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FILE NO. 811-2842
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 20
SAMARNAN INVESTMENT CORPORATION
- - --------------------------------------------------------------------------------
Exact Name of Registrant as Specified in Charter
214 NORTH RIDGEWAY DRIVE, CLEBURNE, TEXAS 76031
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Address of Principal (Number, Street,
Executive Offices City, State, Zip Code)
(817) 641-7881
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Registrant's Telephone Number, including Area Code
GEORGE S. WALLS, JR. 214 NORTH RIDGEWAY DRIVE, CLEBURNE, TEXAS 76031
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Name and Address (Number, Street, City, State, Zip Code)
of Agent for Service
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SAMARNAN INVESTMENT CORPORATION
FORM N-2
CROSS REFERENCE SHEET
ITEM OF FORM N-2 PAGE IN FORM N-2*
- - ---------------- -----------------
PART A
Item 1. Outside Front Cover Not Applicable
Item 2. Inside Front Cover and Outside Back Cover Page Not Applicable
Item 3. Fee Table and Synopsis Not Applicable
Item 4. Financial Highlights Not Applicable
Item 5. Plan of Distribution Not Applicable
Item 6. Selling Shareholders Not Applicable
Item 7. Use of Proceeds Not Applicable
Item 8. General Description of the Registrant 2 & 3
Item 9. Management 3 - 8
Item 10. Capital Stock, Long-Term Debt, and Other Securities 8 & 9
Item 11. Defaults and Arrears on Senior Securities 9
Item 12. Legal Proceedings 9
Item 13. Table of Contents of the Statement of Additional 9
Information
PART B
Item 14. Cover Page Not Applicable
Item 15. Table of Contents Not Applicable
Item 16. General Information and History Not Applicable
Item 17. Investment Objectives and Policies 10
Item 18. Management 10
Item 19. Control Persons and Principal Holders of Securities 10
Item 20. Investment Advisory and Other Services 10
Item 21. Brokerage Allocation and Other Practices 10
Item 22. Tax Status 10
Item 23. Financial Statements 10
(i)
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PART C
Item 24. Financial Statements and Exhibits 11 & 12
Item 25. Market Arrangements Not Applicable
Item 26. Other Expenses of Issuance and Distribution Not Applicable
Item 27. Persons Controlled by or Under Common Control Not Applicable
Item 28. Number of Holders of Securities 12
Item 29. Indemnification 12
Item 30. Business and Other Connections of Investment Adviser 12
Item 31. Location of Accounts and Records 12
Item 32. Management Services Not Applicable
Item 33. Undertakings Not Applicable
Signatures 13
* Filed in Item-and-Answer Form
(ii)
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PART A
THE PROSPECTUS
ITEM 1. OUTSIDE FRONT COVER
Not Applicable.
ITEM 2. INSIDE FRONT COVER AND OUTSIDE BACK COVER PAGE
Not Applicable.
ITEM 3. FEE TABLE AND SYNOPSIS
Not Applicable.
ITEM 4. FINANCIAL HIGHLIGHTS
Not Applicable.
ITEM 5. PLAN OF DISTRIBUTION
Not Applicable.
ITEM 6. SELLING SHAREHOLDERS
Not Applicable.
ITEM 7. USE OF PROCEEDS
Not Applicable.
ITEM 8. GENERAL DESCRIPTION OF THE REGISTRANT
1. GENERAL:
(a) The answer to this Item is found on Page 2 in the response
to Item 1, of the Registrant's initial registration
statement on Form N-8B-1 (Commission File No. 2-33344)
(hereinafter referred to as the "Registration Statement"),
which material is hereby incorporated by reference.
(b) The answer to this Item is found on Page 2 in response to
Item 3 of the Registrant's Registration Statement, which
material is hereby incorporated by reference.
2. INVESTMENT OBJECTIVES AND POLICIES:
(a) The Registrant's investment objective, which it met in
fiscal 1997, is to maintain its qualification as a
"regulated investment company" under Subchapter M of the
Internal Revenue Code.
This objective may not be changed without the vote of the
holders of a majority of the Registrant's outstanding
voting securities.
