THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223 * P. O. Box 8687 * Richmond, VA 23229
(804) 285-8211 * (800) 527-9525 * Fox (804) 285-8251
January 14, 2000
VIA EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Reference: The World Funds, Inc.
File Number 333-29289
Filed Pursuant to Rule 497(e)
Gentlemen:
Transmitted herewith for electronic filing on behalf of The World Funds, Inc.
(the "Fund"), please find enclosed, pursuant to Rule 497(e) under the Securities
Act of 1933, as amended, a revised copy of the Prospectuses dated January 1,
2000 for the CSI Equity Fund series, the CSI Fixed Income Fund series and the
SandHill Portfolio Manager Fund series of the Fund.
Should you have any questions regarding the filing of such documents, please
call the undersigned.
Sincerely,
/s/ John Pasco, III
John Pasco, III
<PAGE>
PROSPECTUS
THE WORLD FUNDS, INC.
CSI Equity Fund
CSI Fixed Income Fund
Prospectus dated January 1, 2000
This Prospectus describes the CSI Equity Fund (the "Equity Fund") and the CSI
Fixed Income Fund (the "Fixed Income Fund") (collectively, the "Funds"). A
series fund offers you a choice of investments, with each series having its own
investment objective and a separate portfolio. The CSI Equity Fund seeks growth
of capital by investing in a diversified portfolio of equity securities. The CSI
Fixed Income Fund seeks current income by investing in debt securities.
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
CSI EQUITY FUND (the "Equity Fund")
Investment Objective:Growth of Capital
Principal Investment
Strategies: The Fund will seek to achieve its investment objective
by
investing in a portfolio consisting primarily of
common
stocks and securities convertible into common stocks,
such
as warrants, convertible bonds, debentures or
convertible
preferred stock.
Principal Risks: The principal risk of investing in the Equity
Fund is that the value of its investments are
subject to market, economic and business risk
that may cause the Equity Fund's net asset
value ("NAV") to fluctuate over time.
Therefore, the value of your investment in the
Equity Fund could decline. There is no
assurance that the investment adviser will
achieve the Equity Fund's objective.
The Equity Fund's assets will be invested on a
global
basis. These investments may involve financial, economic
or
political risks not ordinarily associated with
U.S.
securities. The Equity 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 more volatility than U.S. securities,
taxes,
and adverse social or political developments.
An investment in the Equity Fund is not a bank deposit
and
is not insured or guaranteed by the Federal
Deposit
Insurance Corporation or any other government agency.
Investor Profile: You may want to invest in the Equity Fund if you
are seeking long-term capital growth and are willing
to
accept share prices that may fluctuate,
sometimes
significantly, over the short-term. The Equity Fund
will
not be appropriate if you are seeking current income or
are
seeking safety of principal.
The bar chart and table below provide an indication of the
risks of investing in the Equity Fund by showing past
performances of the Fund. The bar chart shows how the Fund's
performance has varied from one year to another. The table
compares the performance of the Equity Fund and the Lipper
Global Funds Index. The Lipper Global Funds Index is a
composite of the total return of mutual funds with the stated
objective of investing at least 25% of their portfolio
securities outside of the United States and may own U.S.
securities as well. Keep in mind that past performance may not
indicate how well the Equity Fund will perform in the future.
[bar chart goes here]
CSI Equity Fund Total Return *
1998 26.10%
1999 29.41%
CSI Equity
[end bar chart]
* During the periods show in the bar chart, the highest return for a calendar
quarter was 23.2% (quarter ending 12/31/99) and the lowest return for a calendar
quarter was (14.32%) (quarter ending 9/30/98).
Average Annual Total Return
(for the period ending December 31, 1999) One Year Since Inception
(October 15, 1997)
CSI Equity Fund 29.41% 24.79%
Lipper Global Fund Index ** 33.68% 18.01%
** This index, described above, is an unmanaged index. Returns include
reinvestment of all dividends and distributions. It is not adjusted to reflect
expenses that the SEC requires to be reflected in the Fund's performance.
CSI FIXED INCOME FUND (the "Fixed Income Fund")
Investment Objective: Current Income
Principal Investment
Strategies: The Fixed Income Fund seeks to achieve its
objective by investing primarily in obligations
issued or guaranteed by the U.S. Government,
its agencies, authorities, and
instrumentalities ("U.S. Government
Securities"), municipal securities, corporate
debt securities, zero coupon bonds, as well as
obligations of governments, instrumentalities
and corporations outside the U.S.
Principal Risk: The principal risk of investing in the Fixed
Income Fund is that the value of its investments
are subject to interest rate risk that
may cause the NAV to fluctuate over time.
Therefore, the value of the Fund could decline as
well as increase. There is no assurance that the
investment adviser will achieve the Fund's
objective.
An investment in the Fixed Income Fund is not a
bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any
other government agency.
Investor Profile: You may want to invest in the Fixed Income Fund
if you are seeking current income and are
willing to accept share prices that may fluctuate
over the short-term. The Fixed Income Fund will
not be appropriate if you are seeking growth
of capital over the long-term.
The bar chart and table below provide an indication of the risks of investing in
the Fixed Income Fund. The bar chart shows the performance for the initial
calendar year. The table compares the performance of the Fixed Income Fund and
the Lipper Intermediate Investment Grade Index. The Lipper Intermediate
Investment Grade Index is an equally-weighted performance indice, adjusted for
capital gains distributions and income dividends of the largest 30 qualifying
funds that invest at least 65% of their assets in investment grade issues with
dollar-weighted average maturities of five to ten years. Keep in mind that past
performance may not indicate how well the Fixed Income Fund will perform in the
future.
