As filed with the Securities and Exchange Commission on January 7, 2000
Registration No. 333-29289
File No. 811-8255
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
--
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |__|
--
Pre-Effective Amendment No. ______ |__|
--
Post-Effective Amendment No. 9 | X|
and/or
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |__|
--
Amendment No. 11 | X|
(Check appropriate box or boxes)
THE WORLD FUNDS, INC. (THE "COMPANY")
(Exact Name of Registrant as Specified in Charter)
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229
(Address of Principal Executive Offices)(Zip Code)
(800)-527-9525
Registrant's Telephone Number, Including Area Code
Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
(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)
--
|__ immediately upon filing pursuant to paragraph (b)
--
|__| on (date) pursuant to paragraph (b)
--
| | 60 days after filing pursuant to paragraph (a)(I)
--
|__| on (date) pursuant to paragraph (a)(I)
--
|_X| 75 days after filing pursuant to paragraph (a)(2)
--
|__| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
--
|__| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered Common Stock of the GenomicsFund.com 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 GenomicsFund.com series of the Registrant.
2. Part B Statement of Additional Information of the GenomicsFund.com
series of the Registrant.
3. Part C
GenomicsFund.com
a series of
THE WORLD FUNDS, INC.
PROSPECTUS
Prospectus dated ______________________, 1999
This Prospectus describes GenomicsFund.com (the "Fund"), a series of The World
Funds, Inc. (the "World Funds"). 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.
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 or securities convertible into
equity securities.
Under normal market conditions, the Fund will invest at
least 75% of its assets in securities of companies
principally engaged in Genomics or Genomic-related
businesses.
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 per share ("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 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 price movements in the
Fund's larger portfolio positions to have a greater impact
on the Fund's NAV, which could result in increased
volatility.
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 long-term capital appreciation 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.
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 portfolio securities. 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) 2.00% (2)
Exchange Fees (3) None
(1) A shareholder electing to redeem shares by telephone request may be
charged $10 for each such redemption request.
(2) A two percent (2.00%) redemption fee is charged on shares held less than
one year and retained by the Fund to defray markets effects, taxes, and
expenses created by short-term investments in the Fund.
(3) A shareholder may be charged a $10 fee for each telephone exchange.
Estimated Annual Operating Expenses (expenses that are deducted
from Fund assets)
Management Fee 1.00%
Distribution (12b-1) and Service Fees 0.25%
Other Operating Expenses 0.65%
Total Annual Fund Operating Expenses 1.90% *
* In the interest of limiting expenses of the Fund, the Adviser has entered
into an expense limitation agreement with the Fund. Pursuant to the
agreement, the Adviser has agreed to waive or limit its fees and to assume
other expenses so that the total annual operating expenses for the Fund is
limited to 1.90%.
The 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 Fund increases in size, its Other Operating Expenses will
decline as an annual percentage rate reflecting economies of scale.
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 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 5 Years 10 Years
------ ------- ------- --------
Total expenses $193 $596 $1,026 $2,222
<PAGE>
INVESTMENT OBJECTIVES, PRINCIPAL STRATEGIES AND RISKS
The investment objective of the Fund is to achieve capital appreciation. The
Fund seeks to achieve this objective by investing in a non-diversified portfolio
consisting primarily of equity securities or securities convertible into equity
securities, such as warrants, convertible bonds, debentures or convertible
preferred stock.
Under normal circumstances, the Fund will invest at least 75% of its total
assets in securities of companies principally engaged in Genomics or
Genomic-related businesses. A company is considered principally engaged in
Genomic or Genomic-related business if at least 50% of its assets, gross income,
or net profits are committed to, or derived from, the research, design,
development, manufacture, or distribution of products, processes or services for
use with Genomics or Genomic-related businesses. A company will also be
considered to be engaged in Genomic related businesses if it provides goods or
services which benefit from Genomics, provides goods or services to Genomics or
Genomics-related businesses.
Genomics is a broad term referring to the study of genes. The human body
contains 75 trillion cells and each cell nucleus contains 46 chromosomes. Each
chromosome is a twisted strand of DNA which can measure up to nine feet in
length, but is only about 20 atoms across. Genes are segments of DNA and contain
the instructions to make proteins, the building blocks of life. The Human Genome
Project was begun by the Federal government in 1986 to identify all genes, their
location on the chromosome (mapping), their chemical composition (sequencing),
and their function. Some people believe identifying the entire human genome may
be the greatest challenge ever undertaken by man. In the past few years, private
companies have joined with the government and universities in the search to
unravel the basic genomic code. These efforts have accelerated the discovery
process and experts predict the entire human genome sequence may be identified
as early as 2001.
When selecting investments for the Fund, the Adviser will seek to identify
companies that it believes are likely to benefit from new or innovative Genomics
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. Dividend income, if any,
is likely to be incidental.
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.
GenomicsFund.com invests primarily in companies engaged in Genomics and
Genomics-related activities. The value of this type of company is particularly
vulnerable to rapidly changing technology, extensive government regulation,
inconsistent regulation in different countries or markets, and relatively high
risks of obsolescence caused by scientific and technological advances.
Technology sectors historically have been volatile, and securities of companies
in these sectors may be subject to abrupt or erratic price movements. For such
reasons, the Fund may experience greater volatility than funds with portfolio
investments which are not subject to these types of risks.
The economic prospects of Genomics companies can dramatically fluctuate due to
changes in the regulatory and competitive environment in which these companies
operate. A substantial portion of services and research is funded or subsidized
by the government, so changes in government policy at the federal or state level
may affect the demand for these products or services, and the continuation or
success of research and development efforts. Regulatory approvals often entail
lengthy application and testing procedures and are generally required before new
products may be introduced. The Adviser will seek to reduce such risks through
extensive research, and emphasis on more globally-competitive companies.
Genomics-related activities in which the Fund will invest include biological
technologies, bioinformation technologies, gene mapping and sequencing
technologies, and gene delivery technologies (collectively, "technology
sectors"). The Fund will seek to identify securities of companies conducting
these activities. Typically, these companies' products or services compete on a
global, rather than a predominately domestic or regional basis, and the
securities of these companies may be subject to fluctuations in value due to the
effect of changes in the relative values of currencies where the companies
conduct their businesses. The history of these markets reflect both decreases
and increases in worldwide currency valuations, and these may reoccur
unpredictably in the future.
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 or selection are incorrect, the
Fund may not perform as anticipated.
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. 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.
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. To the
extent that securities of small companies are not liquid, the Fund will limit
its investments in such securities to not more than 15% of assets. You should
expect that the value of Fund shares may be more volatile than the shares of
mutual fund investing primarily in larger company stocks.
The Fund is non-diversified under the Investment Company Act of 1940 ("1940
Act"), which means that the Fund may invest more of its assets in a smaller
number of issuers. Under normal circumstances,, the Fund will be concentrating
its investments in biotechnology companies such as those described above, and
will always have not less than than 25% of its assets in this industry.
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.
When the fund's Management 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 or certificates of deposits. When the Fund is in a
temporary defensive position it may not achieve its investment objective of
capital appreciation.
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 at 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 have not been adversely impacted as of
January 5, 2000, however, there can be no assurance that additional time may not
reveal a later adverse impact on the Company.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
Investment Adviser - xGENx, LLC (the "Adviser") manages the investment of the
assets of the Fund pursuant to the Investment Advisory Agreement (the "Advisory
Agreement"). The Adviser is a newly formed company and its only client is the
Fund. The address of the Adviser is 555 Quince Orchard Road, Suite 606,
Gaithersburg, Maryland 20878.
The Adviser provides the Fund with investment management services, subject to
the supervision of the Board, and with office space for investment activities,
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 Fund's 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 1.0% on the first $250 million of average
daily net assets of the Fund; 0.875% on average daily net assets of the Fund in
excess of $250 million and not more than $500 million; and , 0.75% on average
daily net assets of the Fund over $500 million.
In the interest of limiting expenses of the Fund, the Adviser has entered into
an expense limitation agreement with the Company. Pursuant to the agreement, the
Adviser has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses for the Fund will not exceed 1.90% of
net assets. 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, sold or exchanged at the NAV 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
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 $2,000 and additional investments must be $100 or more. The Fund retains
the right to refuse to accept any 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") P.O. Box 26305, Richmond, Va. 23260
together with your check payable to the GenomicsFund.com. 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 at1-800-628-4077 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 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. A two percent (2.00%) redemption fee is deducted from proceeds of Fund
shares redeemed less than one year after purchase and such fees are retained by
the Fund.
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 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 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 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
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 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.
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
charge or close your account if it falls below $1,000 solely because of a market
decline.
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 a suitable money market fund. Please contact the Transfer Agent for
details. 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 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.
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.
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 Fund is offered through financial supermarkets, investment advisers and
consultants, financial planners, brokers, dealers and other investment
professionals, and directly through the Distributor. The shares are offered and
sold without any sales charges imposed by the Fund or the Distributor. However,
investment professionals 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>
Apart from the Prospectus and the Statement of Additional Information ("SAI"),
the Company's registration statement contains certain additional information
that may be of interest to you. You may view that information free of charge at
the Securities and Exchange Commission (" SEC") public reference room in
Washington, D.C., and you may, with payment of a duplicating fee, order copies
of the information.
For more information about the Fund, you may wish to refer to the Company's SAI
dated ___________________ 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.
Information about the Company, including the SAI, can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information about the
operation of the Public Reference Room may be obtained by calling the SEC at
(800) SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains
reports, the Prospectus, SAI, material incorporated by reference, and other
information regarding the Company.
GenomicsFund.com
a series of
THE WORLD FUNDS, INC.
(THE "COMPANY")
1500 FOREST AVENUE, SUITE 223 RICHMOND, VA 23229
1-800-527-9525
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the current Prospectus of GenomicsFund.com (the
"Fund") dated ________, 2000. The Prospectus may be obtained by writing to The
World Funds, Inc. 1500 Forest Avenue, Suite 223, Richmond, VA 23229 or
by calling 1-800-527-9525.
The date of this SAI is ____________, 2000.
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . .
. . . .
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS. . . . . . .
. . .
INVESTMENT OBJECTIVES . . . . . . . . . . . . . . . . . . .