2
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(b) Consistent with this objective, the Registrant's portfolio
emphasis has been the investment exclusively in tax-exempt
obligations issued by a State of the United States or the
District of Columbia or a political subdivision of a State
or Territory of the United States or any public
instrumentality thereof.
At the annual meeting of the Registrant's shareholders held
on April 28, 1998, the shareholders approved a change in the
Registrant's investment objective to permit the Registrant
to invest up to 49% of its portfolio in taxable equity
securities and taxable debt securities, with the remaining 51%
of the portfolio to continue to be invested in the tax-exempt
debt securities described above in the preceeding paragraph.
This change of investment objective is more fully described
under the caption "Change in Investment Objective" on pages
3, 4, 5, 6, 7, 8 and 9 of the Registrant's Proxy Statement,
dated April 9, 1998, filed with the Commission (the "Proxy
Statement") to which reference is made and which material is
hereby incorporated by such reference.
(c) The policies of the Registrant with respect to investments
are set forth on pages 2 and 3 in response to Items 4 and 5
of the Registrant's Registration Statement, which material
is hereby incorporated by reference.
The policies of the Registrant with respect to investments
as a result of the change of investment objective referred
to in paragraph (b) above, are set forth under the caption
"Change in Investment Objective" on pages 3, 4, 5 and 6 of
the Proxy Statement which material is hereby incorporated
by reference.
(d) Not applicable.
3. RISK FACTORS:
Investments by the Registrant in tax-exempt government
obligations are primarily subject to the risk that the
governmental authority issuing the obligations may default in the
payment of interest and/or principal payable under its
obligations and may seek the protection of the Federal bankruptcy
laws. The Registrant has not experienced any such default to
date.
The risk factors with respect to taxable equity securities are
set forth under the subcaption "Proposed Investment Objective"
on page 4 of the Proxy Statement and the risk factors with
respect to taxable debt securities are set forth under the
subcaption "Proposed Investment Objective" on page 5 of the Proxy
Statement which material is hereby incorporated by reference.
4. OTHER POLICIES:
The answer to this Item is found on page 3 of the Registration
Statement in response to Item 4 (g), which material is hereby
incorporated by reference, and under the subcaption "Proposed
Investment Objective" on pages 4, 5 and 6 of the Proxy Statement
which material is hereby incorporated by reference.
5. SHARE PRICE DATA:
The Registrant's securities are not listed on any stock exchange
nor are transactions in its securities reported on NASDAQ.
Consequently, the information requested by this Item is
inapplicable.
6. BUSINESS DEVELOPMENT COMPANIES:
Not applicable.
ITEM 9. MANAGEMENT
1. GENERAL:
(a) BOARD OF DIRECTORS:
The Board of Directors of the Registrant is responsible for
managing the business and affairs of the Registrant.
(b) INVESTMENT ADVISERS:
The Registrant has one investment advisor, Voyageur Asset
Management LLC ("VAM") whose principal business address is 90
South Seventh Street, Suite 4400, Minneapolis, Minnesota 55402.
VAM is a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
3
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VAM is owned 33% in equal parts by Frank C. Tonnemaker, James C. King and
Louis V. Nanne, senior executives of VAM and 67% as an indirect subsidiary of
Dougherty Financial Group LLC ("DFG"), which is owned approximately 50% by
Michael E. Dougherty, 50% in equal parts by James O. Pohlad, Robert C. Pohlad
and William M. Pohlad. Mr. Dougherty co-founded the predecessor of DFG in
1977 and has served as DFG's Chairman of the Board since its inception.
Under the Investment Advisory Agreement, dated as of April 1, 1991 (the
"Agreement"), between the Registrant and VAM, which was approved by the
Registrant's shareholders on April 25, 1991, VAM provides the Registrant with
investment advice and statistical services regarding its investments,
including, subject to authorization by the President of the Registrant,
placing orders for the purchase and sale of the Registrant's portfolio
securities.
VAM has advised the Registrant that in effecting portfolio transactions
on behalf of the Registrant, VAM will seek the most favorable price
consistent with the best execution. VAM may, however, select a dealer to
effect a particular transaction without communicating with all dealers who
might be able to effect such transaction because of the volatility of the
market and the desire of VAM to accept a particular price for a security
because the price offered by the dealer meets guidelines for profit, yield,
or both.
