THE WORLD FUNDS
1500 Forest Avenue, Suite 223 * P. O. Box 8687 * Richmond, Virginia 23229
(804) 285-8211 * (800) 527-9525 * Fax (804) 285-8251
March 1, 2000
FILED VIA EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Reference: The World Funds, Inc.
File Number 333-29289
Filed Pursuant to Rule 497(c)
Gentlemen:
Transmitted herewith for electronic filing on behalf of The World Funds, Inc.
(the "Company") please find enclosed, pursuant to Rule 497(c) under the
Securities Act of 1933, as amended, a copy of the Prospectus and Statement of
Additional Information of the GenomicsFund.com series of the Company dated
March 1, 2000.
Should you have any questions regarding the filing of such documents, please
call the undersigned.
Sincerely,
/s/ John Pasco, III
- --------------------
John Pasco, III
enclosures
<PAGE>
GenomicsFund.com
a series of
THE WORLD FUNDS, INC.
PROSPECTUS
Prospectus dated March 1, 2000
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.
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 of companies
principally engaged in genomics or genomic-related
businesses.
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.
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.
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").
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.
Because the Fund is new, it does not have historical performance data and is not
presenting historical information at this time.
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
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% (4)
(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.
(4) In the interest of limiting expenses of the Fund, the xGENx LLC (the
"Adviser") has entered into a contractual 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 for the first three years
of operations 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.
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
------ -------
Total expenses $193 $596
OBJECTIVES AND STRATEGIES
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.
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.
RISKS
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.
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 Adviser in evaluating,
selecting and monitoring the portfolio assets. If the 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 genomics companies such as those described above, and will
always have not less 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.
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.
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.
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. Steve Newby is President of the Adviser and is the
portfolio manager of the Fund since its inception on March 1, 2000. Since July
1990, Mr. Newby has been President of Newby & Company, a securities
broker/dealer firm located in Gaithersburg, Maryland. Newby & Company is a
member firm of the National Association of Securities Dealers ("NASD") and the
Securities Investor Protection Corporation ("SIPC").
The Adviser provides the Fund with investment management services, subject to
the supervision of the Board of Directors (the "Directors"), 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 A
contractual expense limitation agreement with the Company. Pursuant to the
agreement, the Adviser has agreed to waive or limit its fees and to assume other
expenses 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 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 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 $5,000 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 at 1-800-628-4077 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
at 800-628-4077 to learn if a signature guarantee is needed or to make sure that
it is completed appropriately in order to avoid any processing delays.
Redemption by Telephone - You may redeem your shares by telephone provided that
you request this service on your initial Account application. If you request
this service at a later date, you must send a written request along with a
signature guarantee to the Transfer Agent. Once your telephone authorization is
in effect, you may redeem shares by calling the Transfer Agent at 800-628-4077.
There is no charge for establishing this service, but the Transfer Agent will
charge your account a $10 service fee for each telephone redemption. The
Transfer Agent may change the amount of this service at any time without prior
notice.
Redemption by Wire - If you request that your redemption proceeds be wired to
you, please call your bank for instructions prior to writing or calling the
Transfer Agent. Be sure to include your name, Fund account number, your account
number at your bank and wire information from your bank in your request to
redeem by wire.
Signature Guarantees - To help protect you and the 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.
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
1-202-942-8090. Reports and other information regarding the Fund are available
on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and
copies of this information may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected], or by
writing the Commission's Public Reference Section, Washington D.C. 20549-0102.
For more information about the Fund, you may wish to refer to the Company's SAI
dated March 1, 2000 which is on file with the SEC and incorporated by reference
into this Prospectus. You can obtain a free copy of the SAI by writing to The
World Funds, Inc. , 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229, by
calling toll free (800) 527-9525 or by e-mail at: [email protected].
General inquiries regarding the Fund may also be directed to the above address
or telephone number.
(Investment Company Act File No. 811-8255)
<PAGE>
GenomicsFund.com
a series of
THE WORLD FUNDS, INC.
(THE "COMPANY")
1500 FOREST AVENUE, SUITE 223 RICHMOND, VA 23229
1-800-527-9525
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the current Prospectus of GenomicsFund.com (the
"Fund") dated March 1, 2000. The Prospectus may be obtained by writing to The
World Funds, Inc. 1500 Forest Avenue, Suite 223, Richmond, VA 23229 or by
calling 1-800-527-9525.
The date of this SAI is March 1, 2000.
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TABLE OF CONTENTS
GENERAL INFORMATION
DDITIONAL 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
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GENERAL INFORMATION
The World Funds, Inc. (the "Company") was organized under the laws of the State
of Maryland in May, 1997. The Company is an open-end management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act") commonly known as a "mutual fund". This SAI relates to
GenomicsFund.com (the "Fund"). The Fund is a separate investment portfolio or
series of the Company. See "Capital Stock and Dividends" in this SAI. The Fund
is "non-diversified" as that term is defined in the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The following information supplements the discussion of the Fund's investment
objectives and policies. The Fund's investment objective and fundamental
investment restrictions may not be changed without approval by vote of a
majority of the outstanding voting shares of the Fund. As used in this SAI,
"majority of outstanding voting shares" means the lesser of (1) 67% of the
voting shares of the Fund represented at a meeting of shareholders at which the
holders of 50% or more of the shares of the Fund are represented; or (2) more
than 50% of the outstanding voting shares of the Fund. The investment programs,
restrictions and the operating policies of the Fund that are not fundamental
policies can be changed by the Board of Directors of the Company (the
"Directors") without shareholder approval.