. . .
STRATEGIES AND RISKS . . . . . . . . . . . . . . . . . . . .
. . .
INVESTMENT PROGRAMS. . . . . . . . . . . . . . . . . . . . .
.
DEPOSITARY RECEIPTS . . . . . . . . . . . . . . . . .
REPURCHASE AGREEMENTS. . . . . . . . . . . . .
DEBT SECURITIES . . . . . . . . . . . . . . . . . . . .
. . U.S. GOVERNMENT SECURITIES.
.. . . . . . . .
CONVERTIBLE SECURITIES. . . . . . . . . . . . . .
WARRANTS. . . . . . .. . . . . . . . . . . . . . . . .
. .
INVESTMENT COMPANIES. . . . . . . . . . . .
ILLIQUID SECURITIES. . . . . . . . . . . . . . . . .
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. . . . .
.
RESTRICTED SECURITIES. . . . . . . . . . . . . . . . .
. .
OTHER SECURITIES. . . . . . . . . . . . . . . . . . . .
.
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . .
.
FUNDAMENTAL POLICIES OR RESTRICTIONS . . . . . . . . .
. .
NON-FUNDAMENTAL POLICIES OR RESTRICTIONS . . . . . .
MANAGEMENT OF THE COMPANY. . . . . . . . . . . . . . . . . . . .
. . . .
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . .
. . . .
INVESTMENT ADVISER AND ADVISORY AGREEMENTS. . . .
MANAGEMENT-RELATED SERVICES. . . . . . . . . . . . . . . . . . .
. . .
ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . .
. . .
CUSTODIAN AND ACCOUNTING SERVICES . . . . . . . .
TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . .
. . .
DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . .
. .
INDEPENDENT ACCOUNTANTS. . . . . . . . . . .
PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TURNOVER. . . . . . . . . . . . . . . . . . . . . . . .
.
CAPITAL STOCK AND DIVIDENDS. . . . . . . . . . . . . . . .
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES. . . . .
DISTRIBUTION AND TAXES. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
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
GenomicsFund.com (the "Fund"). The Fund is a separate investment portfolio or
series of the Company. See "Capital Stock and Dividends" in this SAI. The Fund
is "non-diversified" as that term is defined in the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The following information supplements the discussion of the Fund's investment
objectives and policies. The Fund's investment objective and fundamental
investment restrictions may not be changed without approval by vote of a
majority of the outstanding voting shares of the Fund. As used in this SAI,
"majority of outstanding voting shares" means the lesser of (1) 67% of the
voting shares of the Fund represented at a meeting of shareholders at which the
holders of 50% or more of the shares of the Fund are represented; or (2) more
than 50% of the outstanding voting shares of the Fund. The investment programs,
restrictions and the operating policies of the Fund that are not fundamental
policies can be changed by the Board of Directors of the Company (the
"Directors") without shareholder approval.
INVESTMENT OBJECTIVES
The Fund's investment objective is capital appreciation. All investments entail
some market and other risks and there is no assurance that the Fund will achieve
its investment objective. You should not rely on an investment in the Fund as a
complete investment program.
STRATEGIES AND RISKS
Under normal circumstances, the Fund invests primarily in equity securities and
securities convertible into equity securities.
The following discussion of investment techniques and instruments supplements,
and should be read in conjunction with, the investment information in the Fund's
Prospectus. In seeking to meet its investment objective, the Fund may invest in
any type of security whose characteristics are consistent with its investment
program described below.
INVESTMENT PROGRAMS
Depositary Receipts: The Fund may invest on a global basis to take advantage of
investment opportunities both within the U.S. and other countries. The Fund may
buy foreign securities directly in their principal markets or indirectly through
the use of depositary receipts. The Fund may invest in sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDR's),
and other similar depositary receipts. ADRs are issued by an American bank or
trust company and evidence ownership of underlying securities of a foreign
company. EDRs are issued in Europe, usually by foreign banks, and evidence
ownership of either foreign or domestic underlying securities. The foreign
country may withhold taxes on dividends or distributions paid on the securities
underlying the ADRs and EDRs, thereby reducing the dividend or distribution
amount received by the Fund.
Unsponsored ADRs and EDRs are issued without the participation of the issuer of
the underlying securities. As a result, information concerning the issuer may
not be as current as for sponsored ADRs and EDRs. Holders of unsponsored ADRs
generally bear all the costs of the ADR facilities. The depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored ADR.
Repurchase Agreements: As a means of earning income for periods as short as
overnight, the Fund may enter into repurchase agreements that are collateralized
by U.S. Government Securities. Under a repurchase agreement, a fund acquires a
security, subject to the seller's agreement to repurchase that security at a
specified time and price. The Fund considers a purchase of securities under
repurchase agreements to be a loan by the Fund. The Investment Adviser monitors
the value of the collateral to ensure that its value always equals or exceeds
the repurchase price and also monitors the financial condition of the seller of
the repurchase agreement. If the seller becomes insolvent, the ability to
dispose of the securities held as collateral may be impaired and the Fund may
incur extra costs. Repurchase agreements for periods in excess of seven days may
be deemed to be illiquid.
Debt Securities
The Fund may invest in investment grade debt securities; which are securities
rated Baa or higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or
higher by Standard & Poor's Ratings Group ("S&P") at the time of purchase or,
unrated securities which xGENx. LLC(the "Investment Adviser") believes to be of
comparable quality. The Fund does not currently intend to invest more than 5% of
its total assets in securities that are below investment grade or that are
unrated. Securities rated as Baa or BBB are generally regarded as having
adequate capacity to pay interest and repay principal.
Debt securities consist of bonds, notes, government and government agency
securities, zero coupon securities, convertible bonds, asset-backed and
mortgage-backed securities, and other debt securities whose purchase is
consistent with the Fund's investment objective. The Fund's investments may
include international bonds that are denominated in foreign currencies,
including the European Currency Unit or "Euro". International bonds are defined
as bonds issued in countries other than the United States. The Fund's
investments may include debt securities issued or guaranteed by supranational
organizations, corporate debt securities, bank or holding company debt
securities.
U.S. Government Securities: The Fund may invest in U.S. Government Securities
that are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, and securities guaranteed by the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the United
States; others, such as those of the Federal Home Loan Banks, are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those
of the Federal National Mortgage Association ("FNMA"), are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality.
Convertible Securities: The Fund may invest in convertible securities.
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are convertible either at a stated price or a stated rate (that is,
for a specific number of shares of common stock or other security). As with
other fixed income securities, the price of a convertible security generally
varies inversely with interest rates. While providing a fixed income stream, a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so they may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the price of a convertible security tends to rise as a
reflection of the value of the underlying common stock. To obtain such an
opportunity for a higher yield or capital appreciation, the Fund may have to pay
more for a convertible security than the value of the underlying common stock.
The Fund will generally hold common stock it acquires upon conversion of a
convertible security for so long as the Investment Adviser anticipates such
stock will provide the Fund with opportunities that are consistent with its
investment objective and policies.
Warrants: The value of warrants is derived solely from capital appreciation of
the underlying equity securities. Warrants have no voting rights, pay no
dividends and have no rights with respect to the assets of the corporation
issuing them. Warrants are options to purchase equity securities at a specific
price for a specific period of time. If the Fund does not exercise or dispose of
a warrant prior to its expiration, it will expire worthless. They do not
represent ownership of the securities, but only the right to buy them. Warrants
differ from call options in that warrants are issued by the underlying
corporation, whereas call options may be written by anyone.
Illiquid Securities: The Fund may invest up to 15% of its net assets in illiquid
securities. The term "illiquid securities" means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities. Illiquid
securities include generally, among other things, certain written
over-the-counter options, securities or other liquid assets as cover for such
options, repurchase agreements with maturities in excess of seven days, certain
loan participation interests and other securities whose disposition is
restricted under the federal securities laws.
Restricted Securities: The Fund may invest in restricted securities. Generally,
"restricted securities" are securities which have legal or contractual
restrictions on their resale. In some cases, these legal or contractual
restrictions may impair the liquidity of a restricted security; in others, the
legal or contractual restrictions may not have a negative effect on the
liquidity of the security. Restricted securities which are deemed by the
Investment Adviser to be illiquid will be included in the Fund's policy which
limits investments in illiquid securities.
Other Securities: The Board of Directors may, in the future, authorize the Fund
to invest in securities other than those listed in this SAI and in the
Prospectus, provided such investments would be consistent with the Fund's
investment objective and would not violate the Fund's fundamental investment
policies or restrictions.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies and Restrictions: The Funds have adopted the
following fundamental investment restrictions which cannot be changed without
approval by vote of a "majority of the outstanding voting securities" of each
Fund. As a matter of fundamental policy, each Fund may not:
(1) Invest in companies for the purpose of exercising management
or control;
(2) Invest in securities of other investment companies except by purchase in the
open market involving only customary broker's commissions, or as part of a
merger, consolidation, or acquisition of assets;
(3) Purchase or sell commodities or commodity contracts; (4) Invest in interests
in oil, gas, or other mineral exploration or development programs;
(5) Purchase securities on margin, except for use of short-term credits as
necessary for the clearance of purchase of portfolio securities;
(6) Issue senior securities, (except the Funds may engage in transactions such
as those permitted by SEC release IC-10666);
(7) Act as an underwriter of securities of other issuers, except that each Fund
may invest up to 10% of the value of its total assets (at the time of
investment) in portfolio securities which the Fund might not be free to sell
to the public without registration of such securities under the Securities
Act of 1933, as amended (the "1933 Act"), or any foreign law restricting
distribution of securities in a country of a foreign issuer;
(8) Participate on a joint or a joint and several basis in any securities
trading account;
(9) Engage in short sales;
(10)Purchase or sell real estate, provided that liquid securities of companies
which deal in real estate or interests therein would not be deemed to be an
investment in real estate;
(11)Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, more than 10% of the outstanding voting securities of any issuer
would be held by the Fund; and
(12) Make loans.