Decisions with respect to placement of the Registrant's portfolio
transactions are made by VAM. The primary consideration in making these
decisions is efficiency in executing orders and obtaining the most favorable
prices for the Registrant. When consistent with these objectives, business
may be placed with broker-dealers who furnish investment research services to
VAM. Such research services would include advice, both directly and in
writing, 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, as well as analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts. The research services
may allow VAM to supplement its own investment research activities and enable
VAM to obtain the view and information of individuals and research staffs of
many different securities firms prior to making investment decisions for the
Registrant. To the extent portfolio transactions are effected with
broker-dealers who furnish research services, VAM would receive a benefit,
which is not capable of evaluation in dollar amounts, without providing any
direct monetary benefit to the Registrant from these transactions.
4
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VAM has not entered into any formal or informal agreements with any
broker-dealers, and does not maintain any "formula" that will be required to
be followed in connection with the placement of the Registrant's portfolio
transactions in exchange for research services provided to VAM, except as
noted below. However, VAM does maintain an informal list of broker-dealers
which it will use as a general guide in the placement of the Registrant's
business in order to encourage certain broker-dealers to provide VAM with
research services which VAM anticipates will be useful to it. Because this
list is merely a general guide, which is to be used only after the primary
criteria for the selection of broker-dealers (discussed above) has been met,
substantial deviations from the list are permissible and may be expected to
occur. VAM has informal agreements with certain broker dealers who may
provide or make available "soft dollar" credits for the purchase of research
services.
VAM will not effect any brokerage transactions in the Registrant's
portfolio securities with any broker-dealer affiliated directly or indirectly
with VAM.
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, the Registrant may purchase securities from an underwriting
syndicate of which an affiliated broker-dealer is a member (but not directly
from such affiliated broker-dealer itself). Such conditions relate to the
price and amount of the securities purchased, the commission or spread paid
and the quality of the issuer. The rules further require that such purchases
take place in accordance with procedures adopted and reviewed periodically by
the Board of Directors of the Registrant, particularly those Directors who
are not "interested persons" of the Registrant.
When two or more clients of VAM are simultaneously engaged in the
purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by VAM to be equitable to each
client. In some cases, this system could have a detrimental effect on the
price or volume of the security as far as each client is concerned. In other
cases, however, the ability of the clients to participate in volume
transactions may produce better executions for each client.
Under the Agreement, the Registrant pays VAM an advisory fee of $12,000
per quarter, payable quarterly within five days after the end of each
calendar quarter. At December 31, 1997, the Registrant had net assets of
$18,507,502 and the annual fee payable under the Agreement represented
approximately .26% of the Registrant's net assets at that date.
5
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The Registrant has paid VAM under the Agreement an advisory fee of $48,000
in each of the three years ended December 31, 1997.
On April 30, 1997 the parent of VAM's predecessor, Dougherty Financial
Group, Inc. ("DFG, Inc."), executed an Agreement and Plan of Merger
("Agreement") with Lincoln National Corporation ("LNC") pursuant to which
LNC would acquire DFG, Inc., including the mutual fund investment advisory
business of DFG, Inc. conducted by VAM's predecessor. However, VAM's
institutional managed account business, which does business under the name
Voyageur Asset Management, was not part of the merger.
As a part of the merger with Lincoln, VAM's predecessor transferred its
institutional managed account investment advisory business to VAM. This
transfer included the Registrant's investment advisory agreement. As a
result, the party responsible for the Registrant's investment advisory
agreement has been Voyageur Asset Management LLC and not Voyageur Fund
Managers, Inc. or Lincoln National Corporation or any Lincoln affiliate.
Other than the technical change regarding the identity of the entity
providing the services, no changes to the Registrant's investment
advisory agreement has occurred.
(c) PORTFOLIO MANAGEMENT:
The name and title of the person employed by VAM who is primarily
responsible for the day-to-day management of the Registrant's portfolio is
Steven P. Eldredge. Mr. Eldredge has been a Senior Vice President/Senior
Tax Exempt Portfolio Manager of Fund Managers since July 1995, prior to
which he was a portfolio manager for ABT Mutual Funds in Orlando, Florida
from February 1989 to June 1995. Mr. Eldredge has over 19 years experience
in portfolio management.