[bar chart goes here]
CSI Fixed Income Fund Total Return *
1999 (3.74%)
CSI Fixed Income Fund
[end bar chart]
* During the period shown in the bar chart, the highest return for a calendar
quarter was 0.4% (quarter ending 9/30/99) and the lowest return for a calendar
quarter was (2.21%) (quarter ending 3/31/99).
Average Annual Total Return Since Inception
(for the period ending December 31, 1999) One Year (January 27, 1998)
CSI Fixed Income Fund (3.74%) 1.78%
Lipper Intermediate Investment Grade Index ** (0.97%) 3.16%
** This index, described above, is an unmanaged index. Returns include
reinvestment of all dividends and distributions. It is not adjusted to reflect
expenses that the SEC requires to be reflected in the Fund's performance.
FEES AND EXPENSES
Costs are an important consideration in choosing a mutual fund. Shareholders are
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.
The following table describes the fees and expenses that you will pay directly
or indirectly in connection with an investment in the Equity Fund or the Fixed
Income Fund (collectively, the "Funds"). There are no sales charges in
connection with purchases or redemption of shares. The annual operating
expenses, which cover the costs of investment management, administration,
accounting and shareholder communications, are shown as an annual percentage of
the average daily net assets.
Shareholder Transaction Fees (fees paid directly from your investment)
Equity Fund Fixed
Income Fund
Maximum Sales Charge (load)
Imposed on Purchases None None
Sales Charge (load) Imposed on
Reinvested Dividends None None
Redemption Fees(1) 1.0%(2) None
Exchange Fees(3) None None
(1) A shareholder electing to redeem shares via telephone request may
be charged $10 for each such redemption request.
(2) A 1% redemption fee is charged on shares held less than one year.
(3) A shareholder may be charged a $10 fee for each telephone exchange.
Annual Operating Expenses (Expenses that are deducted from the Funds' assets)
Equity Fund Fixed Income Fund
Management Fee 1.00% 1.00%*
Distribution and Service (12b-1) Fees None None
Other Operating Expenses 0.50% 0.50%
Total Fund Operating Expenses 1.50% 1.50%*
* The management fee is 1%, however, the adviser has voluntarily agreed to
hold the Total Fund Operating Expenses to 1% through December 31, 2000
(see "Management Organization and Capital Structure" below).
The purpose of these tables is to assist investors in understanding the various
costs and expenses that they will bear directly or indirectly. Management
expects that, as the Funds increase in size, their Other Operating Expenses will
decline as an annual percentage rate reflecting economies of scale.
EXAMPLE
The following example shows the expenses that you could pay over time. It will
help you compare the costs of investing in the Funds with the cost of investing
in other mutual funds. The example assumes that you invest $10,000 in a Fund and
then redeem all of your shares at the end of the periods indicated. Also, 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 5 Years 10 Years
----- ------- -------- ------
Equity Fund $153 $474 $818 $1,791
Fixed Income Fund * $153 $474 $818 $1,791
* Should the adviser continue the voluntary operating expense limitation for
the periods shown below, your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- -------
$102 $318 $552 $1,225
INVESTMENT OBJECTIVES, PRINCIPAL STRATEGIES AND RISKS
THE EQUITY FUND
The investment objective of the Equity Fund is to achieve growth of capital by
investing in a portfolio consisting primarily of common stocks and securities
convertible into common stocks, such as warrants, convertible bonds, debentures
or convertible preferred stock. Under normal market conditions, the Equity Fund
will have at least 65% of its total assets invested in common stocks or
securities convertible into common stocks. The portfolio of the Equity Fund will
be diversified. The Equity Fund will not be limited to investing in securities
of companies of any size or to securities traded in any particular market.
The Equity Fund's assets will be invested on a global basis to take advantage of
investment opportunities both within the U.S. and outside the U.S. The foreign
securities which the Equity Fund purchases may be bought directly in their
principal markets or may be acquired through the use of depositary receipts.
Investments in foreign securities may involve risks 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 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 the Equity Fund's investments in
those countries. Many foreign securities have substantially less trading volume
than in the U.S. market, and securities in some foreign issuers are less liquid
and more volatile in price than securities of domestic issuers.
It is more expensive for U.S. investors to trade in foreign markets than in
U.S. markets. Mutual funds offer an efficient way for individuals to invest
abroad, but the overall expense ratios of global mutual funds are usually higher
than those of mutual funds that invest only in U.S. securities.
The Equity Fund is subject to stock market risk, which is the possibility that
stock prices overall will decline over short or even long periods. Stock markets
tend to move in cycles, with periods of rising prices and periods of falling
prices. Therefore, the value of your investment in the Equity Fund may increase
or decrease. The Equity Fund's investment success depends on the skill of CSI
Capital Management, Inc. (the "Adviser"), the Equity Fund's investment adviser,
in evaluating, selecting and monitoring the portfolio assets. If the Adviser's
conclusions about growth rates or securities values are incorrect, the Equity
Fund may not perform as anticipated.