INVESTMENT OBJECTIVES
The Fund's investment objective is capital appreciation. All investments entail
some market and other risks and there is no assurance that the Fund will achieve
its investment objective. You should not rely on an investment in the Fund as a
complete investment program.
STRATEGIES AND RISKS
Under normal circumstances, the Fund invests primarily in equity securities and
securities convertible into equity securities.
The following discussion of investment techniques and instruments supplements,
and should be read in conjunction with, the investment information in the Fund's
Prospectus. In seeking to meet its investment objective, the Fund may invest in
any type of security whose characteristics are consistent with its investment
program described below.
INVESTMENT PROGRAMS
Depositary Receipts: The Fund may invest on a global basis to take advantage of
investment opportunities both within the U.S. and other countries. The Fund may
buy foreign securities directly in their principal markets or indirectly through
the use of depositary receipts. The Fund may invest in sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDR's),
and other similar depositary receipts. ADRs are issued by an American bank or
trust company and evidence ownership of underlying securities of a foreign
company. EDRs are issued in Europe, usually by foreign banks, and evidence
ownership of either foreign or domestic underlying securities. The foreign
country may withhold taxes on dividends or distributions paid on the securities
underlying the ADRs and EDRs, thereby reducing the dividend or distribution
amount received by the Fund.
Unsponsored ADRs and EDRs are issued without the participation of the issuer of
the underlying securities. As a result, information concerning the issuer may
not be as current as for sponsored ADRs and EDRs. Holders of unsponsored ADRs
generally bear all the costs of the ADR facilities. The depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored ADR.
Repurchase Agreements: As a means of earning income for periods as short as
overnight, the Fund may enter into repurchase agreements that are collateralized
by U.S. Government Securities. Under a repurchase agreement, a fund acquires a
security, subject to the seller's agreement to repurchase that security at a
specified time and price. The Fund considers a purchase of securities under
repurchase agreements to be a loan by the Fund. The Investment Adviser monitors
the value of the collateral to ensure that its value always equals or exceeds
the repurchase price and also monitors the financial condition of the seller of
the repurchase agreement. If the seller becomes insolvent, the ability to
dispose of the securities held as collateral may be impaired and the Fund may
incur extra costs. Repurchase agreements for periods in excess of seven days may
be deemed to be illiquid.
Debt Securities
The Fund may invest in investment grade debt securities; which are securities
rated Baa or higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or
higher by Standard & Poor's Ratings Group ("S&P") at the time of purchase or,
unrated securities which xGENx. LLC(the "Investment Adviser") believes to be of
comparable quality. The Fund does not currently intend to invest more than 5% of
its total assets in securities that are below investment grade or that are
unrated. Securities rated as Baa or BBB are generally regarded as having
adequate capacity to pay interest and repay principal.
Debt securities consist of bonds, notes, government and government agency
securities, zero coupon securities, convertible bonds, asset-backed and
mortgage-backed securities, and other debt securities whose purchase is
consistent with the Fund's investment objective. The Fund's investments may
include international bonds that are denominated in foreign currencies,
including the European Currency Unit or "Euro". International bonds are defined
as bonds issued in countries other than the United States. The Fund's
investments may include debt securities issued or guaranteed by supranational
organizations, corporate debt securities, bank or holding company debt
securities.
U.S. Government Securities: The Fund may invest in U.S. Government Securities
that are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, and securities guaranteed by the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the United
States; others, such as those of the Federal Home Loan Banks, are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those
of the Federal National Mortgage Association ("FNMA"), are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality.
Convertible Securities: The Fund may invest in convertible securities.
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are convertible either at a stated price or a stated rate (that is,
for a specific number of shares of common stock or other security). As with
other fixed income securities, the price of a convertible security generally
varies inversely with interest rates. While providing a fixed income stream, a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so they may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the price of a convertible security tends to rise as a
reflection of the value of the underlying common stock. To obtain such an
opportunity for a higher yield or capital appreciation, the Fund may have to pay
more for a convertible security than the value of the underlying common stock.
The Fund will generally hold common stock it acquires upon conversion of a
convertible security for so long as the Investment Adviser anticipates such
stock will provide the Fund with opportunities that are consistent with its
investment objective and policies.
Warrants: The value of warrants is derived solely from capital appreciation of
the underlying equity securities. Warrants have no voting rights, pay no
dividends and have no rights with respect to the assets of the corporation
issuing them. Warrants are options to purchase equity securities at a specific
price for a specific period of time. If the Fund does not exercise or dispose of
a warrant prior to its expiration, it will expire worthless. They do not
represent ownership of the securities, but only the right to buy them. Warrants
differ from call options in that warrants are issued by the underlying
corporation, whereas call options may be written by anyone.
Illiquid Securities: The Fund may invest up to 15% of its net assets in illiquid
securities. The term "illiquid securities" means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities. Illiquid
securities include generally, among other things, certain written
over-the-counter options, securities or other liquid assets as cover for such
options, repurchase agreements with maturities in excess of seven days, certain
loan participation interests and other securities whose disposition is
restricted under the federal securities laws.