(13)Except as specified below, the Funds may only borrow money for temporary or
emergency purposes and then only in an amount not in excess of 5% of the
lower of value or cost of its total assets, in which case the Fund may
pledge, mortgage or hypothecate any of its assets as security for such
borrowing but not to an extent greater than 5% of its total assets. A Fund
may borrow money to avoid the untimely disposition of assets to meet
redemptions, in an amount up to 33 1/3% of the value of its assets, provided
that the Fund maintains asset coverage of 300% in connection with
borrowings, and the Fund does not make other investments while such
borrowings are outstanding.
(14)Concentrate its investments in any industry, except that the Fund may
concentrate in securities of companies which are Genomic and Genomic-related
companies as described in the prospectus.
Non-Fundamental Policies and Restrictions: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus and elsewhere in the SAI, the
Funds will be subject to the following investment restrictions, which are
considered non-fundamental and may be changed by the Board of Directors without
shareholder approval.
As a matter of non-fundamental policy, a Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities;
(2) Engage in arbitrage transactions; or (3) Purchase or sell options.
In applying its investment policies and restrictions:
(1) A percentage restriction on investment or utilization of assets is
determined at the time an investment is made. A later change in percentage
resulting from changes in the value or the total cost of a Fund's assets
will not be considered a violation of the restriction; and
(2) Investments in certain categories of companies will not be considered to be
investments in a particular industry. Examples of these categories include:
(i) financial service companies will be classified according to the end
users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; (ii)
technology companies will be divided according to their products and
services, for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry; and
(iii) utility companies will be divided according to their services, for
example, gas, gas transmission, electric and telephone will each be
considered a separate industry.
MANAGEMENT OF THE COMPANY
Directors and Officers:
The Company is governed by a Board of Directors, which is responsible for
protecting the interest of shareholders. The Directors are experienced business
persons who meet throughout the year to oversee the Company's activities, review
contractual arrangements with companies that provide services to the Fund, and
review performance. The names and addresses of the Directors and officers of the
Company, together with information as to their principal occupations during the
past five years, are listed below. The Directors who are considered "interested
persons" as defined in Section 2(a)(19) of the 1940 Act, as well as those
persons affiliated with the Investment Adviser and principal underwriter, and
officers of the Company, are noted with an asterisk (*).
Name, Address Position(s) Held Principal Occupation(s)
and Birthdate With Registrant During the Past 5 Years
- -----------------------------------------------------------------
*John Pasco, III Chairman, Director Mr. Pasco is Treasurer and
1500 Forest Avenue and Treasurer Director of Commonwealth
Richmond, VA 23229 Shareholder Services, Inc.,
(4/10/45) the Company's Administrator,
since 1985; President and
Director of First Dominion
Capital Corp., the Company's
principal underwriter.
Director and shareholder of
Fund Services Inc., the
Company's Transfer and
Disbursing Agent, since 1987;
shareholder of Commonwealth
Fund Accounting, Inc. which
provides bookkeeping services
to Star Bank; and Chairman,
Director and Treasurer of
Vontobel Funds, Inc., a
registered investment company
since March, 1997. Mr. Pasco
is also a certified public
accountant.
Samuel Boyd, Jr. Director Mr. Boyd is Manager of the
10808 Hob Nail Court Customer Services Operations and
Potomac, MD. 20854 Accounting Division of the
(9/18/40) 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
(6/11/36) 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. Realtors
Richmond, VA 23229 since April, 1971; and Director of
(11/11/47) Vontobel Funds, Inc. a
registered investment company
since March, 1997.
*Jane H. Williams Vice President of Ms. Williams is the Executive
3000 Sand Hill Road the Company and Vice President of Sand Hill
Suite 150 President of the Advisors, Inc. since 1982.
Menlo Park, CA 94025 Sand Hill Portfolio
(6/28/48) Manager Fund series
*Leland H. Faust President of Mr. Faust is President of CSI
One Montgomery St. the CSI Equity Capital Management, Inc. since
Suite 2525 Fund and the CSI 1978. Mr. Faust is also a Partner
San Francisco, CA 94104 Fixed Income Fund in the law firm Taylor & Faust
(8/30/46) since December, 1975.
*F. Byron Parker, Jr. Secretary Mr. Parker is Secretary of
810 Lindsay Court Commonwealth Shareholder
Richmond, Virginia 23229 Services, Inc., and First
(1/26/43) Dominion Capital Corp.
since 1986; Secretary of
Vontobel Funds, Inc., a
registered investment company
since March, 1997; and Partner in
the law firm Mustian & Parker.
*Franklin A. Trice, III Vice President of Mr. Trice is President of
P.O. Box 8535 the Company and Virginia Management Investment
Richmond, VA 23226-0535 President of the Corp. since May, 1998; and a
(12/25/63) New Market Fund registered representative of
series. First Dominion Capital Corp, the
Company's underwriter since
September, 1998. Mr. Trice was a
broker with Scott & Stringfellow
from March, 1996 to May, 1998
and with Craigie, Inc. from
March, 1992 to January, 1996.
*John T. Connor, Jr. Vice President of President of Third Millennium
515 Madison Ave., the Company and Investment Advisors, LLC since
24th Floor President of the April, 1998; and Chairman of
New York, NY 10022 Third Millennium ROSGAL, a Russian financial
(6/16/41) Russia Fund series company and of its affiliated
ROSGAL Insurance since 1993.
*Steven T. Newby Vice President of President of Newby & Co., a NASD
555 Quince Orchard Rd. the Company and broker/dealer since July, 1990;
Suite 606 President of President of xGENx, LLC since
Gaithersburg, MD 20878 GenomicsFund.com November, 1999.
(9/18/46) series
Compensation of Directors: The Company does not compensate the Directors who are
officers or employees of the Investment Adviser. The "independent" Directors
receive an annual retainer of $1,000.00 and a fee of $200.00 for each meeting of
the Directors which they attend in person or by telephone. Directors are
reimbursed for travel and other out-of-pocket expenses. The Company does not
offer any retirement benefits for Directors.
For the fiscal period ended August 31, 1999, the Directors received the
following compensation from the Company:
Aggregate Compensation Total
Name and From the Fund Pension or Retirement Compensation
Position Fiscal Year Ended Benefits Accrued as from the
Held August 31, 1999(1) Part of Fund Expenses Company
- -----------------------------------------------------------------------
John Pasco, III, 0 N/A 0
Director
Samuel Boyd, Jr., N/A
Director
William E. Poist, N/A
Director
Paul M. Dickinson, N/A
Director
(1) This amount represents the aggregate amount of compensation paid to the
Directors for service on the Board of Directors for the Fund's fiscal year ended
August 31, 1999.
CONTROL PERSONS - PRINCIPAL HOLDERS OF SECURITIES
The Directors and officers of the Company, as a group, do not own 1% or more of
the Fund.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
xGENx, LLC (the "Investment Adviser"), 555 Quince Orchard Road, Suite 606,
Gaithersburg, Maryland 20878 manages the investments of the Fund pursuant to an
Investment Advisory Agreement (the "Advisory Agreement" ), dated ___________,
1999. The Advisory Agreement has an initial term of two years, and may be
renewed annually thereafter provided such renewal is approved by: 1) the
Company's Board of Directors; or 2) by a majority vote of the outstanding voting
securities of the Company, and in either event by and a majority of the
Directors who are not "interested persons" of the Company. The Advisory
Agreements will automatically terminate in the event of their "assignment," as
that term is defined in the 1940 Act, and may be terminated without penalty at
any time upon 60 days' written notice to the other party by: (i) the majority
vote of all the Directors or by vote of a majority of the outstanding voting
securities of the Fund; or (ii) the Adviser.
The Investment Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 as amended, the "Advisers Act". The Investment
Adviser is an independent, privately-held corporation.
Steven T. Newby is President of the Investment Adviser and is the portfolio
manager of the Fund since its inception on __________________. Since July 1990,
Mr. Newby has been President of Newby & Company, a securities broker/dealer firm
located in Gaithersburg, Maryland. Newby & Company is a member firm of the
National Association of Securities Dealers ("NASD") and the Securities Investor
Protection Corporation ("SIPC").
Under the Advisory Agreement, the Investment Adviser, subject to the supervision
of the Directors, provides a continuous investment program for the Fund,
including investment research and management with respect to securities,
investments and cash equivalents, in accordance with the Fund's investment
objective, policies, and restrictions as set forth in the Prospectus and this
SAI. The Investment Adviser is responsible for effecting all security
transactions on behalf of the Fund, including the allocation of principal
business and portfolio brokerage and the negotiation of commissions. The
Investment Adviser also maintains books and records with respect to the
securities transactions of the Fund and furnishes to the Directors such periodic
or other reports as the Directors may request.
Under the Advisory Agreement, the monthly compensation paid to the Adviser is
accrued daily at an annual rate of 1.0% on the first $250 million of average
daily net assets of the Fund; 0.875% on average daily net assets of the Fund in
excess of $250 million and not more than $500 million; and , 0.75% on average
daily net assets of the Fund over $500 million.
In the interest of limiting expenses of the Fund, the Adviser has entered into
an expense limitation agreement with the Company. Pursuant to the agreement, the
Adviser has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses for the Fund is limited to 1.90%. The
limit does not apply to interest, taxes, brokerage commissions, other
expenditures capitalized in accordance with generally accepted accounting
principles or other extraordinary expenses not incurred in the ordinary course
of business. The Adviser will be entitled to reimbursement of fees waived or
remitted by the Adviser to the Fund. The total amount of reimbursement
recoverable by the Adviser (the "Reimbursement Amount") is the sum of all fees
previously waived or remitted by the Adviser to the Fund during any of the
previous five (5) years, less any reimbursement previously paid by the Fund to
the Adviser with respect to any waivers, reductions, and payments made with
respect to the Fund. The Reimbursement Amount may not include any additional
charges or fees, such as interest accruable on the Reimbursement Amount. Such
reimbursement will be authorized by the Board of Directors.
Pursuant to the terms of the Advisory Agreement, the Investment Advisor pays all
expenses incurred by it in connection with its activities thereunder, except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The services furnished by the Investment Adviser under the Advisory
Agreement are not exclusive, and the Investment Adviser is free to perform
similar services for others.
MANAGEMENT-RELATED SERVICES
ADMINISTRATION
Pursuant to an Administrative Services Agreement with the Company dated
______________________, 1999 (the "Administrative Agreement"), Commonwealth
Shareholder Services, Inc. ("CSS"), 1500 Forest Avenue, Suite 223, Richmond,
Virginia 23229, serves as administrator of the Fund and supervises all aspects
of the operation of the Fund except those performed by the Investment Adviser.
