person actually benefited, and
o fines for the employer or other controlling person
of up to the greater of $1 million or three times
the amount of the profit gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions by a Provider, including dismissal of the persons
involved.
Section II - The following procedures have been established to Procedures
aid the officers, directors, and employees of a Provider in avoiding insider
trading, and to aid in preventing, detecting, and imposing sanctions against
insider trading. Every officer, director, and employee of a Provider must follow
these procedures or risk serious sanctions, including dismissal, substantial
personal liability, and/or criminal penalties. If you have any questions about
these procedures you should consult the compliance officer.
1. Identifying Inside Information. Before
-----------------------------------
trading for yourself or others, including investment companies
or private accounts managed by a Provider, in the securities
of a company about which you may have potential inside
information, ask yourself the following questions:
i. Is the information material? Is this information that an investor would
consider important in making his or her investment decisions? Is this
information that would substantially affect the market price of the securities
if generally disclosed?
Statement on Insider Trading (continued)
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the marketplace
by being published in Reuters, The Wall Street Journal or other publications of
general circulation? If, after consideration of the above, you believe that the
information is material and non-public, or if you have questions as to whether
the information is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself or others,
including investment companies or private accounts managed by a Provider.
(c) Do not communicate the information to anybody, other than to the
compliance official.
(d) After the compliance official has reviewed the issue, you will be
instructed to either continue the prohibitions against trading and
communication, or you will be allowed to communicate the information and then
trade.
2. Personal Security Trading. All officers, directors, and employees of a
Provider (other than officers, directors and employees who are required to
report their securities transactions to a registered investment company in
accordance with a Code of Ethics) shall submit to the compliance officer, on a
quarterly basis, a report of every securities transaction in which they, their
families (including the spouse, minor children, and adults living in the same
household as the officer, director, or employee), and trusts of which they are
trustees or in which they have a beneficial interest have participated, or at
such lesser intervals as may be required from time to time. The report shall
include the name of the security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. All officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information
in your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph 1 above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted. Statement on Insider Trading (continued)
4. Resolving Issues Concerning Insider Trading. If, after consideration of
the items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
Section III - The role of the compliance officer is critical to Supervision
the implementation and maintenance of this Statement on Insider Trading. These
supervisory procedures can be divided into two classifications, (1) the
prevention of insider trading, and (2) the detection of insider trading.
1. Prevention of Insider Trading:
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on Insider
Trading;
(b) resolve issues of whether information received by an officer, director,
or employee is material and non-public;
(c) review and ensure that officers, directors, and employees review, at
least annually, and update as necessary, the Statement on Insider Trading; and
(d) when it has been determined that an officer, director, or employee has
material non-public information,
(i) implement measures to prevent dissemination of such information, and
(ii) if necessary, restrict officers, directors, and employees from trading
the securities.
2. Detection of Insider Trading:
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer, director,
and employee, to ensure no trading took place in securities in which the
Provider has material non-public information;
(b) review the trading activity of the mutual funds managed by the
investment advisor and the mutual funds which the broker-dealer acts as
principal underwriter; Statement on Insider Trading (continued)
(c) coordinate, if necessary, the review of such reports with other
appropriate officers, directors, or employees of a Provider and The World Funds,
Inc.
3. Special Reports to Management:
Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Compliance Officer must prepare a written report to
management of the Provider, and provide a copy of such report to the Board of
Directors of The World Funds, Inc., providing full details and recommendations
for further action.
4. Annual Reports:
On an annual basis, the Compliance Officer of each Provider will prepare a
written report to the management of the Provider, and provide a copy of such
report to the Board of Directors of The World Funds, Inc., setting forth the
following:
(a) a summary of the existing procedures to detect and prevent insider
trading;
(b) full details of any investigation, either internal or by a regulatory
agency, of any suspected insider trading and the results of such investigation;
(c) an evaluation of the current procedures and any recommendations for
improvement.
<PAGE>
Exhibit B
THE WORLD FUNDS, INC.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of The World Funds, Inc.:
5. I hereby acknowledged receipt of a copy of the Code of Ethics for The
World Funds, Inc.
6. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Fund Personnel."
7. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
8. As of the date below I had a direct or indirect beneficial ownership in
the following securities:
----------------------------------------------------------------------
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
<PAGE>
Exhibit C
THE WORLD FUNDS, INC.
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer of The World Funds, Inc.:
5. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Fund Personnel."
6. I hereby certify that, during the year ended December 31, 19____, I have
complied with the requirements of the Code and I have reported all securities
transactions required to be reported pursuant to the Code.
7. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
8. As of December 31, 19____, I had a direct or indirect beneficial
ownership in the following securities:
----------------------------------------------------------------------
Type of Interest
Name of Security Number of Shares (Direct or Indirect)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
<PAGE>
Exhibit D
THE WORLD FUNDS, INC.
Securities Transactions Report
For the Calendar Quarter Ended: ______________________, 19____
To the Compliance Officer of The World Funds, Inc.:
During the quarter referred to above, the following transactions were effected
in securities of which I had, or by reason of such transaction acquired, direct
or indirect beneficial ownership and which are required to be reported pursuant
to the Code of Ethics adopted by The World Funds, Inc.
------------------------------------------------------------------------
Nature of Broker
Dealer
Date of No. of Dollar Transaction or Bank
Amt of thru
Security Transaction Shares Transactio(Buy/Sell) Price Whom
Effected
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) other transactions not required to be
reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that I have
no knowledge of the existence of any personal conflict of interest relationship
which may involve the Fund, such as the existence of any economic relationship
between my transactions and securities held or to be acquired by the Fund.
Date: _________________________ Signature:
--------------------------------
Print Name: _______________________________
--------
1 This list of countries is subject to change from time to time. Certain
countries may be removed from this list while new markets may be added. 2 The
Firm has determined that placement of a limit order constitutes a transaction
requiring approval, and the limit order must be placed within two days from the
date of approval. Implementation of a limit order in accordance with its
approved terms is a ministerial act which occurs in the future by the terms of
the limit order, and does not require approval. A change of terms in, or
withdrawal of, a standing limit order is an investment decision for which
clearance must be obtained.