The Adviser considers the Equity Fund's universe of recommended stock to be
worldwide in scope. Securities under consideration for purchase must meet a
variety of criteria. No particular formulas are used, but rather emphasis is
placed on those companies which the Adviser believes are most likely to prosper
under various economic conditions and which have demonstrated the ability to
produce reliable earnings or dividend growth over the years. Among other things,
balance sheet analysis, return on equity, price/earnings ratios and relative
strength are included in the Adviser's decision making process.
While the Equity Fund intends to remain substantially invested in common stocks
and securities convertible into common stocks, it may invest in high quality
money market instruments during times when excess cash is generated or when cash
is held pending investment in suitable securities. Such money market investments
include short-term obligations of the U.S. Government (and its agencies) or
other forms of indebtedness, such as bonds, certificates of deposit or
repurchase agreements. The Equity Fund has authority to invest up to 100% of its
total assets in such short term instruments for temporary or defensive purposes
in response to extreme or adverse market, economic or other conditions. The
Adviser does not anticipate exercising this authority, but reserves the right to
do so. When the Equity Fund is in a temporary defensive position, it might not
achieve its investment objective.
THE FIXED INCOME FUND
The Fixed Income Fund seeks current income by investing in debt securities. The
Fixed Income Fund seeks to achieve its objective by investing primarily in U.S.
Government Securities, municipal securities, corporate debt securities, zero
coupon bonds, as well as obligations of governments, instrumentalities and
corporations outside the U.S.
Under normal market conditions, at least 65% of the Fixed Income Fund's total
assets will be invested in securities rated, at the time of purchase, AA or
higher by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Rating Group ("S&P"), or unrated securities which the Adviser believes to be of
comparable quality. The Fixed Income Fund may invest in lower rated securities
in order to avail itself of the higher yields available with these securities.
However, no more than 5% of the total assets may be invested in securities rated
below investment grade (i.e., below BBB by S&P or Baa by Moody's) or which are
unrated but are of comparable quality as determined by the Adviser. Securities
rated below investment grade entail greater risk than investment grade
securities. After purchase by the Fixed Income Fund, a debt security may cease
to be rated or its rating may be reduced. Neither event would require the
elimination of the debt security from the portfolio.
The selection of debt securities for the Fixed Income Fund is dependent upon the
Adviser's evaluation of those factors influencing interest rates. The Adviser
considers the rates of return available for any particular maturity and compares
that to the rates for other maturities in order to determine the relative and
absolute differences as they relate to income and the potential for market
fluctuation. There are no restrictions on the maturity composition of the Fixed
Income Fund. Under normal economic and market conditions, the Fixed Income Fund
generally will hold its short-term securities or debt obligations until maturity
and its other securities or obligations until market conditions, in the judgment
of the Adviser, make sale advantageous to the Fixed Income Fund. In either case,
the Fixed Income Fund may sell such securities or obligations as required to
meet requests for redemption of shares of the Fixed Income Fund.
The market values of fixed income securities tend to vary inversely with the
level of interest rates. When interest rates rise, the market values of such
securities tend to decline and vice versa. Although under normal market
conditions longer term securities yield more than short-term securities of
similar quality, longer term securities are subject to greater price
fluctuations. Fluctuations in the value of the investments will be reflected in
the NAV of the Fixed Income Fund.
OTHER PRINCIPAL RISKS
Year 2000 Issue. Like other mutual funds and financial or business organizations
around the world, The World Funds, Inc. (the "Company") could be adversely
affected if its computer systems or the computer systems of its service
providers do not properly process and calculate date-related information and
data as of and after January 1, 2000. This is commonly known as the "Year 2000
Issue". The Company has taken steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to computer systems that it uses and to
obtain reasonable assurances that comparable steps are being taken by its major
service providers. These steps include identifying system problems, remediation
and testing the system fixes. The Company and each of its major service
providers are in the stage of testing the system fixes that have been
implemented. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Company.
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 replaced its existing currency with the Euro as of January
1, 1999. 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. If either of the Funds invests in
securities of countries that have converted to the Euro or convert in the
future, the Fund 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 the Funds.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
CSI Capital Management, Inc. (the "Adviser") located at 445 Bush Street, 5th
Floor, San Francisco, CA 94108-3725, manages the assets of the Funds. Since the
Funds' inceptions on October 14, 1997, Leland Faust has been primarily
responsible for the day to day management of the Funds. The Adviser has two
years experience in managing a mutual fund. The Adviser has been in existence
since 1978 and as of December 30, 1999 has approximately $244 million under
management. Mr. Faust has been President of the Adviser since its formation.
The Adviser is responsible for effecting all security transactions on behalf of
the Funds, including the allocation of principal business and portfolio
brokerage and the negotiation of commissions. In placing orders with brokers and
dealers, the Adviser will attempt to obtain the best price and execution of
orders.
Each Fund pays the Adviser a monthly investment advisory fee at an annual rate
of 1% of the average daily net assets. However, the Adviser has voluntarily
agreed to waive all or a portion of the advisory fee or make payments to the
Fixed Income Fund in order to maintain its total operating expenses at an annual
rate not to exceed 1%. This voluntary arrangement continues through December 31,
2000.
SHAREHOLDER INFORMATION
Each Fund's share price, called its NAV per share, is determined and shares are
priced 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 Funds are 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 a Fund's investments and other assets, subtracting any
liabilities of the Fund and then dividing by the total number of Fund shares
outstanding.
Shares are bought, sold or exchanged at the NAV 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 given 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 Funds.