John Pasco, III, Chairman of the Board of the Company, is the sole owner of CSS.
CSS provides certain administrative services and facilities for the Fund,
including preparing and maintaining certain books, records, and monitoring
compliance with state and federal regulatory requirements.
As administrator, CSS receives an asset-based administrative fee, computed daily
and paid monthly, at the annual rate of 0.20% on the first $250 million of
average daily net assets of the Fund; 0.175% on average daily net assets of the
Fund in excess of $250 million and not more than $500 million; 0.15% on average
daily net assets of the Fund in excess of $500 million and not more than $1
billion; and 0.10% on average daily net assets of the Fund in excess of $1
billion, subject to a minimum amount of $15,000 per year for a period of two
years from the date of the Administrative Agreement. Thereafter, the minimum
administrative fee is $30,000 per year. CSS receives an hourly rate, plus
certain out-of-pocket expenses, for shareholder servicing and state securities
law matters.
CUSTODIAN AND ACCOUNTING SERVICES
Pursuant to a Custodian Agreement with the Company dated ___________________,
1999, Star Bank acts as the custodian of the Fund's securities and cash.
Portfolio securities purchased for the Fund are maintained in the custody of the
custodian and may be entered into the Federal Reserve Book Entry System of the
security depository system of the Depository Trust Corporation. Star Bank
maintains a separate account in the name of the Fund. Star Bank is responsible
for holding and making payments of all cash received for the account of the
Fund.
Star Bank may make payments from the Fund for the purchase of securities,
payment of interest, taxes, fees and other operating expenses. As the custodian,
Star Bank is authorized to endorse and collect checks, drafts or other orders
for payment and is responsible for the release or delivery of portfolio
securities and monitoring compliance with the regulatory requirements of the
Treasury Department, Internal Revenue Service and the laws of the states. Star
Bank is compensated on the basis of an annual fee based on the market value of
assets of the Fund and fees for certain transactions.
Pursuant to an Accounting Service Agreement dated ______________, 1999 (the
"Accounting Agreement"), Star Bank, 425 Walnut Street, P.O. Box 1118,
Cincinnati, Ohio 45201-1118, is responsible for accounting relating to the Fund
and its investment transactions; maintaining certain books and records of the
Fund; determining daily the net asset value per share of the Fund; and preparing
security position, transaction and cash position reports. Star Bank also
monitors periodic distributions of gains or losses on portfolio sales and
maintains a daily listing of portfolio holdings. Star Bank is responsible for
providing expenses accrued and payment reporting services, tax-related financial
information to the Company, and for monitoring compliance with the regulatory
requirements relating to maintaining accounting records.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with the Company dated
____________________, 1999, Fund Services, Inc. ("FSI") acts as the Company's
transfer, dividend disbursing and redemption agent. FSI is located at 1500
Forest Avenue, Suite 111, Richmond, VA 23229. John Pasco, III, Chairman of the
Board of the Company owns one-third of the voting shares of FSI, and therefore,
FSI may be deemed to be an affiliate of the Company and CSS.
FSI provides certain shareholder and other services to the Company, including
furnishing account and transaction information and maintaining shareholder
account records. FSI is responsible for processing orders for shares and
ensuring appropriate participation with the National Securities Clearing
Corporation for transactions in the Fund's shares. FSI receives and processes
redemption requests and administers distribution of redemption proceeds. FSI
also handles shareholder inquiries and provides routine account information. In
addition, FSI prepares and files appropriate tax related information concerning
dividends and distributions to shareholders.
Under the Transfer Agency Agreement, FSI is compensated pursuant to a schedule
of services, and is reimbursed for out-of-pocket expenses. The schedule calls
for a minimum payment of $12,000 for the first year and $16,500 per year
thereafter.
DISTRIBUTOR
First Dominion Capital Corp. ("FDCC"), located at 1500 Forest Avenue, Suite 223,
Richmond, Virginia 23229, serves as the principal underwriter and national
distributor for the shares of the Fund pursuant to a Distribution Agreement
dated ____________, 1999 (the "Distribution Agreement"). John Pasco, III,
Chairman of the Board of the Company, owns 100% of FDCC, and is its President,
Treasurer and a Director. FDCC is registered as a broker-dealer and is a member
of the National Association of Securities Dealers, Inc. (the "NASD"). The
offering of the Fund's shares is continuous.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Tait, Weller & Baker, audit the Company's
annual financial statements, assists in the preparation of certain reports to
the U.S. Securities and Exchange Commission (the "SEC"), and prepares the
Company's tax returns. Tait, Weller & Baker is located at 8 Penn Center Plaza,
Suite 800, Philadelphia, PA 19103.
PORTFOLIO TRANSACTIONS
It is the policy of the Investment Adviser, in placing orders for the purchase
and sale of the Fund's securities, to seek to obtain the best price and
execution for its securities transactions, taking into account such factors as
price, commission, where applicable, (which is negotiable in the case of U.S.
national securities exchange transactions but which is generally fixed in the
case of foreign exchange transactions), size of order, difficulty of execution
and the skill required of the executing broker/dealer. After a purchase or sale
decision is made by the Investment Adviser, the Investment Adviser arranges for
execution of the transaction in a manner deemed to provide the best price and
execution for the Fund.
Exchange-listed securities are generally traded on their principal exchange
unless another market offers a better result. Securities traded only in the
over-the-counter market may be executed on a principal basis with primary market
makers in such securities, except for fixed price offerings and except where the
Fund may obtain better prices or executions on a commission basis or by dealing
with other than a primary market maker.
The Investment Adviser, when placing transactions, may allocate a portion of the
Fund's brokerage to persons or firms providing it with investment
recommendations or statistical, research or similar services useful in its
decision making process. The term "investment recommendations or statistical,
research or similar services" means (1) advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and (2)
analyses and reports concerning issuers, industries, securities, economic
factors and trends, and portfolio strategy. The Investment Adviser may cause the
Fund to pay a commission higher than that charged by another broker in
consideration of such research services. Such services are one of the many ways
the Investment Adviser can keep abreast of the information generally circulated
among institutional investors by broker-dealers. While this information is
useful in varying degrees, its value is indeterminable. Such services received
on the basis of transactions for the Fund may be used by the Investment Adviser
for the benefit of the Fund and other clients, and the Fund may benefit from
such transactions effected for the benefit of other clients.
While there is no formula, agreement or undertaking to do so, and when it can be
done consistent with the policy of obtaining best price and execution, the Fund
may consider sales of its shares as a factor in the selection of brokers to
execute portfolio transactions. The Investment Adviser is not authorized, when
placing portfolio transactions for the Fund, to pay a brokerage commission in
excess of that which another broker might have charged for executing the same
transaction solely on the basis of execution. Except for implementing the policy
stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
PORTFOLIO TURNOVER
Average annual portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less. A higher
portfolio turnover rate involves greater transaction expenses to a fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed. The Investment Adviser makes purchases and sales
for the Fund's portfolio whenever necessary, in its opinion, to meet the Fund's
objective. The Investment Adviser anticipates that the Fund's average annual
portfolio turnover rate will be 100%.
CAPITAL STOCK AND DIVIDENDS
The Company is a series investment company that currently offers one class of
shares. The Company is authorized to issue 500,000,000 shares of common stock,
with a par value of $0.01 per share. The Company has currently allocated
50,000,000 shares to the Fund and 250,000,000 shares to other series of the
Company. Each share has equal dividend, voting, liquidation and redemption
rights. There are no conversion or preemptive rights. Shares of the Fund do not
have cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect all of the Directors
if they choose to do so. In such event, the holders of the remaining shares will
not be able to elect any person to the Board of Directors. Shares will be
maintained in open accounts on the books of the Transfer Agent.
If they deem it advisable and in the best interests of shareholders, the
Directors may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act or as
permitted by the Directors. Upon the Company's liquidation, all shareholders of
a series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Company will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of the Automatic Investment Plan described below. Shareholders may rely
on these statements in lieu of stock certificates.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES:
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. Under certain circumstances the Company or the
Investment Adviser may waive the minimum initial investment for purchases by
officers, Directors, and employees of the Company and its affiliated entities
and for certain related advisory accounts and retirement accounts (such as
IRAs). The Fund may also change or waive policies concerning minimum investment
amounts at any time.
SELLING SHARES:
You may sell your shares by giving instructions to the Transfer Agent by mail or
by telephone.
The Board of Directors may suspend the right of redemption or postpone the date
of payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such exchange is closed for other than
weekends and holidays, (b) the SEC has by order permitted such suspension, or
(c) an emergency, as defined by rules of the SEC, exists during which time the
sale of Fund shares or valuation of securities held by the Fund are not
reasonably practicable.
SMALL ACCOUNTS: Due to the relative higher cost of maintaining small accounts,
the Fund may deduct $50 per year from your account, if, as a result of
redemption or exchange of shares, the total investment remaining in the account
has a value of less than $1,000. Shareholders will receive 30 days' written
notice to increase the account value above $1,000 before the fee is to be
deducted. A decline in the market value of your account alone would not require
you to bring your investment up to this minimum.
SPECIAL SHAREHOLDER SERVICES
As described briefly in the Prospectus, the Fund offers the following
shareholder services:
Regular Account: The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. Simply
use the Account Application provided with the Prospectus to open your account.
Telephone Transactions: A shareholder may redeem shares or transfer into another
fund by telephone if this service is requested at the time the shareholder
completes the initial Account Application. If you do not elect this telephone
service at that time, you may do so at a later date by putting your request in
writing to the Transfer Agent and having your signature guaranteed.
The Fund employs reasonable procedures designed to confirm the authenticity of
instructions communicated by telephone and, if the procedures are followed the
Fund will not be liable for any losses due to unauthorized or fraudulent
transactions. As a result of this policy, a shareholder authorizing telephone
redemption bears the risk of loss which may result from unauthorized or
fraudulent transactions which the Fund believes to be genuine. When requesting a
telephone redemption or transfer, the shareholder will be asked to respond to
certain questions designed to confirm the shareholder's identify as a
shareholder of record. Cooperation with these procedures helps to protect the
account and the Fund from unauthorized transactions.