Restricted Securities: The Fund may invest in restricted securities. Generally,
"restricted securities" are securities which have legal or contractual
restrictions on their resale. In some cases, these legal or contractual
restrictions may impair the liquidity of a restricted security; in others, the
legal or contractual restrictions may not have a negative effect on the
liquidity of the security. Restricted securities which are deemed by the
Investment Adviser to be illiquid will be included in the Fund's policy which
limits investments in illiquid securities.
Other Securities: The Board of Directors may, in the future, authorize the Fund
to invest in securities other than those listed in this SAI and in the
Prospectus, provided such investments would be consistent with the Fund's
investment objective and would not violate the Fund's fundamental investment
policies or restrictions.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies and Restrictions: The Funds have adopted the
following fundamental investment restrictions which cannot be changed without
approval by vote of a "majority of the outstanding voting securities" of each
Fund. As a matter of fundamental policy, each Fund may not:
(1) Invest in companies for the purpose of exercising management or control;
(2) Invest in securities of other investment companies except by purchase in
the open market involving only customary broker's commissions, or as
part of a merger, consolidation, or acquisition of assets;
(3) Purchase or sell commodities or commodity contracts;
(4) Invest in interests in oil, gas, or other mineral exploration or development
programs;
(5) Purchase securities on margin, except for use of short-term
credits as necessary for the clearance of purchase of portfolio
securities;
(6) Issue senior securities, (except the Funds may engage in transactions such
as those permitted by SEC release IC-10666);
(7) Act as an underwriter of securities of other issuers, except that each
Fund may invest up to 10% of the value of its total assets (at the time of
investment) in portfolio securities which the Fund might not be free to
sell to the public without registration of such securities under the
Securities Act of 1933, as amended (the "1933 Act"), or any foreign law
restricting distribution of securities in a country of a foreign issuer;
(8) Participate on a joint or a joint and several basis in any securities
trading account;
(9) Engage in short sales;
(10)Purchase or sell real estate, provided that liquid securities of companies
which deal in real estate or interests therein would not be
deemed to be an investment in real estate;
(11)Purchase the securities of any issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
as a result, more than 10% of the outstanding voting securities of any
issuer would be held by the Fund; and
(12)Make loans.
(13)Except as specified below, the Funds may only borrow money for temporary
or emergency purposes and then only in an amount not in excess of 5% of
the lower of value or cost of its total assets, in which case the Fund may
pledge, mortgage or hypothecate any of its assets as security for such
borrowing but not to an extent greater than 5% of its total assets. A Fund
may borrow money to avoid the untimely disposition of assets to meet
redemptions, in an amount up to 33 1/3% of the value of its assets,
provided that the Fund maintains asset coverage of 300% in connection with
borrowings, and the Fund does not make other investments while such
borrowings are outstanding.
(14)Concentrate its investments in any industry, except that the Fund may
concentrate in securities of companies which are genomic and
genomic-related companies as described in the prospectus.
Non-Fundamental Policies and Restrictions: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus and elsewhere in the SAI, the
Funds will be subject to the following investment restrictions, which are
considered non-fundamental and may be changed by the Board of Directors without
shareholder approval.
As a matter of non-fundamental policy, a Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities;
(2) Engage in arbitrage transactions; or
(3) Purchase or sell options.
In applying its investment policies and restrictions:
(1) A percentage restriction on investment or utilization of assets is
determined at the time an investment is made. A later change in percentage
resulting from changes in the value or the total cost of a Fund's assets
will not be considered a violation of the restriction; and
(2) Investments in certain categories of companies will not be considered to
be investments in a particular industry. Examples of these categories
include:
(i) financial service companies will be classified according to the end
users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry;
(ii) technology companies will be divided according to their products and
services, for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry;
and
(iii)utility companies will be divided according to their services, for
example, gas, gas transmission, electric and telephone will each be
considered a separate industry.
MANAGEMENT OF THE COMPANY
Directors and Officers:
The Company is governed by a Board of Directors (the "Directors"), which is
responsible for protecting the interest of shareholders. The Directors are
experienced business persons who meet throughout the year to oversee the
Company's activities, review contractual arrangements with companies that
provide services to the Fund, and review performance. The names and addresses of
the Directors and officers of the Company, together with information as to their
principal occupations during the past five years, are listed below. The
Directors who are considered "interested persons" as defined in Section 2(a)(19)
of the 1940 Act, as well as those persons affiliated with the Investment Adviser
and principal underwriter, and officers of the Company, are noted with an
asterisk (*).
Name, Address Position(s) Held Principal Occupation(s)
and Birthdate With Registrant During the Past 5 Years
*John Pasco, III Chairman, Director Mr.Pasco is Treasurer and
1500 Forest Avenue and Treasurer Director of Commonwealth
Richmond, VA 23229 Shareholder Services,
(4/10/45) Inc., 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
Potomac, MD. 20854 Operations and Accounting
(9/18/40) Division of the Potomac
Electric Power Company
since August, 1978;
and Director of Vontobel
Funds, Inc., a registered
investment company since
March, 1997. Mr. Boyd is
also a certified public
accountant.