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
Shares of the Fund may be purchased directly from First Dominion Capital Corp.
(the "Distributor") or through brokers or dealers who are members of the
National Association of Securities Dealers, Inc. When an investor acquires
shares of a Fund from a securities broker dealer, the investor may be charged a
transaction fee by that broker dealer. The minimum initial investment in a Fund
is $1,000 and additional investments must be $50 or more. The Funds retain the
right to refuse to accept an order.
Purchases by Mail - For initial purchases, the account application form,
which accompanies the prospectus, should be completed, signed and mailed to Fund
Services, Inc. (the "Transfer Agent") at 1500 Forest Avenue, Suite 111,
Richmond, VA 23229, together with your check(s) payable to the Fund(s) that you
selected. For subsequent purchases, include with your check the tear-off stub
from a prior purchase confirmation, or otherwise identify the name(s) of the
registered owner(s) and social security number(s).
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
Transfer Agent for instructions, then notify the Distributor by calling
800-776-5455. 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 records of the Fund(s). You will not have access to your shares
until the records of the Fund(s) are complete. Once your account is opened, you
may make additional investments using the wire procedure described above. Be
sure to include your name, account number and the name of the Fund(s) to receive
the amount(s) you are investing in the wire instructions you provide your bank.
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 Funds' procedure is to redeem shares at the NAV next determined after the
Transfer Agent receives the redemption request in proper order. A 1% redemption
fee is deducted from proceeds of the Funds' shares redeemed less than one year
after purchase. Payment will be made promptly, but no later than the seventh day
following the receipt of the request in proper order. The Funds may suspend the
right to redeem shares for any period during which the NYSE is closed or the
U.S. Securities and Exchange Commission 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(s) you designate
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 redemption request may be delayed until
the designated 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 designated Fund receives a completed account
application form for the account to permit the Fund to verify the identify 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 that designates the Fund(s) you selected and is 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 form has been changed within
the last 30 days, or if you ask that the proceeds be sent to a different person
or address. Signature guarantees are used to help protect you and the Funds. 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 requested 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 charge for 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 to protect you and the Funds 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 Funds 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 Funds
will guarantee your signature if you personally visit its offices at 1500 Forest
Avenue, Suite 223, Richmond, VA 23229. The Transfer Agent cannot honor
guarantees from notaries public, savings and loan associations, or savings
banks.
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 of the
Fund(s) you designate. To use this service, you must authorize the transfer of
funds by completing the Plan section of the account application form and sending
a blank voided check.
Exchange Privileges - You may exchange all or a portion of your shares of a Fund
for the shares of the othe Fund or 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.
Dividends and Capital Gain Distributions - Dividends from net investment income,
if any, are declared and paid annually. Each of the Funds intends to distribute
annually any net capital gains.
Distributions from a Fund will automatically be reinvested in additional shares
of the same Fund, 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 each Fund's distribution
schedule before you invest.
DISTRIBUTION 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. Foreign exchange gains or
losses realized on the sale of securities generally are treated as ordinary
income or loss by a Fund and may increase or decrease Fund distributions to you.
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, a 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 IRS has notified you that you are subject to
backup withholding and instructs a Fund to do so.
DISTRIBUTION ARRANGEMENTS
The Funds are offered directly through the Distributor and through third
parties, such as financial supermarkets, investment advisers and consultants,
financial planners, brokers, dealers and other investment professionals. The
shares are offered and sold without any sales charges imposed by the Funds or
the Distributor. However, third parties who offer shares may request fees from
their individual clients. If you invest through a third party, the policies and
fees may be different than those described in the Prospectus. For example, third
parties may charge transaction fees or set different minimum investment amounts.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance for the past year and the initial period of the Funds' operations
prior to the last year. Certain information reflects financial results for a
single Fund share. The total returns in the tables represent the rate that an
investor would have earned or lost on investments in the Funds (assuming
reinvestment of all dividends and distributions). The Funds' financial
highlights for the period presented have been audited by Tait, Weller and Baker,
independent auditors, whose unqualified report thereon is included in the SAI.
The Funds' financial statements, notes to financial statements and report of
independent accountants are included in the SAI as well as in the Funds' Annual
Report to Shareholders (the "Annual Report"). Additional performance information
for the Funds is included in the Annual Report. The Annual Report and the SAI
are available at no cost from the Funds at the address and telephone number
noted on the back page of this Prospectus. The following information should be
read in conjunction with the financial statements and notes thereto.
EQUITY FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------
Year ended Period ended
August 31,1999 August 31,1998*
------------- ----------
Per Share Operating
Performance
Net asset value, $9.88 $10.00
beginning of period
------------- ----------
Income from investment
operations-
Net Investment Income (.02) 0.02
Net realized and unrealized 3.52 (0.14)
gain (loss) on investments
------------- ----------
Total from investment operations 3.50 (0.12)
------------- ----------
Less distributions-
Distributions from net
investment income (0.02) -
Distributions from capital gains - -
------------- ----------
Total distributions (0.02) -
------------- ----------
Net asset value, end of period $13.36 $9.88
============= ==========
Total Return 35.21% (1.20%)***
Ratios/Supplemental Data
Net assets, end of period (000's) $52,924 $26,576
Ratio of expenses to average net assets-
Expenses (A) 1.50% 1.50% **
Expenses-net (B) 1.50% 1.49% **
Net investment income (0.15%) 0.42% **
Portfolio turnover rate 12.91% 8.16%
* Commencement of operations October 15, 1997
** Annualized
*** Not annualized
(A) Expense ratio has been increased to include custodian fees which were offset
by custodian credits for the period ended August 31, 1998. (B) Expense ratio net
reflects the effect of the custodian fee credits the Fund received for the
period ended August 31, 1998.