Invest-A-Matic Accounts: Any shareholder may utilize this feature, which
provides for automatic monthly investments into your account. Upon your request,
the Transfer Agent will withdraw a fixed amount each month from a checking or
savings account for investment into the Fund. This does not require a commitment
for a fixed period of time. A shareholder may change the monthly investment,
skip a month or discontinue the Invest-A-Matic Plan as desired by notifying the
Transfer Agent.
Individual Retirement Account ("IRA"): All wage earners under 70-1/2, even those
who participate in a company sponsored or government retirement plan, may
establish their own IRA. You can contribute 100% of your earnings up to $2,000.
A spouse who does not earn compensation can contribute up to $2,000 per year to
his or her own IRA. The deductibility of such contributions will be determined
under the same rules as for contributions made by individuals with earned
income. A special IRA program is available for corporate employees under which
the employers may establish IRA accounts for their employees in lieu of
establishing corporate retirement plans. Known as SEP-IRA's (Simplified Employee
Pension-IRA), they free the corporate employer of many of the recordkeeping
requirements of establishing and maintaining a corporate retirement plan trust.
If a shareholder has received a distribution from another qualified retirement
plan, all or part of that distribution may be rolled over into your Fund IRA. A
rollover contribution is not subject to the limits on annual IRA contributions.
By acting within applicable time limits of the distribution you can continue to
defer federal income taxes on your rollover contribution and on any income that
is earned on that contribution.
Roth IRA: A Roth IRA permits certain taxpayers to make a non-deductible
investment of up to $2,000 per year. Provided an investor does not withdraw
money from his or her Roth IRA for a five-year period, beginning with the first
tax year for which a contribution was made, deductions from the investor's Roth
IRA would be tax free after the investor reaches the age of 59-1/2. Tax free
withdrawals may also be made before reaching the age of 59-1/2 under certain
circumstances. Please consult your financial and/or tax professional as to your
eligibility to invest in a Roth IRA. An investor may not make a contribution to
both a Roth IRA and a regular IRA in any given year. An annual limit of $2,000
applies to contributions to regular and Roth IRAs. For example, if a taxpayer
contributes $2,000 to a regular IRA for a year, he or she may not make any
contribution to a Roth IRA for that year.
How to Establish Retirements Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan accounts.
Each plan's custodian charges nominal fees in connection with plan establishment
and maintenance. These fees are detailed in the plan documents. A shareholder
may wish to consult with an attorney or other tax adviser for specific advice
concerning tax status and plans.
Exchange Privilege: Shareholders may exchange their shares for shares of a
suitable money market fund. The account must meet the minimum investment
requirements (currently $2,500). A written request must have been completed and
be on file with the Transfer Agent. To make an exchange, an exchange order must
comply with the requirements for a redemption or repurchase order and must
specify dollar amount or the number of shares to be exchanged. An exchange will
take effect as of the next determination of the Fund's NAV per share (usually at
the close of business on the same day). The Transfer Agent may charge the
shareholder's account a $10 service fee each telephone exchange. The Company
reserves the right to limit the number of exchanges or to otherwise prohibit or
restrict shareholders from making exchanges at any time, without notice, should
the Company determine that it would be in the best interest of its shareholders
to do so. For tax purposes an exchange constitutes the sale of the shares of the
fund from which you are redeeming and the purchase of shares of the fund into
which you are exchanging. Consequently, the sale may involve either a capital
gain or loss to the shareholder for federal income tax purposes.
TAX STATUS
DISTRIBUTIONS AND TAXES
Distributions of net investment income: The Fund receives income generally in
the form of interest and other income on their investments. This income, less
expenses incurred in the operation of the Fund, constitutes net investment
income from which dividends may be paid to you. Any distributions by the Fund
from such income will be taxable to you as ordinary income, whether you take
them in cash or reinvest them in additional shares.
Distribution of capital gains: The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminated excise or income taxes on the Fund.
Effect of foreign investments on distributions: Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
Fund. Similarly, foreign exchange losses realized by the Fund on the sale of
debt securities are generally treated as ordinary losses. These gains when
distributed will be taxable to you as ordinary dividends, and any losses will
reduce the Fund's ordinary income otherwise available for distribution to you.
This treatment could increase or reduce the Fund's ordinary income distributions
to you, and may cause some or all of its previously distributed income to be
classified as return of capital.
The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of its total assets at the end of the
fiscal year are invested in securities of foreign corporations, it may elect to
pass-through to you your pro rata share of foreign taxes paid by it. If this
election is made, the year-end statement you receive from the Fund will show
more taxable income than was actually distributed to you. However, you will be
entitled to either deduct your share of such taxes in computing your taxable
income or (subject to limitations) claim a foreign tax credit for such taxes
against your U.S. federal income tax. The Fund will provide you with the
information necessary to complete your individual income tax return if it makes
this election.
Information on the tax character of distributions: The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of the tax status for federal income
tax purposes shortly after the close of each calendar year. If you have not held
Fund shares for a full year, the Fund may designate and distribute to you, as
ordinary income or capital gain, a percentage of income that is not equal to the
actual amount of such income earned during the period of your investment in the
Fund.
Election to be taxed as a regulated investment company: The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the Fund generally pay no federal income tax on the income and gains it
distributes to you. The Board reserves the right not to maintain the
qualifications of the Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the Fund's earnings and profits.
Excise tax distribution requirements: To avoid federal excise taxes, the
Internal Revenue Code requires a fund to distribute to shareholders by December
31 of each year, at a minimum the following amounts: 98% of its taxable ordinary
income earned during the twelve month period ending October 31, and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
Redemption of Fund shares: Redemption and exchanges of Fund shares are taxable
transactions for federal and state income tax purposes. If you redeem or
exchange your Fund shares for shares of a different fund within the Company, the
IRS will require that you report a gain or loss on your redemption or exchange.
The gain or loss that you realize will be either a long-term or short-term
capital gain or loss depending on how long you held your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in such Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you purchase.
U.S. government obligations: Many states grant tax-free status to dividends paid
to shareholders from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that must
be met by the Fund. Investments in Government National Mortgage Association or
Federal National Mortgage Association securities, bankers' acceptances,
commercial paper and repurchase agreements collateralized by U.S. government
securities do not generally qualify for tax-free treatment. The rules on
exclusion of this income are different for corporations.
Dividends received deduction for corporations: Because the Fund's income
includes corporate dividends, if the shareholder is a corporation, a portion of
its distributions may qualify for the intercorporate dividends-received
deduction. You will be permitted in some circumstances to deduct these qualified
dividends, thereby reducing the tax that you would otherwise be required to pay
on these dividends. The dividends-received deduction will be available only with
respect to dividends designated by the Fund as eligible for such treatment. All
dividends (including the deducted portion) must be included in your alternative
minimum taxable income calculations.
Investment in complex securities: The Fund may invest in complex securities,
such as original issue discount obligations, the shares of passive foreign
investment companies and others. These investments may be subject to numerous
special and complex tax rules. These rules could affect whether gains and losses
recognized by the Fund are treated as ordinary income or capital gain,
accelerate the recognition of income to the Fund and/or defer the Fund's ability
to recognize losses, and, in limited cases, subject the Fund to U.S. federal
income tax on income from certain of its foreign securities. In turn, these
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to that of
other mutual funds and to relevant indices, in advertisements or in reports to
shareholders, The Fund states performance in terms of total return or yield.
Both "total return" and "yield" figures are based on the historical performance
of the Fund, show the performance of a hypothetical investment and are not
intended to indicate future performance.
YIELD INFORMATION
From time to time, the Fund may advertise a yield figure. A portfolio's yield is
a way of showing the rate of income the portfolio earns on its investments as a
percentage of the portfolio's share price. Under the rules of the SEC, yield
must be calculated according to the following formula:
6
YIELD = 2[( A-B + 1) -1]
CD
Where:
A = dividends and interest earned during the period.
B = expenses accrued for the period (net of reimbursements).
C = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
D = the maximum offering price per share on the last day of the period.
A fund's yield, as used in advertising, is computed by dividing the fund's
interest and dividend income for a given 30-day period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by a fund's net asset value ("NAV") at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock and
bond mutual funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation. Income calculated for the purpose
of calculating a fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yield quoted for a
fund may differ from the rate of distributions the fund paid over the same
period or the rate of income reported in the fund's financial statements.
TOTAL RETURN PERFORMANCE
Under the rules of the SEC, fund advertising performance must include total
return quotes, "T" below, calculated according to the following formula:
n
P(1+ T) = ERV
Where:
P = a hypothetical initial payment $1,000
T = average annual total return
n = number of years (l, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods (or fractional portion
thereof).
The average annual total return will be calculated under the foregoing formula
and the time periods used in advertising will be based on rolling calendar
quarters, updated to the last day of the most recent quarter prior to submission
of the advertising for publication, and will cover prescribed periods. When the
period since inception is less than one year, the total return quoted will be
the aggregate return for the period. In calculating the ending redeemable value,
all dividends and distributions by the Fund are assumed to have been reinvested
at NAV as described in the prospectus on the reinvestment dates during the
period. Total return, or "T" in the formula above, is computed by finding the
average annual compounded rates of return over the prescribed periods (or
fractional portions thereof) that would equate the initial amount invested to
the ending redeemable value.
The Fund may also from time to time include in such advertising an aggregate
total return figure or an average annual total return figure that is not
calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. The
Fund may quote an aggregate total return figure in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, Russell Indices, the
Value Line Composite Index, the Lehman Brothers Bond, Government Corporate,
Corporate and Aggregate Indices, Merrill Lynch Government & Agency Index,
Merrill Lynch Intermediate Agency Index, Morgan Stanley Capital International
Europe, Australia, Far East Index or the Morgan Stanley Capital International
World Index. For such purposes, the Fund calculates its aggregate total return
for the specified periods of time by assuming the investment of $1,000 in shares
of the Fund and assuming the reinvestment of each dividend or other distribution
at NAV on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. To calculate its average annual
total return, the aggregate return is then annualized according to the SEC's
formula for total return quotes outlined above.