Reference is made to the caption "Investment Advisor" on page 13 of
the Proxy Statement for information relating to the individual who would
be responsible for equity investments of the Registrant which material
is hereby incorporated by reference.
6
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(d) ADMINISTRATORS:
Not applicable.
(e) CUSTODIANS:
The name and principal business address of the Registrant's custodian,
transfer agent and dividend paying agent are as follows:
Custodian:
Trust Company of Texas
7001 Preston Road, Suite 300
Dallas, Texas 75205
Transfer Agent and Dividend Paying Agent:
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(f) EXPENSES:
The Regstrant pays, in addition to the fees payable to VAM under the
Agreement, expenses for legal and accounting fees, the fees and
expenses of its custodian, transfer agent and dividend paying agent as
well as the costs of its shareholders meetings.
(g) AFFILIATED BROKERAGE:
All portfolio transactions in the Registrant's securities during the
three years ended December 31, 1997, were transacted with primary
market makers acting as principal on a net basis. Accordingly, the
Registrant did not pay any brokerage commissions, as such, during such
three year period, however, the market makers were compensated in the
form of a "mark-up" or "mark-down" which may have resulted in a profit
or a loss to them from such transactions. None of such market makers
was an affiliated person of the Registrant or of VAM, or an
affiliated person of any such person. The Registrant has not purchase
any underwritten issues of securities for its portfolio during the
three year period ended December 31, 1997.
2. NON-RESIDENT MANAGERS:
Not applicable.
3. CONTROL PERSONS:
Reference is made to the caption "Principal Shareholders" on pages 2 and
3, and to the subcaption "Stock Ownership of Directors and Officers" on
page 11 of the Proxy Statement for information relating to control of the
Registrant, which material is hereby incorporated by reference. The
information contained therein is the same as of April 20, 1998.
7
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Reference is made to the caption "Election of Directors" on pages 10
and 11 of the Proxy Statement for information as to the name, address,
age, and the principal occupation during the past five years of each
director and officer of the Registrant and also to those directors who
are "interested persons" of the Registrant and to the subcaption
"Remuneration" on pages 11 and 12 of the Proxy Statement for the
compensation paid to the officers and directors of the Registrant, which
material is hereby incorporated by reference. The information contained
therein is the same as of April 20, 1998.
Reference is made to the subcaption "Stock Ownership of Directors and
Officers" on page 11 of the Proxy Statement for information as to the
equity securities of the Registrant owned by all of its officers and
directors, which material is hereby incorporated by reference. The
information contained therein is the same as of April 20, 1998.
ITEM 10. CAPITAL STOCK, LONG-TERM DEBT, AND OTHER SECURITIES
1. CAPITAL STOCK:
The Registrant has only one class of capital stock authorized, Common
Stock, par value $1.00 per share.
A description of the rights of the holders of the Registrant's Common
Stock is found on page 8 of the Registration Statement in response to
Item 26, which material is hereby incorporated by reference.
2. LONG-TERM DEBT:
The Registrant has no long-term debt.
3. GENERAL:
Not applicable.
4. TAXES:
For fiscal year 1997, Registrant qualified as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. As a
"regulated investment company", income and dividends were not taxable to
Registrant or its shareholders, but capital gains distributions were
taxable. Registrant will pay dividends from its net investment income at
such times and in such amounts as the Board of Directors determines. The
Registrant will inform shareholders of the amount and nature of the income
and gains.
Reference is made to the subcaption "Tax Effects of Change in Investment
Objective" on pages 7, 8 and 9 of the Proxy Statement for the federal
income tax effects resulting from the change in the Registrant's investment
objective, which material is hereby incorporated by reference.
8
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5. OUTSTANDING SECURITIES:
As of April 20, 1998, the authorized and outstanding shares of the
Registrant's Common Stock was as follows:
<TABLE>
Authorized Outstanding
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<S> <C> <C>
2,000,000 shares 1,201,768 shares
</TABLE>
6. SECURITIES RATINGS:
Not applicable.
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES
Not applicable. The Registrant does not have any Senior Securities.
ITEM 12. LEGAL PROCEEDINGS
None.
ITEM 13. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Not applicable.
9
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PART B
INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
ITEM 14. COVER PAGE
Not applicable.