See Notes to Financial Statements
FIXED INCOME FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -----------------------------------------------------------------------
Year ended Period ended
August 31, 1999 August 31,1998*
------------- ---------------
Per Share Operating Peformance
Net asset value, $10.48 $10.00
beginning of period
------------- -------
Income from investment operations-
Net investment income 0.39 0.22
Net realized and unrealized (0.51) 0.26
gain (loss) on investments
------------- -------
------------- -------
Total from investment operations (0.12) 0.48
------------- -------
Less distributions-
Distributions from net
investment income (0.61) -
Distributions from capital gains - -
------------- -------
-------------
Total distributions (0.61) -
------------- -------
=======
Net asset value, end of period $9.75 $10.48
============= =======
Total Return (1.31%) 4.80%***
Ratios/Supplemental Data
Net assets, end of period (000's) $48,605 $33,900
Ratio of expenses to average net assets - (A)
Expenses (B) 1.00% 1.51% **
Expenses-net (C) 1.00% 1.00% **
Net investment income 4.22% 4.34% **
Portfolio turnover rate 1.38% 0.00%
* Commencement of operations January 27, 1998
** Annualized
*** Not annualized
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .50% for the period ended August 31, 1998.
(B) Expense ratios have been increased to include custodian fees which were
offset by custodian credits and before management fee waivers.
(C) Expense ratio - net reflects the effect of the management fee waivers and
the custodian fee credits the fund received.
See Notes to Financial Statements
<PAGE>
For investors who want more information about the Funds, the following documents
are available free upon request:
Annual & Semiannual Reports:
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareholders. In each Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
You can receive free copies of reports and SAI, request other information and
discuss your questions about the Funds by contacting the Funds directly at:
THE WORLD FUNDS, INC.
1500 FOREST AVENUE, SUITE 223
RICHMOND, VIRGINIA 23229
TELEPHONE: 1-800-527-9525
E-MAIL: [email protected]
You can review and copy the Funds' reports and SAIs at the Public Reference Room
of the SEC. You can receive text-only copies:
For a fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 or call 1-800-SEC-0330 Free from the SEC's Internet
Website at http://www.sec.gov.
(Investment Company Act File No. 811-8255)
<PAGE>
PROSPECTUS
THE WORLD FUNDS, INC.
Sand Hill Portfolio Manager Fund
Prospectus dated January 1, 2000
This Prospectus describes the Sand Hill Portfolio Manager Fund (the "Fund"), a
series of The World Funds, Inc. A series fund offers you a choice of
investments, with each series having its own investment objective and a separate
portfolio. The Fund seeks to maximize total return by investing in a diversified
portfolio of equity securities, debt securities and short-term investments on a
global basis (within the U.S. and in other countries).
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: Maximize total return
Principal Investment
Strategies: The Fund seeks to achieve its objective by investing
in
equity securities, debt securities and short term
investments on a global basis (within the U.S. and in
other countries). Equity securities consist of common
stocks and securities convertible into common stocks.
Debt securities include obligations of governments,
instrumentalities and corporations. Short-term
instruments are generally used to protect the Fund
against movements in interest rates or currency
exchange rates and to provide the Fund with liquidity.
The Fund may invest in each of these three asset
classes without limit.
Principal Risks: The principal risk of investing in the Fund is that
the values of its investments are subject to
market, economic, interest rate and business risk
that may cause the Fund's 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.
The Fund invests a varying portion of its assets in
foreign investments. These foreign investments may
involve financial, economic or political risks
not ordinarily associated with U.S. securities. With
foreign investments, the Fund's NAV may be affected by
changes in exchange rates between foreign currencies
and the U.S. dollar, less rigorous regulatory
standards, less liquidity in markets and more
volatility in prices than U.S. securities, higher
taxes, and adverse social or political developments.
An investment in the Fund is not a bank deposit and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
Investor Profile: You may want to invest in the Fund if you are seeking
to maximize total return and are willing to accept
share prices that may fluctuate, sometimes
significantly, over the short-term. The Fund will not
be appropriate if you are seeking current income
or are seeking safety of principal.
The bar chart and table below provide an indication of the risks of
investing in the Fund by showing past performances of the Fund. The bar chart
shows how the Fund's performance has varied from one year to another. The table
compares the performance of the Fund to the Lipper Global Flexible Portfolio
Index. The Lipper Global Flexible Portfolio Index is a composite of the total
return of mutual funds with the stated objective of allocating investments
across asset classes, including stocks, bonds, and money market instruments with
a focus on total return, with at least 25% of their portfolios invested in
securities outside of the United States. Keep in mind that past performance may
not indicate how well the Fund will perform in the future.