The Fund may also advertise the performance rankings assigned by various
publications and statistical services, including but not limited to, SEI, Lipper
Mutual Fund Performance Analysis, Intersec Research Survey of Non-U.S. Equity
Fund Returns, Frank Russell International Universe, and any other data which may
be reported from time to time by Dow Jones & Company, Morningstar, Inc., Chase
Investment Performance, Wilson Associates, Stanger, CDA Investment Technologies,
Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor National Index, or
IBC/Donaghue's Average U.S. Government and Agency, or as appears in various
publications, including but not limited to, The Wall Street Journal, Forbes,
Barron's Fortune, Money Magazine, The New York Times, Financial World, Financial
Services Week, USA today and other national or regional publications.
FINANCIAL INFORMATION
You can receive free copies of reports, request other information and discuss
your questions about GenomicsFund.com (the "Fund") by contacting the Fund
directly at:
THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
TELEPHONE: 1-800-527-9525
E-MAIL: [email protected]
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a) ARTICLES OF INCORPORATION.
(1) FORM OF 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. FORM OF 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 Sand811-8255), as filed with the SEC on
August 1, 1997.
b. FORM OF 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. FORM OF 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. FORM OF Re: The creation of the GenomicsFund.com dated December 9,
1999 is filed herewith as Exhibit 23(a)(2)(d).
(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.
1. Specimen Share Certificates.
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. 33-29289 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 filed herewith as Exhibit 23
(c)(1)(4).
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.
FORM OF 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.
FORM OF 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.
FORM OF Agreement dated October 14, 1997 between CSI Capital
Management Inc. and the Registrant is herein incorporated byreference
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 No. 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 No. 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 No. 811-
8255), as filed with the SEC on December 30, 1998.
(6) FORM OF Agreement between xGENx, LLC and the Registrant is filed
herweith as Exhibit 23(d)(6)
(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.
(f) BONUS OR PROFIT SHARING CONTRACTS.
Not Applicable.
(g) CUSTODIAN AGREEMENTS.
(1) Re: Sand Hill Portfolio Manager Fund.
FORM OF Agreement dated August 19, 1997 between Star Bank, N.A. 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.
(2) Re: CSI Equity Fund and CSI Fixed Income Fund. FORM OF Agreement
dated October 14, 1997 between Star Bank, N.A. 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.
(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) RE: The New Market Fund.
Letter agreement dated August 21, 1998 adding the New Market Fund
series to the agreement dated October 14,1997 with CSI Equity Fund and
CSI Fixed Income Fund series is hereby incorporated by reference to
Post-Effective Amendment No. 9 to the Registrant's Regfistration
Statement on Form N-1A (File No. 811-8255), af filed with the SEC
on December 29, 1999.
(5) 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.
(h) OTHER MATERIAL CONTRACTS.
(1) Transfer Agency.
a. FORM OF 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.
(2) Administrative Services.
a. Re: Sand Hill Portfolio Manager Fund.
FORM OF 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.
FORM OF 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.
FORM OF 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.
FORM OF Agreement between Commonwealth Shareholder Services,
Inc. and the Registrant is filed herewith as Exhibit 23(h)
(2)(f).
(3) Fund Accounting Service.
a. Re: Sand Hill Portfolio Manager Fund.
FORM OF Agreement dated August 18, 1997 between Star Bank,
N.A. and the Registrant is herein incorporated by reference to
Post-Effective Amendment Nos. 2/2 to 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 and CSI Fixed Income Fund.
FORM OF Agreement dated October 14, 1997 between Star Bank
N.A. 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. Letter agreement dated August 21, 1998 adding the New Market
Fund series to the agreement dated October 14,1997 with CSI
Equity Fund and CSI Fixed Income Fund series is hereby
incorporated by reference to Post-Effective Amendment No. 9 to
the Registrant's Regfistration Statement on Form N-1A (File No.
811-8255), af filed with the SEC on December 29, 1999.
(4) Accounting Agency.
a. Re: Third Millennium Russia Fund.
FORM OF 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.
(5) FORM OF 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.
(i) LEGAL OPINION.
(1) Opinion of Stradley, Ronon, Stevens & Young, LLP dated April 22,
1998 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.
(2) Opinion of Stradley, Ronon, Stevens & Young LLP dated January 7, 2000
is filed herewith as Exhibit 23(i)(2).
(k) OMITTED FINANCIAL STATEMENTS.
Not Applicable.
(l) INITIAL CAPITAL AGREEMENTS.
Not applicable.
(m) RULE 12B-1 PLAN.
(1) Re: Third Millennium Russia Fund.
FORM OF 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.
FORM OF 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
FORM OF Plan of Distribution is filed herewith as Exhibit 23(m)(3).
(n) RULE 18F-3 PLAN Not Applicable.
(o) 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.
(p) CODES OF ETHICS.
The Code of Ethics of the Registrant will be filed by future
Post-Effective Amendment.
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.
Sand Hill Advisors, Inc., the investment advisor 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.
CSI Capital Management, Inc., ("CSI") the investment advisor 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.
Third Millennium Investment Advisors, LLC, the investment advisor to
the Third Millennium Russia Fund, Virginia Management Investment Corporation,
the investment manager to provides investment advisory services consisting of
portfolio management for a variety of individuals and institutions and as of
December 21, 1999, had approximately $1 million in assets under management.
Virginia Management Investment Corporation, the investment manager to the
New Market Fund is a newly formed advisor formed for the purpose of advising
Registered Investment Companies. The London Company of Virginia (The London
Company") is the investment advisor 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.
xGENx, LLC, the investment advisor to the GenomicsFund.com is a newly
formed advisor 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
advisors, and each director, officer or partner of such investment advisors, 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 advisor's Form ADV listed opposite the investment
advisor'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 Pending, will be supplied
at a later filing.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The Registrant's underwriter, First Dominion Capital Corp., also acts
as underwriter to Vontobel Funds, Inc.
(b) Name and Principal Position and Offices Positions and
Business Address with Underwriter Offices with
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
(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 advisor, as follows:
Fund: Sand Hill Portfolio Manager Fund
Advisor: 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
Advisor: CSI Capital Management
Location: 445 Bush Street, 5th Floor
San Francisco, CA 94108.
Fund: Third Millennium Russia Fund
Advisor: Third Millennium Investment Advisors, LLC:
Location: 515 Madison Avenue, 24th Floor
NY, NY 10022.
Fund: New Market Fund
Advisor: The London Company
Location: Riverfront Plaza, West Tower
901 E. Byrd Street, Suite 350A
Richmond, VA 23219.
Fund: GenomicsFund.com
Advisor: xGENx, LLC
Location: 555 Quince Orchard Road, Suite 606
Gaithersburg, MD 20878
(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:
Funds: Sand Hill Portfolio Manager Fund
CSI Equity Fund
CSI Fixed Income Fund
New Market Fund
GenomicsFund.com
Custodian Bank/Accounting
Services Agent: Star Bank, N.A.
Location: 425 Walnut Street
P.O. Box 1118
Cincinnati, OH 45201-1118.
Fund: Third Millennium Russia Fund
Custodian Bank/Accounting Brown Brothers Harriman & Co.
Services Agent: 40 Water Street
Location: Boston, MA 02109
(c) Shareholder Account Records (including share ledgers, duplicate
confirmations, duplicate account statements and applications forms) pertaining
to each of the Funds are maintained by their transfer agent, Fund Services,
Inc.:
1500 Forest Avenue, Suite 111
Richmond, VA. 23229.
(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 each of the Funds are
kept at their distributor, First Dominion Capital Corp., located at:
1500 Forest Avenue, Suite 223 Richmond, VA 23229.
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.
<PAGE>
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 7th day of January, 2000.
THE WORLD FUNDS, INC.
Fund
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 January 7, 2000
John Pasco, III Chief Executive
Officer and Chief
Financial Officer
/S/ SAMUEL BOYD, JR.* Director January 7, 2000
Samuel Boyd, Jr.
/S/ PAUL M. DICKENSON* Director January 7, 2000
Paul M. Dickinson
/S/ WILLIAM E. POIST* Director January 7, 2000
William E. Poist
/s/ John Pasco, III
------------------------
John Pasco, III
* By John Pasco, III, Attorney-in-Fact Pursuant to Powers-of-Attorney.
EXHIBIT INDEX EDGAR EXHIBIT #
Articles Supplementary EX-23(a)(2)(d)
Specimen Stock Certificate EX-23 (c)(1)(4)
Investment Advisory Agreement EX-23(d)(6)
Administrative Services EX-23(h)(2)(f)
Opinion of Counsel EX-23(i)(2)
Rule 12b-1 Plan EX-23(m)(3)
THE WORLD FUNDS, INC.
1500 Forest Avenue, Suite 223, Richmond, Va. 23229
804-285-8211 * 800-527-9500 * 804-285-8251 (fax)
VIA EDGAR
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
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. 9 under the 1933 Act
and Amendment No. 11 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") for the GenomicsFund.com, a new series of shares to be added
to the Registrant's Registration Statement. The Post-Effective Amendment will
become effective pursuant to paragraph (a)(2) seventy-five 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 215-564-8074, should you have
any questions or comments concerning this filing.
Sincerely,
/s/ Darryl S. Peay
Darryl S. Peay
Assistant Secretary
cc: Carylyn Gail Gilheany, Esq.
John Pasco, III
Steven M. Felsenstein, Esq.
<PAGE>
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
December 9, 1999, adopted resolutions classifying and allocating unallocated and
unissued Common Stock 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 to the Genomicsfund.com series of the Corporation.
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 ($500,000); and
(b) The total number of shares of stock which the Corporation is
authorized to issue, following the aforesaid actions, is Five Hundred Fifty
Million (5000,000,000) shares of Common Stock, with a par value of One Cent
($.01) per share, having an aggregate par value of Five Million Dollars
($5,000,000):
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);
THIRD: The shares of the GenomicsFund.com 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: The aforesaid shares of the GenomicsFund.com 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 9 day of December,
1999.
The World Funds, Inc.
By ______________________________
John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
- -----------------
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.
---------------------------------
John Pasco, III
Chairman and Chief Executive Officer
Attest:
- ---------------------
Assistant Secretary
Below is the text of a sample of the Stock Certificate for GenomicsFund.com
series of The World Funds, Inc.