William E. Poist Director Mr.Poist is a financial
5272 River Road and tax consultant
Bethesda, MD. 20816 through his firm,
(6/11/36) Management Consulting for
Professionals since 1968;
Director of Vontobel
Funds, Inc., a
registered investment
company
since March, 1997.
Mr.Poist is also a
certified public
accountant.
Paul M. Dickinson Director Mr. Dickinson is
8704 Berwickshire Drive President of Alfred J.
Richmond, VA 23229 Dickinson, Inc. Realtors
(11/11/47) since April, 1971; and
Director of Vontobel
Funds, Inc. a
registered investment
company since
March, 1997.
*Jane H. Williams Vice President of Ms. Williams is the
3000 Sand Hill Road the Company and Executive Vice President
Suite 150 President of the of SandHill Advisors,Inc.
Menlo Park, CA 94025 Sand Hill Portfolio since 1982.
(6/28/48) Manager Fund series
*Leland H. Faust President of Mr. Faust is President of
One Montgomery St. the CSI Equity CSI Capital Management,
Suite 2525 Fund and the CSI Inc.since 1978. Mr.Faust
San Francisco, CA 94104 Fixed Income Fund is also a Partner in the
(8/30/46) law Firm Taylor & Faust
since December, 1975.
*F. Byron Parker, Jr. Secretary Mr.Parker is Secretary of
810 Lindsay Court Commonwealth Shareholder
Richmond, Virginia 23229 Services, Inc., and First
(1/26/43) Dominion Capital Corp.
since 1986; Secretary of
Vontobel Funds, Inc., a
registered investment
company since
March, 1997; and Partner
in the law firm Mustian
& Parker.
*Franklin A. Trice, III Vice President of Mr.Trice is President of
P.O. Box 8535 the Company and Virginia Management
Richmond, VA 23226-0535 President of the Investment Corp. since
(12/25/63) New Market Fund May, 1998; and a
series. registered representative
of First Dominion Capital
Corp, the Company's
underwriter since
September, 1998. Mr.
Trice was a broker with
Scott & Stringfellow
from March, 1996 to May,
1998 and with Craigie,
Inc. from March, 1992 to
January, 1996.
*John T. Connor, Jr. Vice President of President of Third
515 Madison Ave., the Company and Millennium Investment
24th Floor President of the Advisors, LLC since
New York, NY 10022 Third Millennium April, 1998; and
(6/16/41) Russia Fund series Chairman of ROSGAL, a
Russian financial company
and of its affiliated
ROSGAL Insurance since
1993.
*Steven T. Newby Vice President of President of Newby & Co.,
555 Quince Orchard Rd. the Company and a NASD broker/dealer
Suite 606 President of since July, 1990;
Gaithersburg, MD 20878 GenomicsFund.com President of xGENx, LLC
(9/18/46) series since November, 1999.
Compensation of Directors: The Company does not compensate the Directors who are
officers or employees of the Investment Adviser. The "independent" Directors
receive an annual retainer of $1,000.00 and a fee of $200.00 for each meeting of
the Directors which they attend in person or by telephone. Directors are
reimbursed for travel and other out-of-pocket expenses. The Company does not
offer any retirement benefits for Directors.
For the fiscal period ended August 31, 1999, the Directors received the
following compensation from the Company:
Aggregate
Compensation Total
From the Fun Pension or Retirement Compensation
Name and Fiscal Year Ended Benefits Accrued as from the
Position Held August 31, 1999 Part of Fund Expenses Company(1)
- -------------- ----------------- --------------------- ----------
John Pasco, III,
Director 0 N/A 0
Samuel Boyd, Jr.,
Director 0 N/A $9,000
William E. Poist,
Director 0 N/A $9,000
Paul M. Dickinson,
Director 0 N/A $9,000
(1) This amount represents the aggregate amount of compensation paid to the
Directors for service on the Board of Directors for the Fund's fiscal year
ended August 31, 1999.
CONTROL PERSONS - PRINCIPAL HOLDERS OF SECURITIES
The Directors and officers of the Company, as a group, do not own 1% or more of
the Fund.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
xGENx, LLC (the "Investment Adviser"), 555 Quince Orchard Road, Suite 606,
Gaithersburg, Maryland 20878 manages the investments of the Fund pursuant to an
Investment Advisory Agreement (the "Advisory Agreement" ), dated March 1,2000.
The Advisory Agreement has an initial term of two years, and may be renewed
annually thereafter provided such renewal is approved by: 1) the Company's Board
of Directors; or 2) by a majority vote of the outstanding voting securities of
the Company, and in either event by and a majority of the Directors who are not
"interested persons" of the Company. The Advisory Agreements will automatically
terminate in the event of their "assignment," as that term is defined in the
1940 Act, and may be terminated without penalty at any time upon 60 days'
written notice to the other party by: (i) the majority vote of all the Directors
or by vote of a majority of the outstanding voting securities of the Fund; or
(ii) the Adviser.
The Investment Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 as amended, the "Advisers Act". The Investment
Adviser is an independent, privately-held corporation.
Steven T. Newby is President of the Investment Adviser and is the portfolio
manager of the Fund since its inception on March 1, 2000. Since July 1990, Mr.