ITEM 15. TABLE OF CONTENTS
Not applicable.
ITEM 16. GENERAL INFORMATION AND HISTORY
Not applicable.
ITEM 17. INVESTMENT OBJECTIVES AND POLICIES
The answer to this item is fully responded to in Item 8 of Part A
hereof.
ITEM 18. MANAGEMENT
The answer to this Item is fully responded to in Item 9 of Part A
hereof.
ITEM 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The answer to this Item is fully responded to in Item 9 of Part A
hereof.
ITEM 20. INVESTMENT ADVISORY AND OTHER SERVICES
The answer to this Item is fully responded to in Item 9 of Part A
hereof.
ITEM 21. BROKERAGE ALLOCATION AND OTHER PRACTICES
The answer to this Item is fully responded to in Item 9 of Part A
hereof.
ITEM 22. TAX STATUS
The answer to this Item is fully responded to in Item 10 of Part A
hereof.
ITEM 23. FINANCIAL STATEMENTS
Reference is made to Item 24 of Part C hereof for the financial
statements filed as exhibits hereto.
10
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
(i) Statement of Assets and Liabilities as of December 31, 1997.
(ii) Portfolio of Investment Securities as of December 31, 1997.
(iii) Statement of Operations for the Year ended December 31,
1997.
(iv) Statement of Changes in Net Assets for the Years ended
December 31, 1997 and 1996.
(v) Notes to Financial Statements.
(vi) Selected Per Share Data and Ratios for Each of the Years
in the Five Year Period ended December 31, 1997.
All of the foregoing are in Registrant's Annual Report to
Shareholders for 1997, which material is incorporated by
reference in Part B hereof.
(b) EXHIBITS:
(1) Amended Articles of Incorporation (1)
(2) By-Laws (1)
(3) None
(4) Specimen Stock Certificate (1)
(5) None
(6) None
(7) Investment Advisory Contract (2)
(8) Not applicable
(9) None
(10) Custodian Agreement (3)
(11) None
(12) Not Applicable
(13) None
(14) Consent of Independent Auditors (4)
(15) None
(16) None
(17) None
(18) Not applicable
(19) Registrant's Annual Report to Shareholders (4)
- - -------------
(1) This material filed as an exhibit to Registrant's Registration
Statement pursuant to the corresponding exhibit number therein is
hereby incorporated by reference.
(2) Registrant's Investment Advisory Agreement, dated as of April 1,
1991, with Voyageur Fund Managers, its present investment advisor, was
attached as Exhibit A to the Registrant's Proxy Statement, dated April
8, 1991, filed in preliminary
11
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form with the Commission on or about March 20, 1991, which Agreement
is hereby incorporated by reference.
(3) Registrant's Custodian Agreement, dated August 14, 1992, with
Trust Company of Texas was filed as Exhibit (9) to the Registrant's
Amendment No. 15 to Registration Statement under the Investment
Company Act of 1940 on Form N-2, dated April 20, 1993, which Agreement
is hereby incorporated by reference.
(4) Filed herewith.
ITEM 25. MARKET ARRANGEMENTS
Not applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
On March 24, 1998, the outstanding shares of the Registrant's Common
Stock were held of record by 147 persons.
ITEM 29. INDEMNIFICATION
The answer to this Item is found on page 7 of the Registration
Statement, in response to Item 19, which material is hereby
incorporated by reference.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For information as to the other business or employment of the
Registrant's investment advisor, reference is made to Form ADV, as
amended, of Voyageur Asset Mamagement LLC as filed with the
Commission, which is hereby incorporated by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the 1940 Act and Rules
31a-1 and 31a-3 thereunder are in the possession of Mr. Jerry D.
Wheatley, Secretary and Treasurer of the Registrant, 214 North
Ridgeway Drive, Cleburne, Texas.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
Not applicable.
12
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S I G N A T U R E S
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment No. Twenty to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cleburne, and State of Texas, on the 28th day of
April 1998.
SAMARNAN INVESTMENT CORPORATION
BY: /s/ George S. Walls, Jr.
-----------------------------
GEORGE S. WALLS, JR.
PRESIDENT
13
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CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
SAMARNAN INVESTMENT CORPORATION:
WE CONSENT TO THE USE OF OUR REPORT INCLUDED HEREIN.