CAPITAL STOCK OF CUSIP
THE WORLD FUNDS, INC.
GENOMICSFUND.COM
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
This Certifies that
Is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01
EACH OF THE CAPITAL STOCK OF
THE WORLD FUNDS, INC. GENOMICSFUND.COM
(hereinafter called the "Corporation") transferable on he books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Certificate of Incorporation and the bylaws of the Corporation and all
amendments thereto, to all of which the holder by acceptance hereof assents.
This certificate is not value until countersigned by the Transfer Agent.
Witness the facsimile signatures of the duly authorized officers of the
Corporation
Dated Attest By
Secretary Chairman
-3-
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated this of
____________, 1999 by and between THE WORLD FUNDS,
INC., a Maryland corporation (herein called the "Fund"), and xGENx, LLC, a
____[insert state]__ Limited Liability Company (the "Adviser") a registered
investment adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
consisting of several series of shares, each having its own investment policies;
and
WHEREAS, the Fund desires to retain the Adviser to furnish investment
advisory and management services to certain portfolios of the Fund, subject to
the control of the Fund's Board of Directors, and the Adviser is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints the Adviser to act as the Adviser
to the GenomicsFund.com series of the Fund (the "Portfolio") for the period and
on the terms set forth in this Agreement. The Adviser accepts such appointment
and agrees to furnish the services herein set forth, for the compensation herein
provided.
2. Duties of the Adviser. The Fund employs the Adviser to manage the
investments and reinvestment of the assets of the Portfolio, and to continuously
review, supervise, and administer the investment program of the Portfolio, to
determine in its discretion the securities to be purchased or sold, to provide
the Fund and Commonwealth Shareholder Services, Inc. (the "Administrator") with
records concerning the Adviser's activities which the Fund is required to
maintain, and to render regular reports to the Fund's Officers and Board of
Directors and to the Administrator concerning the Adviser's discharge of the
foregoing responsibilities.
The Adviser shall discharge the foregoing responsibilities subject to
the control of the Fund's Board of Directors and in compliance with such
policies as the Board may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Portfolio as set forth in its
Prospectus and Statement of Additional Information, as amended from time to
time, and applicable laws and regulations.
The Fund will instruct each of its agents and contractors to
cooperate in the conduct of the business of the Portfolio.
The Adviser accepts such employment and agrees, at its own expense,
to render the services and to provide the office space, furnishings, and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Adviser is authorized to select the brokers
and dealers that will execute the purchases and sales of portfolio securities
for the Portfolio and is directed to use its best efforts to obtain the best
price and execution for the Portfolio's transactions in accordance with the
policies of the Fund as set forth from time to time in the Portfolio's
Prospectus and Statement of Additional Information. The Adviser will promptly
communicate to the Fund and to the Administrator such information relating to
portfolio transactions as they may reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Fund or be in breach of
any obligation owing to the Fund under this Agreement, or otherwise, by reason
of its having directed a securities transaction on behalf of the Fund to an
unaffiliated broker-dealer in compliance with the provisions of Section 28(e) of
the Securities Exchange Act of 1934 or as described from time to time by the
Portfolio's Prospectus and Statement of Additional Information. Subject to the
foregoing, the Adviser may direct any transaction of the Portfolio to a broker
which is affiliated with the Adviser in accordance with, and subject to, the
policies and procedures approved by the Board of Directors of the Fund pursuant
to Rule 17e-1 under the 1940 Act. Such brokerage services are not deemed to be
provided under this Agreement.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser under this Agreement, the Portfolio shall pay to the Adviser, and the
Adviser will accept as full compensation a fee, accrued daily and payable within
five (5) business days after the last business day of each month, at an annual
rate of 1.00% on the first $250 million of average net assets; 0.875% on assets
in excess of $250 million and not more than $500 million of average net assets;
and 0.75% on average net assets over $500 million.
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the termination of this
Agreement.
5. Expenses. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with the management of the Fund.
Notwithstanding the foregoing, the Portfolio shall pay the expenses and costs of
the Portfolio for the following:
a. Taxes;
b. Brokerage fees and commissions with regard to
portfolio transactions;
c. Interest charges, fees and expenses of the
custodian of the securities;
d. Fees and expenses of the Fund's transfer agent and
the Administrator;
e. Its proportionate share of auditing and legal
expenses;
f. Its proportionate share of the cost of maintenance
of corporate existence;
g. Its proportionate share of compensation of
directors of the Fund who are not interested
persons of the Adviser as that term is defined by
law;
h. Its proportionate share of the costs of corporate
meetings;
i. Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
j. Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to
existing shareholders;
k. The Advisory fee payable to the Adviser, as
provided in paragraph 4 herein;
l. Costs of recordkeeping (other than investment
records required to be maintained by the Adviser),
and daily pricing;
m. Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
n. Expenses and taxes incident to the failure of the Portfolio to
qualify as a regulated investment company under the provisions
of the Internal Revenue Code of 1986, as amended, unless such
expenses and/or taxes arise from the negligence of another
party.
6. Reports. The Fund and the Adviser agree to furnish to each other, if
applicable, current information required for the preparation by such parties of
prospectuses, statements of additional information, proxy statements, reports to
shareholders, certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to their affairs as
each may reasonably request.
7. Status of the Adviser. The services of the Adviser to the Fund are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby.
Pursuant to comparable agreements, the Fund may also retain the
services of the Adviser to serve as the investment adviser of other series of
the Fund.
8. Books and Records. In compliance with the requirements of the 1940 Act,
the Adviser hereby agrees that all records which it maintains for the Fund are
the property of the Fund, and further agrees to surrender promptly to the Fund
any of such records upon the Fund's request. The Adviser further agrees to
preserve for the periods prescribed by the 1940 Act, and the rules or orders
thereunder, the records required to be maintained by the 1940 Act.
9. Limitation of Liability of Adviser. The duties of the Adviser shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Adviser hereunder. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or negligence on the part of the Adviser in the performance of its duties
or from reckless disregard by it of its obligations and duties under this
Agreement. (As used in this Paragraph 9, the term "Adviser" shall include
directors, officers, employees and other corporate agents of the Adviser as well
as that corporation itself).
10. Permissible Interests. Directors, agents, and shareholders of the Fund
are or may be interested in the Adviser (or any successor thereof) as directors,
officers, or shareholders, or otherwise; directors, officers, agents, and
shareholders of the Adviser are or may be interested in the Fund as directors,
officers, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in the Fund as a shareholder or otherwise. In addition,
brokerage transactions for the Fund may be effected through affiliates of the
Adviser if approved by the Fund's Board of Directors, subject to the rules and
regulations of the Securities and Exchange Commission, and the policies and
procedures adopted by the Fund.
11. License of Adviser's Name. The Adviser hereby authorizes the Fund to
use the name "GenomicsFund.com" for the Portfolio. The Fund agrees that if this
Agreement is terminated it will promptly redesignate the name of the Portfolio
to eliminate any reference to the name "GenomicsFund.com" or any derivation
thereof unless the Adviser waives this requirement in writing.
12. Duration and Termination. This Agreement shall become effective on the
date first above written subject to its approval by the shareholders of the
Portfolio and unless sooner terminated as provided herein, shall continue in
effect for two (2) years from that date. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of those members of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons of any such party (as that term is defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by vote of either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this Agreement may be terminated by
the Portfolio or by the Fund at any time on sixty (60) days written notice,
without the payment of any penalty, provided that termination must be authorized
either by vote of the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of the Portfolio or by the Adviser on sixty (60)
days written notice. This Agreement will automatically terminate in the event of
its assignment (as that term is defined in the 1940 Act).
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act).
14. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
address stated below, or at such other address as either party may advise in
writing:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
(b) To the Adviser at: 555 Quince Orchard Road
Suite 606
Gaithersburg, MD 20878
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Maryland, and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
17. 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
xGENx, LLC
BY:
Steve Newby
Chairman
THE WORLD FUNDS, INC.
BY:
John Pasco, III
Chairman
ADMINISTRATIVE SERVICES AGREEMENT
Administrative Services Agreement (the "Agreement") dated , 1999, by and
between THE WORLD FUNDS, INC.
(the "Fund"), a diversified, open-end management investment company, duly
organized as a corporation in accordance with the laws of the State of Maryland,
and COMMONWEALTH SHAREHOLDER SERVICES, INC. ("CSS"), a corporation duly
organized as a corporation in accordance with the laws of the Commonwealth of
Virginia.
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint CSS as its Administrative Services
Agent, for and on behalf of the GenomicsFund.com series (the "Portfolio"), to
perform certain recordkeeping and shareholder servicing functions required of a
duly registered investment company to comply with certain provisions of federal,
state and local law, rules and regulations, and, as is required, to assist the
Fund in preparing and filing certain financial reports, and further to perform
certain daily functions in connection with on-going operations of the Fund and
the Portfolio, and provide ministerial services to implement the investment
decisions of the Fund and the investment advisor of the Portfolio, Virginia
Management Investment Company (the "Manager"); and
WHEREAS, CSS is willing to perform such functions upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. CSS shall examine and review all records and documents of the
Portfolio pertaining to its duties under this Agreement in order to determine
and/or recommend how such records and documents shall be maintained.
Section 2. CSS shall, as necessary for such purposes, advise the Fund and its
agents of the information which is deemed to be "necessary" for the performance
of its duties under this Agreement, and upon receipt of necessary information
and Written or Oral Instructions from the Fund, shall maintain and keep current
such shareholder relations records.
Unless the information necessary to perform the above functions is furnished in
writing to CSS by the Fund or its agents (such as Custodians, Transfer Agents,
etc.), CSS shall incur no liability and the Fund shall indemnify and hold
harmless CSS from and against any liability arising from any discrepancy in the
information received by CSS and used in the performance by CSS of its duties.
It shall be the responsibility of the Fund to furnish CSS with the net asset
value per share, declaration, record and payment dates and amounts of any
dividends or income and any other special actions required concerning each of
its securities.
CSS shall maintain such shareholder records above mentioned as required by
regulation and as agreed upon between the Fund and CSS.