Newby has been President of Newby & Company, a securities broker/dealer firm
located in Gaithersburg, Maryland. Newby & Company is a member firm of the
National Association of Securities Dealers ("NASD") and the Securities Investor
Protection Corporation ("SIPC").
Under the Advisory Agreement, the Investment Adviser, subject to the supervision
of the Directors, provides a continuous investment program for the Fund,
including investment research and management with respect to securities,
investments and cash equivalents, in accordance with the Fund's investment
objective, policies, and restrictions as set forth in the Prospectus and this
SAI. The Investment Adviser is responsible for effecting all security
transactions on behalf of the Fund, including the allocation of principal
business and portfolio brokerage and the negotiation of commissions. The
Investment Adviser also maintains books and records with respect to the
securities transactions of the Fund and furnishes to the Directors such periodic
or other reports as the Directors may request.
Under the Advisory Agreement, the monthly compensation paid to the Adviser is
accrued daily at an annual rate of 1.0% on the first $250 million of average
daily net assets of the Fund; 0.875% on average daily net assets of the Fund in
excess of $250 million and not more than $500 million; and , 0.75% on average
daily net assets of the Fund over $500 million.
In the interest of limiting expenses of the Fund, the Adviser has entered into
an expense limitation agreement with the Company. Pursuant to the agreement, the
Adviser has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses for the Fund is limited to 1.90%. The
limit does not apply to interest, taxes, brokerage commissions, other
expenditures capitalized in accordance with generally accepted accounting
principles or other extraordinary expenses not incurred in the ordinary course
of business. The Adviser will be entitled to reimbursement of fees waived or
remitted by the Adviser to the Fund. The total amount of reimbursement
recoverable by the Adviser (the "Reimbursement Amount") is the sum of all fees
previously waived or remitted by the Adviser to the Fund during any of the
previous five (5) years, less any reimbursement previously paid by the Fund to
the Adviser with respect to any waivers, reductions, and payments made with
respect to the Fund. The Reimbursement Amount may not include any additional
charges or fees, such as interest accruable on the Reimbursement Amount. Such
reimbursement will be authorized by the Directors.
Pursuant to the terms of the Advisory Agreement, the Investment Advisor pays all
expenses incurred by it in connection with its activities thereunder, except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The services furnished by the Investment Adviser under the Advisory
Agreement are not exclusive, and the Investment Adviser is free to perform
similar services for others.
MANAGEMENT-RELATED SERVICES
ADMINISTRATION
Pursuant to an Administrative Services Agreement with the Company dated March 1,
2000 (the "Administrative Agreement"), Commonwealth Shareholder Services, Inc.
("CSS"), 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229, serves as
administrator of the Fund and supervises all aspects of the operation of the
Fund except those performed by the Investment Adviser. John Pasco, III, Chairman
of the Board of the Company, is the sole owner of CSS. CSS provides certain
administrative services and facilities for the Fund, including preparing and
maintaining certain books, records, and monitoring compliance with state and
federal regulatory requirements.
As administrator, CSS receives an asset-based administrative fee, computed daily
and paid monthly, at the annual rate of 0.20% on the first $250 million of
average daily net assets of the Fund; 0.175% on average daily net assets of the
Fund in excess of $250 million and not more than $500 million; 0.15% on average
daily net assets of the Fund in excess of $500 million and not more than $1
billion; and 0.10% on average daily net assets of the Fund in excess of $1
billion, subject to a minimum amount of $15,000 per year for a period of two
years from the date of the Administrative Agreement. Thereafter, the minimum
administrative fee is $30,000 per year. CSS receives an hourly rate, plus
certain out-of-pocket expenses, for shareholder servicing and state securities
law matters.
CUSTODIAN AND ACCOUNTING SERVICES
Pursuant to a Custodian Agreement and Accounting Agency Agreement with the
Company dated October 28, 1998, Brown Brothers Harriman & Co. ("BBH"), 40 Water
Street, Boston Massachusetts, 02109, acts as the custodian of the Fund's
securities and cash and as the Fund's accounting services agent. With the
consent of the Company, BBH has designated The Depository Trust Company of New
York as its agent to secure a portion of the assets of the Fund. BBH is
authorized to appoint other entities to act as sub-custodians to provide for the
custody of foreign securities which may be acquired and held by the Fund outside
the U.S. Such appointments are subject to appropriate review by the Company's
Board of Directors. As the accounting services agent of the Fund, BBH maintains
and keeps current the books, accounts, records, journals or other records of
original entry relating to the Fund's business.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with the Company dated August 19, 1997,
Fund Services, Inc. ("FSI") acts as the Company's transfer, dividend disbursing
and redemption agent. FSI is located at 1500 Forest Avenue, Suite 111, Richmond,
VA 23229. John Pasco, III, Chairman of the Board of the Company owns one-third
of the voting shares of FSI, and therefore, FSI may be deemed to be an affiliate
of the Company and CSS.
FSI provides certain shareholder and other services to the Company, including
furnishing account and transaction information and maintaining shareholder
account records. FSI is responsible for processing orders for shares and
ensuring appropriate participation with the National Securities Clearing
Corporation for transactions in the Fund's shares. FSI receives and processes
redemption requests and administers distribution of redemption proceeds. FSI
also handles shareholder inquiries and provides routine account information. In
addition, FSI prepares and files appropriate tax related information concerning
dividends and distributions to shareholders.