[bar chart goes here]
Sand Hill Portfolio Manager Fund Total Return *
1995 11.60%
1996 19.57%
1997 17.87%
1998 (6.73%)
1999 23.22%
Sand Hill Portfolio Manager Fund
[end bar chart]
* During the period shown in the bar chart, the highest return for a calendar
quarter was 13.56% (quarter ending 12/31/99) and the lowest return for a
calendar quarter was (7.24%) (quarter ending 9/30/98)
Average Annual Total Return
(for the period ending Since Inception
December 31, 1999) One Year Three Years (January 2,1995)
Sand Hill Portfolio
Manager Fund 23.22% 10.65% 12.57%
Lipper Global
Flexible Portfolio ** 24.85% 10.09% 12.39%
** This index, described above, is an unmanaged index. Returns include
reinvestment of all dividends and distributions. The index is not adjusted to
reflect expenses that the SEC requires to be reflected in the Fund's
performance.
FEES AND EXPENSES
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.
The following table describes the fees and expenses that you may pay directly or
indirectly in connection with an investment in the Fund. There are no sales
charges in connection with purchases or redemption of shares. 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)
Maximum Sales Charge (load) Imposed on Purchases None
Sales Charge (load) Imposed on Reinvested Dividends None
Redemption Fees(1) None
Exchange Fees(2) None
(1) A shareholder may be charged $10 for each redemption requested by
telephone.
(2) A shareholder may be charged a $10 fee for each exchange requested by
telephone.
Annual Operating Expenses (Expenses that are deducted from the Fund's assets)
Management Fee 1.00%
Distribution and Service (12b-1) Fees None
Other Operating Expenses* 1.05
Total Annual Fund Operating Expenses* 2.05%**
* The investment adviser (as defined below) has voluntarily agreed to waive
its management fee or make payments to limit the Fund's expenses to the extent
necessary to ensure that Total Annual Fund Operating Expenses do not exceed
1.90% of average daily net assets through December 31, 2000 (see "Management
Organization and Capital Structure" below).
** Expense credits reduced the Fund's total annual fund operating expenses
to 1.90% during the fiscal year ended August 31, 1999.
The purpose of these tables is to assist investors in understanding the various
costs and expenses that they will bear directly or indirectly. Management
expects that, to the extent the Fund increases in size, its Other Operating
Expenses will decline, reflecting economies of scale and its management fee rate
is reduced in one step as certain asset levels are reached. See "Management
Organization and Capital Structure".
EXAMPLE:
The following 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. Also,
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 5 Years 10 Years
------ ------- ------- -----
$208 $643 $1,103 $2,379
* Should the adviser continue the voluntary operating expense limitation
for the periods shown below, your costs would be:
1 Year * 3 Years * 5 Years * 10 Years *
-------- --------- --------- ----------
$193 $597 $1,026 $2,222
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RISKS
The investment objective of the Fund is to maximize total return (consisting of
realized and unrealized appreciation plus income) consistent with allocating its
investments among equity securities, debt securities and short term investments.
Within each asset class, the Fund may invest in domestic or foreign securities.
By allocating investments across broad asset classes, Sand Hill Advisors, Inc.
(the "Investment Adviser") seeks to achieve over time a high total return, and a
lower price volatility than might be inherent in a more limited asset mix. The
portfolio of the Fund will be diversified. The Fund will not be limited to
investing in securities of companies of any size or to securities traded in any
particular market.
The Fund seeks to take advantage of investment opportunities using a mix of
asset classes and markets throughout the world. The Fund allocates its
investments among equity securities, debt securities and short term investments
according to the Investment Adviser's anticipation of risks and returns for each
asset class. The Fund may invest in each of these three asset classes without
limit. While broad representation in markets and asset classes is a primary
asset allocation policy of the Fund, the Investment Adviser intends to retain
the flexibility necessary to move among asset classes and markets as changing
conditions warrant.
Because the Fund invests in different types of securities in proportions which
will vary over time, investors should not expect the Fund to exhibit stable
asset allocations. Investors should also realize that the Fund's performance
will depend upon the skill of the Investment Adviser to anticipate the relative
risks and returns of stocks, bonds and other securities and to adjust the Fund's
portfolio accordingly.
Equity securities consist of common stocks as well as warrants, rights and
securities which are convertible into common stocks, such as convertible bonds.
The Investment Adviser screens the Fund's equity holdings primarily by analyzing
a company's cash flow return on investment. Specifically, the Investment Adviser
determines the cash flow of a company and then applies a market derived discount
rate to the cash flow to evaluate the company. The Investment Adviser also
determines the free cash flow that can be reinvested into the company and
applies the same market derived discount rate. The Investment Adviser also
identifies industries that are positioned to participate in strong demographic,
societal or economic trends and looks for companies within those industries that
have a particular competitive advantage or niche.
Debt Securities consist of bonds, obligations and other evidences of
indebtedness denominated in U.S. or foreign currencies which are issued by
governments, companies or other issuers to borrow money from investors. Debt
securities may pay fixed or variable rates of interest, have varying maturity
dates at which the issuers must repay the debt, and have varying degrees of
risk. There is no limit on the maturities of the debt securities that the
Investment Adviser will select. Rather, the Investment Adviser will select debt
securities for the Fund on the basis of, among other things, credit quality,
yield, potential for capital gains and the Investment Adviser's fundamental
outlook for currency and interest rate trends around the world.
The debt securities in which the Fund will invest will be almost entirely
investment grade debt securities. Investment grade debt securities are
securities that (1) bear the rating BBB or higher by Standard & Poor's Ratings
Group; (2) bear the rating Baa or higher by Moody's Investors Service, Inc.; or
(3) are unrated securities which the Investment Adviser deems to be of
comparable quality. The Fund may invest in lower quality debt securities in
order to avail itself of the higher yields available from these securities or to
seek to realize capital gains. The Fund does not currently intend to invest more
than 5% of its total assets in securities that are rated below investment grade
or are unrated. After the Fund buys a debt security, the security may cease to
be rated or its rating may be reduced. Neither event would require the
elimination of the debt security from the Fund's portfolio.