Section 3. The Fund shall confirm to the Fund's Transfer Agent all purchases and
redemptions of shares of the Portfolio effected through the Fund or its
distributor, as and when such orders are accepted by the Fund or an authorized
agent of the Fund designated for that purpose. CSS shall receive from the Fund's
Transfer Agent daily reports of share purchases, redemptions, and total shares
outstanding, and shall be accountable for the information contained in such
reports of purchases and redemptions when received. It is agreed by the parties
that the net asset value per share of the Fund will be calculated in accordance
with Rule 22c-1 under the Investment Company Act of 1940 and as otherwise
directed by the Board of Directors of the Fund.
CSS shall reconcile its records of outstanding shares and shareholder accounts
with the Fund's Transfer Agent periodically, and not less frequently than
monthly.
Section 4. CSS shall provide assistance to the Fund in the servicing of
shareholder accounts, which may include telephone and written conversations,
assistance in redemptions, exchanges, transfers and opening accounts as may be
required from time to time. CSS shall, in addition, provide such additional
administrative non-advisory management services as CSS and the Fund may from
time to time agree.
Section 5. The accounts and records maintained by CSS shall be the property of
the Fund, and shall be made available to the Fund, within a reasonable period of
time, upon demand. CSS shall assist the Fund's independent auditors, or any
other person authorized by the Fund or, upon demand, any regulatory body as
authorized by law or regulation, in any requested review of the Fund's accounts
and records but shall be reimbursed for all reasonable and documented expenses
and employee time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from the Fund of any necessary information, CSS
shall assist the Fund in organizing necessary data for the Fund's completion of
any necessary tax returns, questionnaires, periodic reports to shareholders and
such other reports and information requests as the Fund and CSS shall agree upon
from time to time.
Section 6. CSS and the Fund may from time to time adopt procedures they agree
upon, and, absent knowledge to the contrary, CSS may conclusively assume that
any procedure approved by the Fund or directed by the Fund, does not conflict
with or violate any requirements of Fund's Prospectuses, Articles of
Incorporation, By-Laws, registration statements, orders, or any rule or
regulation of any regulatory body or governmental agency. The Fund (acting
through its officers or other agents) shall be responsible for notifying CSS of
any changes in regulations or rules which might necessitate changes in the
Fund's procedures.
Section 7. CSS may rely upon the advice of the Fund and upon statements of the
Fund's lawyers, accountants and other persons believed by it in good faith to be
expert in matters upon which they are consulted, and CSS shall not be liable for
any actions taken in good faith upon such statements.
Section 8. CSS shall not be liable for any actions taken in good faith reliance
upon any authorized Oral Instructions, any Written Instructions, and certified
copy of any resolution of the Board of Directors of the Fund or any other
document reasonably believed by CSS to be genuine and to have been executed or
signed by the proper person or persons.
CSS shall not be held to have notice of any change of authority of any officer,
employee or agent of the Fund until receipt of notification thereof by the Fund.
The Fund shall indemnify and hold CSS harmless 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 any information provided to CSS by the Fund, or the failure of the
Fund to provide any information needed by CSS knowledgeably to perform its
functions hereunder. Also, the Fund shall indemnify and hold harmless CSS from
all claims and liabilities (including reasonable documented expenses for legal
counsel) incurred by or assessed against CSS in connection with the performance
of this Agreement, except such as may arise from CSS's own negligent action,
omission or willful misconduct; provided, however, that before confessing any
claim against it, CSS shall give the Fund reasonable opportunity to defend
against such claim in the name of the Fund or CSS or both.
Section 9. The Fund agrees to pay CSS compensation for its services and to
reimburse it for expenses, as set forth in the Schedule attached hereto, or as
shall be set forth in amendments to such schedule approved by the Fund's Board
of Directors and CSS. Section 10. Except as required by laws and regulations
governing investment companies, nothing contained in this Agreement is intended
to or shall require CSS, in any capacity hereunder, to perform any functions or
duties on any holiday or other day of special observance on which CSS is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day on which both the Fund and CSS
are open. CSS will be open for business on days when the Fund is open for
business and/or as otherwise set forth in the Fund's Prospectuses and Statements
of Additional Information.
Section 11. Either the Fund or CSS may give written notice to the other of the
termination of this Agreement, such termination to take effect at the time
specified in the notice, which time shall be not less than 90 days from the
giving of such notice. Such termination shall be without penalty.
Section 12. 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 at their last known address, except that Oral Instructions
may be given if authorized by the Board of the Fund and preceded by a
certificate from the Fund's secretary so attesting.
Notices to the Fund shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Notices to CSS shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Section 13. 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.
Section 14. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the written consent of
CSS, or by CSS without the written consent of the Fund, authorized or approved
by a resolution of its Board of Directors.
Section 15. For purposes of this Agreement, the terms Oral Instructions and
Written Instructions shall mean:
Oral Instructions: The term Oral Instruction shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to CSS in person or by telephone, telegram, telecopy, or other
mechanical or documentary means lacking a signature, by a person or persons
believed in good faith by CSS 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.
Written Instructions: The term Written Instruction shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to CSS in original writing containing original signatures or a copy
of such document transmitted by telecopy including transmission of such
signature believed in good faith by CSS to be the signature of a person
authorized by a resolution of the Board of Directors of the Fund to give Written
Instructions on behalf of the Fund.
The Fund shall file with CSS 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. This Agreement shall be governed by the laws of the State of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
THE WORLD FUNDS, INC.
By:
John Pasco, III
Chairman
COMMONWEALTH SHAREHOLDER SERVICES, INC.
By:
John Pasco, III
President
<PAGE>
SCHEDULE A TO
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
THE WORLD FUNDS, INC. AND
COMMONWEALTH SHAREHOLDER SERVICES, INC.
FOR THE
GenomicsFund.com
Pursuant to Section 9 of the Administrative Services Agreement,
dated , 1999, by and between The World Funds, Inc.
(the "Fund"), and Commonwealth Shareholder Services, Inc.
("CSS"), GenomicsFund. Com series of the Fund shall pay CSS a fee
calculated and paid monthly as follows:
A. For the performance of Blue Sky matters, CSS shall be paid at the rate of
$30 per hour of actual time used.
B. For shareholder servicing, CSS shall be paid at the rate of $30 per hour
of actual time used.
C. For all other administration, CSS shall be paid a fee at the rate of 0.2%
per annum of the average daily net assets of GenomicsFund.com series of
the Fund, payable monthly, with a minimum fee of $30,000.
D. In addition to the foregoing, the Fund shall reimburse CSS,
from the assets of the Portfolio, for the Portfolio's
proportionate share of general expenses incurred for the
Fund and for all expenses incurred by the Portfolio
individually. Such out-of-pocket expenses shall include,
but not be limited to: documented fees and costs of
obtaining advice of counsel or accountants in connection
with its services to the Fund; postage; long distance
telephone; special forms required by the Fund; any travel
which may be required in the performance of its duties to
the Fund; and any other extraordinary expenses it may incur
in connection with its services to the Fund.
1
Law Offices
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8074
January 7, 2000
The World Funds, Inc.
Suite 223
1500 Forest Avenue
Richmond, Virginia 23226
Re: Legal Opinion - Securities Act of 1933
Ladies and Gentlemen:
On July 8, 1998, we provided to The World Funds, Inc. (the "Fund"), a
series corporation organized under Maryland law, an opinion respecting shares of
common stock of the Fund registered under the Securities Act of 1933, as amended
(the "Securities Act"). In connection with that opinion, we examined the
Articles of Incorporation (the "Articles") of the Fund, the By-Laws of the Fund,
the resolutions adopted by the Fund's Board of Directors organizing the business
of the Fund, and its proposed form of Share Certificates (if any), all as
amended to date, and the various pertinent corporate proceedings we deem
material. We also examined the Notification of Registration and the Registration
Statements filed under the Investment Company Act of 1940 (the "Investment
Company Act") and the Securities Act, all as amended to date, as well as other
items we deemed material to that opinion.
We noted that the Fund is authorized by the Articles to issue five
hundred million (500,000,000) shares of common stock at a par value of $0.01 per
share. The Articles designated the Sand Hill Portfolio Manager Fund series of
the Fund, and authorized the issuance of fifty million (50,000,000) shares of
common stock of such series. Articles Supplementary also authorized the issuance
of fifty million (50,000,000) shares of common stock of the CSI Fixed Income
Fund series, and the issuance of fifty million (50,000,000) shares of common
stock of the CSI Equity Fund series. Finally, Articles Supplementary also
authorized the issuance of fifty million (50,000,000) shares of common stock of
the New Market Fund series, and the issuance of fifty million (50,000,000)
shares of common stock of the Third Millenium Russia Fund series. More recently,
the Fund filed Articles Supplementary to authorize the issuance of fifty million
(50,000,000) shares of common stock of the GenomicsFund.com series.
The Fund has filed with the U.S. Securities and Exchange Commission,
a registration statement under the Securities Act, which registration statement
is deemed to register an indefinite number of shares of the Fund pursuant to the
provisions of Rule 24f-2 under the Investment Company Act. You have advised us
that the Fund each year hereafter will timely file, a Notice pursuant to Rule
24f-2 perfecting the registration of the shares sold by the Fund during each
fiscal year during which such registration of an indefinite number of shares
remains in effect.
You have also informed us that the shares of the Fund have been, and
will continue to be, sold in accordance with the Fund's usual method of
distributing its registered shares, under which prospectuses are made available
for delivery to offerees and purchasers of such shares in accordance with
Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long as the
Fund remains a valid and subsisting entity under the laws of Maryland, and the
registration of an indefinite number of shares of the Fund remains effective,
the authorized shares of the five series of the Fund identified above, when
issued for the consideration set by the Board of Directors pursuant to the
Articles, and subject to compliance with Rule 24f-2, will be legally
outstanding, fully-paid, and non-assessable shares, and the holders of such
shares will have all the rights provided for with respect to such holding by the
Articles and the laws of the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any other,
as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:
---------------------------------------
Steven M. Felsenstein
THE WORLD FUNDS, INC.
Distribution Plan
Of
GENOMICSFUND.COM FUND
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 GenomicsFund.com 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 0.25% 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
- ---------, ----.
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:
First Dominion Capital Corp.
By:
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 Company's 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.