Under the Transfer Agency Agreement, FSI is compensated pursuant to a schedule
of services, and is reimbursed for out-of-pocket expenses. The schedule calls
for a minimum payment of $12,000 for the first year and $16,500 per year
thereafter.
DISTRIBUTOR
First Dominion Capital Corp. ("FDCC"), located at 1500 Forest Avenue, Suite 223,
Richmond, Virginia 23229, serves as the principal underwriter and national
distributor for the shares of the Fund pursuant to a Distribution Agreement
dated August 19, 1997 (the "Distribution Agreement"). John Pasco, III, Chairman
of the Board of the Company, owns 100% of FDCC, and is its President, Treasurer
and a Director. FDCC is registered as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"). The offering of
the Fund's shares is continuous.
PLAN OF DISTRIBUTION
The Fund has a Plan of Distribution or "12b-1 Plan" (the "Plan") in accordance
with Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may finance
activities primarily intended to sell shares, provided that the categories of
the expenses are approved in advance by the Board of Directors of the Company
and the expenses paid under the Plan are incurred within the preceding 12 months
and accrued while the Plan is in effect.
The Plan provides that the Fund will pay a fee to the Distributor at an annual
rate of 0.25% of the Fund's average daily net assets. The fee is paid to the
Distributor as reimbursement for expenses incurred for distribution-related
activity.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Tait, Weller & Baker, audit the Company's
annual financial statements, assists in the preparation of certain reports to
the U.S. Securities and Exchange Commission (the "SEC"), and prepares the
Company's tax returns. Tait, Weller & Baker is located at 8 Penn Center Plaza,
Suite 800, Philadelphia, PA 19103.
PORTFOLIO TRANSACTIONS
It is the policy of the Investment Adviser, in placing orders for the purchase
and sale of the Fund's securities, to seek to obtain the best price and
execution for its securities transactions, taking into account such factors as
price, commission, where applicable, (which is negotiable in the case of U.S.
national securities exchange transactions but which is generally fixed in the
case of foreign exchange transactions), size of order, difficulty of execution
and the skill required of the executing broker/dealer. After a purchase or sale
decision is made by the Investment Adviser, the Investment Adviser arranges for
execution of the transaction in a manner deemed to provide the best price and
execution for the Fund.
Exchange-listed securities are generally traded on their principal exchange
unless another market offers a better result. Securities traded only in the
over-the-counter market may be executed on a principal basis with primary market
makers in such securities, except for fixed price offerings and except where the
Fund may obtain better prices or executions on a commission basis or by dealing
with other than a primary market maker.
The Investment Adviser, when placing transactions, may allocate a portion of the
Fund's brokerage to persons or firms providing it with investment
recommendations or statistical, research or similar services useful in its
decision making process. The term "investment recommendations or statistical,
research or similar services" means (1) advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and (2)
analyses and reports concerning issuers, industries, securities, economic
factors and trends, and portfolio strategy. The Investment Adviser may cause the
Fund to pay a commission higher than that charged by another broker in
consideration of such research services. Such services are one of the many ways
the Investment Adviser can keep abreast of the information generally circulated
among institutional investors by broker-dealers. While this information is
useful in varying degrees, its value is indeterminable. Such services received
on the basis of transactions for the Fund may be used by the Investment Adviser
for the benefit of the Fund and other clients, and the Fund may benefit from
such transactions effected for the benefit of other clients.
While there is no formula, agreement or undertaking to do so, and when it can be
done consistent with the policy of obtaining best price and execution, the Fund
may consider sales of its shares as a factor in the selection of brokers to
execute portfolio transactions. The Investment Adviser is not authorized, when
placing portfolio transactions for the Fund, to pay a brokerage commission in
excess of that which another broker might have charged for executing the same
transaction solely on the basis of execution. Except for implementing the policy
stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
PORTFOLIO TURNOVER
Average annual portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less. A higher
portfolio turnover rate involves greater transaction expenses to a fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed. The Investment Adviser makes purchases and sales
for the Fund's portfolio whenever necessary, in its opinion, to meet the Fund's
objective. The Investment Adviser anticipates that the Fund's average annual
portfolio turnover rate will be 100%.
CAPITAL STOCK AND DIVIDENDS
The Company is a series investment company that currently offers one class of
shares. The Company is authorized to issue 500,000,000 shares of common stock,
with a par value of $0.01 per share. The Company has currently allocated
50,000,000 shares to the Fund and 250,000,000 shares to other series of the
Company. Each share has equal dividend, voting, liquidation and redemption
rights. There are no conversion or preemptive rights. Shares of the Fund do not
have cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect all of the Directors
if they choose to do so. In such event, the holders of the remaining shares will
not be able to elect any person to the Board of Directors. Shares will be
maintained in open accounts on the books of the Transfer Agent.
If they deem it advisable and in the best interests of shareholders, the
Directors may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act or as
permitted by the Directors. Upon the Company's liquidation, all shareholders of
a series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the Fund at their net
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Company will confirm all account activity, including the
payment of dividend and capital gain distributions and transactions made as a
result of the Automatic Investment Plan described below. Shareholders may rely
on these statements in lieu of stock certificates.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES:
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. Under certain circumstances the Company or the
Investment Adviser may waive the minimum initial investment for purchases by
officers, Directors, and employees of the Company and its affiliated entities
and for certain related advisory accounts and retirement accounts (such as
IRAs). The Fund may also change or waive policies concerning minimum investment
amounts at any time.