Short-term investments are obligations denominated in U.S. or foreign currencies
consisting of bank deposits; bankers acceptances; certificates of deposit;
commercial paper; short-term government, government agency, supranational agency
and corporate obligations; and repurchase agreements. Depending on the
Investment Adviser's assessment of the prospects for the various asset classes,
all or a portion of the Fund's assets may be invested in high quality short-term
investments or cash for investment, to protect against adverse movements of the
market or interest rates or to provide liquidity.
The Fund's assets will be invested on a global basis to take advantage of
investment opportunities both within the U.S. and outside the U.S. The foreign
securities which the Fund purchases may be bought directly in their principal
markets or may be acquired through the use of depositary receipts. Investments
in foreign securities may involve risks 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 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 the Fund's investments in those countries. Many foreign securities
have substantially less trading volume than securities traded on U.S. markets,
and securities in some foreign issuers are less liquid and more volatile in
price than securities of domestic issuers. It is more expensive to trade in
foreign markets than in U.S. markets.
The market values of debt securities are influenced primarily by credit risk and
interest rate risk. Credit risk is the risk that the issuer of the security will
not maintain the financial strength needed to pay principal and interest on its
debt securities. Generally, the market values of fixed-rate debt securities vary
inversely with the changes in prevailing interest rates. When interest rates
rise, the market values of such securities tend to decline and vice versa.
Although under normal market conditions longer term securities yield more than
short-term securities of similar quality, longer term securities are subject to
greater price fluctuations.
The Fund is subject to stock market risk, which is the possibility that stock
prices overall will decline over short or even long periods. Stock markets tend
to move in cycles, with periods of rising prices and periods of falling prices.
Therefore, the value of your investment in the Fund may increase or decrease.
The Fund's investment success depends on the skill of the Investment Adviser in
evaluating, selecting and monitoring the portfolio assets. If the Investment
Adviser's conclusions about asset allocation are incorrect, the Fund may not
perform as anticipated.
Like other mutual funds and financial or business organizations around the
world, The World Funds, Inc. (the "Company") and the Fund could be adversely
affected if its computer systems or the computer systems of its service
providers do not properly process and calculate date-related information and
data as of and after January 1, 2000. This is commonly known as the "Year 2000
Issue". The Company has taken steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to computer systems that it uses and to
obtain reasonable assurances that comparable steps are being taken by its major
service providers. These steps include identifying system problems, remediation
and testing the system fixes. The Company and each of its major service
providers are in the stage of testing the system fixes that have been
implemented. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Company.
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 replaced its existing currency with the Euro as of January 1, 1999.
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. If the Fund invests in securities of
countries that have converted to the Euro or convert in the future, the Fund
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 the Fund.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
Sand Hill Advisors, Inc. (the "Investment Adviser") located at 3000 Sand Hill
Road, Building Three, Suite 150, Menlo Park, CA 94025, manages the assets of the
Fund. The Investment Adviser has been in existence since 1982 and as of December
31, 1999 had approximately $500 million under management. Since the Fund's
inception in January, 1995, Ms. Jane H. Williams, Executive Vice President of
the Investment Adviser, has been primarily responsible for the day to day
management of the Fund. Effective June 1, 1998, Gary K. Conway began co-managing
the Fund with Ms. Williams. Mr. Conway is President and co-founder of the
Investment Adviser. Prior to assuming the role of co-manager, Mr. Conway was an
adviser to the Fund and was actively involved in management decisions and
portfolio selection. The 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. In placing
orders with brokers and dealers, the Adviser will attempt to obtain the best
price and execution of orders.
Under its investment advisory agreement with the Fund, the Investment Adviser is
entitled to receive a monthly investment advisory fee at an annual rate of 1% of
the first $100 million of the average daily net assets of the Fund and 0.75% of
the average daily net assets of the Fund over $100 million. The Investment
Adviser has voluntarily agreed to waive all or a portion of the advisory fee or
make payments to the Fund in order to maintain the Fund's total operating
expenses at an annual rate not to exceed 1.90% through December 31, 2000. For
the period ended August 31, 1999, the Investment Adviser received $126,902 in
advisory fees from the Fund.
SHAREHOLDER INFORMATION
The Fund's share price, called its NAV per share, is determined and shares are
priced 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 of the Fund and then dividing by the total number of Fund shares
outstanding.
Shares are bought, 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 given 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
Shares of the Fund may be purchased directly from First Dominion Capital Corp.
(the "Distributor") or through brokers or dealers who are members of the
National Association of Securities Dealers, Inc. 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 $25,000 and additional investments must be $50 or more. The Fund retains
the right to refuse to accept an order.
Purchases by Mail - For initial purchases, the account application form,
which accompanies the prospectus, should be completed, signed and mailed to Fund
Services, Inc. (the "Transfer Agent") at 1500 Forest Avenue, Suite 111,
Richmond, Virginia 23229, together with your check payable to the Fund. For
subsequent purchases, include with your check the tear-off stub from a prior
purchase confirmation, or otherwise identify the name(s) of the registered
owner(s) and social security number(s).