SELLING SHARES:
You may sell your shares by giving instructions to the Transfer Agent by mail or
by telephone.
The Board of Directors may suspend the right of redemption or postpone the date
of payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the SEC or such exchange is closed for other than
weekends and holidays, (b) the SEC has by order permitted such suspension, or
(c) an emergency, as defined by rules of the SEC, exists during which time the
sale of Fund shares or valuation of securities held by the Fund are not
reasonably practicable.
SMALL ACCOUNTS:
Due to the relative higher cost of maintaining small accounts, the Fund may
deduct $50 per year from your account, if, as a result of redemption or exchange
of shares, the total investment remaining in the account has a value of less
than $1,000. Shareholders will receive 30 days' written notice to increase the
account value above $1,000 before the fee is to be deducted. A decline in the
market value of your account alone would not require you to bring your
investment up to this minimum.
SPECIAL SHAREHOLDER SERVICES
As described briefly in the Prospectus, the Fund offers the following
shareholder services:
Regular Account: The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. Simply
use the Account Application provided with the Prospectus to open your account.
Telephone Transactions: A shareholder may redeem shares or transfer into another
fund by telephone if this service is requested at the time the shareholder
completes the initial Account Application. If you do not elect this telephone
service at that time, you may do so at a later date by putting your request in
writing to the Transfer Agent and having your signature guaranteed.
The Fund employs reasonable procedures designed to confirm the authenticity of
instructions communicated by telephone and, if the procedures are followed the
Fund will not be liable for any losses due to unauthorized or fraudulent
transactions. As a result of this policy, a shareholder authorizing telephone
redemption bears the risk of loss which may result from unauthorized or
fraudulent transactions which the Fund believes to be genuine. When requesting a
telephone redemption or transfer, the shareholder will be asked to respond to
certain questions designed to confirm the shareholder's identify as a
shareholder of record. Cooperation with these procedures helps to protect the
account and the Fund from unauthorized transactions.
Invest-A-Matic Accounts: Any shareholder may utilize this feature, which
provides for automatic monthly investments into your account. Upon your request,
the Transfer Agent will withdraw a fixed amount each month from a checking or
savings account for investment into the Fund. This does not require a commitment
for a fixed period of time. A shareholder may change the monthly investment,
skip a month or discontinue the Invest-A-Matic Plan as desired by notifying the
Transfer Agent.
Individual Retirement Account ("IRA"): All wage earners under 70-1/2, even those
who participate in a company sponsored or government retirement plan, may
establish their own IRA. You can contribute 100% of your earnings up to $2,000.
A spouse who does not earn compensation can contribute up to $2,000 per year to
his or her own IRA. The deductibility of such contributions will be determined
under the same rules as for contributions made by individuals with earned
income. A special IRA program is available for corporate employees under which
the employers may establish IRA accounts for their employees in lieu of
establishing corporate retirement plans. Known as SEP-IRA's (Simplified Employee
Pension-IRA), they free the corporate employer of many of the recordkeeping
requirements of establishing and maintaining a corporate retirement plan trust.
If a shareholder has received a distribution from another qualified retirement
plan, all or part of that distribution may be rolled over into your Fund IRA. A
rollover contribution is not subject to the limits on annual IRA contributions.
By acting within applicable time limits of the distribution you can continue to
defer federal income taxes on your rollover contribution and on any income that
is earned on that contribution.
Roth IRA: A Roth IRA permits certain taxpayers to make a non-deductible
investment of up to $2,000 per year. Provided an investor does not withdraw
money from his or her Roth IRA for a five-year period, beginning with the first
tax year for which a contribution was made, deductions from the investor's Roth
IRA would be tax free after the investor reaches the age of 59-1/2. Tax free
withdrawals may also be made before reaching the age of 59-1/2 under certain
circumstances. Please consult your financial and/or tax professional as to your
eligibility to invest in a Roth IRA. An investor may not make a contribution to
both a Roth IRA and a regular IRA in any given year. An annual limit of $2,000
applies to contributions to regular and Roth IRAs. For example, if a taxpayer
contributes $2,000 to a regular IRA for a year, he or she may not make any
contribution to a Roth IRA for that year.
How to Establish Retirements Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan accounts.
Each plan's custodian charges nominal fees in connection with plan establishment
and maintenance. These fees are detailed in the plan documents. A shareholder
may wish to consult with an attorney or other tax adviser for specific advice
concerning tax status and plans.
Exchange Privilege: Shareholders may exchange their shares for shares of a
suitable money market fund. The account must meet the minimum investment
requirements (currently $2,500). A written request must have been completed and
be on file with the Transfer Agent. To make an exchange, an exchange order must
comply with the requirements for a redemption or repurchase order and must
specify dollar amount or the number of shares to be exchanged. An exchange will
take effect as of the next determination of the Fund's NAV per share (usually at
the close of business on the same day). The Transfer Agent may charge the
shareholder's account a $10 service fee each telephone exchange. The Company
reserves the right to limit the number of exchanges or to otherwise prohibit or
restrict shareholders from making exchanges at any time, without notice, should
the Company determine that it would be in the best interest of its shareholders
to do so. For tax purposes an exchange constitutes the sale of the shares of the
fund from which you are redeeming and the purchase of shares of the fund into
which you are exchanging. Consequently, the sale may involve either a capital
gain or loss to the shareholder for federal income tax purposes.