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
Transfer Agent for instructions, then notify the Distributor by calling
800-776-5455. 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.
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 per share next 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 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 redemption 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 account application form for the
account to permit the Fund to verify the identify 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
form has been changed within the last 30 days, or if you ask that the proceeds
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 requested this service on your initial account application form. 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 charge for 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 to protect you and the Company 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, VA 23229. The Transfer Agent cannot
honor guarantees from notaries public, savings and loan associations, or savings
banks.
Automatic Investment Plan - Existing shareholders, who wish to make regular
monthly investments in amounts of $50 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.
Dividends and Capital Gain Distributions - Dividends from net investment income,
if any, are declared and paid annually. The Fund intends to distribute annually
any net capital gains.
Distributions will automatically be reinvested in additional shares of the Fund,
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 the 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.
DISTRIBUTION 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 the Fund or receive them in cash. Any capital gains the
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 the Fund, you may have a capital gain or loss. For tax
purposes, an exchange of your shares of the 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. Foreign exchange gains or
losses realized on the sale of securities generally are treated as ordinary
income or loss by the Fund and may increase or decrease Fund distributions to
you. 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 the 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 IRS has notified you that you are subject to
backup withholding and instructs a Fund to do so.
DISTRIBUTION ARRANGEMENTS
The Fund is offered directly through the Distributor and through third parties,
such as financial supermarkets, investment advisers and consultants, financial
planners, brokers, dealers and other investment professionals. The shares are
offered and sold without any sales charges imposed by the Funds or the
Distributor. However, third parties who offer shares may request fees from their
individual clients. If you invest through a third party, the policies and fees
may be different than those described in the Prospectus. For example, third
parties may charge transaction fees or set different minimum investment amounts.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
Fund's financial highlights for the period presented have been audited by Tait,
Weller and Baker, independent auditors, whose unqualified report thereon is
included in the SAI. The Fund's financial statements, notes to financial
statements and report of independent accountants are included in the SAI as well
as in the Fund's Annual Report to Shareholders (the "Annual Report"). Additional
performance information for the Fund is included in the Annual Report. The
Annual Report and the SAI are available at no cost from the Fund at the address
and telephone number noted on the back page of this Prospectus. The following
information should be read in conjunction with the financial statements and
notes thereto.
FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD
- -------------------------------------------------------------------
Years
ended Jan 2,
Period December 1995*
Year ended ended 31, to
August August 1997 1996 Dec
31, 1999 31, 31,
1998*** 1995
---------- -------------------- -----
Per Share Operating
Performance
Net asset value, $13.59 $14.57 $12.79 $11.11 $10.00
beginning of period
---------- ---- ----- ---- -----
Income from investment
operations-
Net investment 0.02 0.06 0.09 0.14 0.06
income
Net realized and 3.04 (1.04) 2.20 2.02 1.10
unrealized gain on
investments
---------- ---- ----- ---- -----
---------- ---- ----- ---- -----
Total from investment 3.06 (0.98) 2.29 2.16 1.16
operations
---------- ---- ----- ---- -----
Less distributions-
Distributions from (0.07) -- (0.08) (0.15) (0.05)
net investment income
Distributions from (0.85) -- (0.43) (0.33) 0.00
realized gains on
investments
---------- ---- ----- ---- -----
---------- ---- -----
Total distributions (0.92) 0.00 (0.51) (0.48) (0.05)
---------- ---- ----- ---- -----
========== ==== ===== ==== =====
Net asset value, $15.73 $13.59 $14.57 $12.79 $11.11
end of period
========== ==== ===== ==== =====
Total Return 23.22% (6.73%) 17.87% 19.57% 11.60%
Ratios/Supplemental Date
Net assets, end of $14,190 $10,370 $10,566 $6,459 $4,025
period (000's)
Ratio to average
net assets - (A)
Expenses (B) 2.05% 2.08** 2.08% 2.50% 3.03%
Expense ratio - net (C) 1.90% 1.86** 1.90% 2.00% 1.90%
Net investment incoem 0.19% 0.62** 0.71% 1.29% 0.52%
Portfolio turnover rate 39.17% 30.19% 16.48% 32.97% 40.96%
- --------------
* Commencement of operations
** Annualized
*** The Fund has changed its year end from December 31st to August 31st.
This represents the period from January 1, 1998 to August 31, 1998.
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .64% in 1996 and 1.00% in 1995.
(B) Expense ratios have been increased to include custodian fees which were
offset by custodian credits.
(C) Expense ratio - net reflects the effect of the custodian fee credits the
Fund received.
See Notes to Financial Statements
<PAGE>
For investors who want more information about the Fund, the following documents
are available free upon request:
Annual & Semiannual Reports:
Additional information about the Fund's investments is available in the Fund's
Annual and Semiannual Reports to Shareholders. In the Fund's Annual Report to
Shareholders, you will find performance information for the Fund.
Statement of Additional Information (SAI): The SAI provides additional detailed
information about the Fund and is incorporated into this prospectus by
reference.
You can receive free copies of reports and the SAI, 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: 1-800-527-9525
E-MAIL: [email protected]
You can review the Fund's reports and SAI at the Public Reference Room of the
SEC. You can receive text-only copies:
For a fee, by writing the Public Reference Section of the SEC, Washington,
D.C. 20549-6009 or call 1-800-SEC-0330
Free from the SEC's Internet Website at http://www.sec.gov.
(Investment Company Act file No. 811-8255)