TAX STATUS
DISTRIBUTIONS AND TAXES
Distributions of net investment income: The Fund receives income generally in
the form of interest and other income on their investments. This income, less
expenses incurred in the operation of the Fund, constitutes net investment
income from which dividends may be paid to you. Any distributions by the Fund
from such income will be taxable to you as ordinary income, whether you take
them in cash or reinvest them in additional shares.
Distribution of capital gains: The Fund may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions from net short-term capital gains will be taxable to you as
ordinary income. Distributions from net long-term capital gains will be taxable
to you as long-term capital gain, regardless of how long you have held your
shares in the Fund. Any net capital gains realized by the Fund generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminated excise or income taxes on the Fund.
Effect of foreign investments on distributions: Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
Fund. Similarly, foreign exchange losses realized by the Fund on the sale of
debt securities are generally treated as ordinary losses. These gains when
distributed will be taxable to you as ordinary dividends, and any losses will
reduce the Fund's ordinary income otherwise available for distribution to you.
This treatment could increase or reduce the Fund's ordinary income distributions
to you, and may cause some or all of its previously distributed income to be
classified as return of capital.
The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of its total assets at the end of the
fiscal year are invested in securities of foreign corporations, it may elect to
pass-through to you your pro rata share of foreign taxes paid by it. If this
election is made, the year-end statement you receive from the Fund will show
more taxable income than was actually distributed to you. However, you will be
entitled to either deduct your share of such taxes in computing your taxable
income or (subject to limitations) claim a foreign tax credit for such taxes
against your U.S. federal income tax. The Fund will provide you with the
information necessary to complete your individual income tax return if it makes
this election.
Information on the tax character of distributions: The Fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of the tax status for federal income
tax purposes shortly after the close of each calendar year. If you have not held
Fund shares for a full year, the Fund may designate and distribute to you, as
ordinary income or capital gain, a percentage of income that is not equal to the
actual amount of such income earned during the period of your investment in the
Fund.
Election to be taxed as a regulated investment company: The Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the Fund generally pay no federal income tax on the income and gains it
distributes to you. The Board reserves the right not to maintain the
qualifications of the Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the Fund's earnings and profits.
Excise tax distribution requirements: To avoid federal excise taxes, the
Internal Revenue Code requires a fund to distribute to shareholders by December
31 of each year, at a minimum the following amounts: 98% of its taxable ordinary
income earned during the twelve month period ending October 31, and 100% of any
undistributed amounts from the prior year. The Fund intends to declare and pay
these amounts in December (or in January which must be treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
Redemption of Fund shares: Redemption and exchanges of Fund shares are taxable
transactions for federal and state income tax purposes. If you redeem or
exchange your Fund shares for shares of a different fund within the Company, the
IRS will require that you report a gain or loss on your redemption or exchange.
The gain or loss that you realize will be either a long-term or short-term
capital gain or loss depending on how long you held your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in such Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you purchase.
U.S. government obligations: Many states grant tax-free status to dividends paid
to shareholders from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that must
be met by the Fund. Investments in Government National Mortgage Association or
Federal National Mortgage Association securities, bankers' acceptances,
commercial paper and repurchase agreements collateralized by U.S. government
securities do not generally qualify for tax-free treatment. The rules on
exclusion of this income are different for corporations.
Dividends received deduction for corporations: Because the Fund's income
includes corporate dividends, if the shareholder is a corporation, a portion of
its distributions may qualify for the intercorporate dividends-received
deduction. You will be permitted in some circumstances to deduct these qualified
dividends, thereby reducing the tax that you would otherwise be required to pay
on these dividends. The dividends-received deduction will be available only with
respect to dividends designated by the Fund as eligible for such treatment. All
dividends (including the deducted portion) must be included in your alternative
minimum taxable income calculations.
Investment in complex securities: The Fund may invest in complex securities,
such as original issue discount obligations, the shares of passive foreign
investment companies and others. These investments may be subject to numerous
special and complex tax rules. These rules could affect whether gains and losses
recognized by the Fund are treated as ordinary income or capital gain,
accelerate the recognition of income to the Fund and/or defer the Fund's ability
to recognize losses, and, in limited cases, subject the Fund to U.S. federal
income tax on income from certain of its foreign securities. In turn, these
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to that of
other mutual funds and to relevant indices, in advertisements or in reports to
shareholders, The Fund states performance in terms of total return or yield.
Both "total return" and "yield" figures are based on the historical performance
of the Fund, show the performance of a hypothetical investment and are not
intended to indicate future performance.
YIELD INFORMATION
From time to time, the Fund may advertise a yield figure. A portfolio's yield is
a way of showing the rate of income the portfolio earns on its investments as a
percentage of the portfolio's share price. Under the rules of the SEC, yield
must be calculated according to the following formula:
YIELD = 2[(A-B + 1) -1] 6
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:
P(1+ T)n = 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]