/s/ CHESHER & FULLER, L.L.P.
---------------------------------
CHESHER & FULLER, L.L.P.
DALLAS, TEXAS
MARCH 14, 1998
<PAGE>
Annual Report to Stockholders
December 31, 1997
SAMARNAN
INVESTMENT CORPORATION
P.O. BOX 651 CLEBURNE, TEXAS 76033
Registered under the Investment Company Act of 1940 as a diversified, closed
end management company. Copies of the Company's Annual Report are available
to registered stockholders upon written request to the Secretary at the above
address.
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Samarnan Investment Corporation:
We have audited the accompanying statement of assets and liabilities of
Samarnan Investment Corporation, including the portfolio of investment
securities, as of December 31, 1997, and the related statements of operations
for the year then ended and changes in net assets for each of the two years
in the period then ended, and the selected per share data and ratios for each
of the five years in the period then ended. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and per
share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material aspects, the
financial position of Samarnan Investment Corporation as of December 31,
1997, the results of its operations for the year ended, the changes in net
assets for each of the two years in the period then ended, and the selected
per share data and ratios for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ CHESHIER & FULLER, L.L.P.
CHESHIER & FULLER, L.L.P.
Dallas, Texas
March 14, 1998
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C>
Assets:
Cash $ 329,818
Investment in securities at market (cost, net of amortization
of bond premium, $17,445,192) 18,303,467
Accrued interest receivable 290,152
-----------
Total assets 18,923,437
Liabilities:
Payables:
Accounts payable 15,935
Investments purchased 400,000
-----------
Total liabilities 415,935
-----------
Net assets applicable to outstanding capital shares, equivalent
to $15.40 per share $18,507,502
-----------
-----------
Source of net assets:
Capital shares - authorized 2,000,000 shares of $1.00 par
value; outstanding 1,201,768 shares $ 1,201,768
Accumulated net realized gains of $1,041,988 less accumulated
distribution of $1,154,071 (112,083)
Unrealized appreciation of investments 858,275
Undistributed net investment income 753,233
Retained earnings at April 29, 1978, commencement of operations
as an investment company 15,806,309
-----------
$18,507,502
-----------
-----------
SAMARNAN INVESTMENT CORPORATION
Statement of Operations
Year Ended December 31, 1997
Investment income - interest $ 976,675
-----------
Expenses:
Investment advisory fee 48,000
Legal and professional fees 22,712
Audit fees 7,100
Directors fees 7,800
Custodian expense 6,000
Administrative fees 1,582
Office and printing supplies 2,151
-----------
Total expenses 95,345
-----------
Net investment income 881,330
-----------
Realized and unrealized gain on investments:
Realized gain from security transactions - excluding
short-term securities:
Proceeds from sales 4,230,950
Cost of securities sold, net of amortization of bond
premiums 4,268,391
-----------
Net realized (loss) (37,441)
-----------
Unrealized appreciation of investments:
Beginning of period 461,561
End of period 858,275
-----------
Increase in unrealized appreciation on investments 396,714
-----------
Net realized and unrealized gain on investments 359,273
-----------
Increase in net assets from investment activities $ 1,240,603
-----------
-----------
Total expenses as a percentage of total investment income 9.8%
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Statement of Changes in Net Assets
Year Ended December 31, 1997 and 1996
<TABLE>
1997 1996
----------- -----------
<S> <C> <C>
Investment activities:
Net investment income $ 881,330 $ 895,006
Net realized gain (loss) from security transactions (37,441) (74,642)
Increase (decrease) in unrealized appreciation
of investments 396,714 (118,256)
----------- -----------
Increase in net assets from investment activities 1,240,603 702,108
----------- -----------
Dividends and distributions to shareholders:
Net investment income (901,326) (849,489)
Capital gains -0- (15,784)
----------- -----------
Decrease in net assets from dividends and
distributions to shareholders (901,326) (865,273)
----------- -----------
Increase (decrease) in net assets 339,277 (163,165)
Net assets:
Beginning of period 18,168,225 18,331,390
----------- -----------
End of period $18,507,502 $18,168,225
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Notes to Financial Statements
December 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is registered under the Investment Company Act of 1940 as a
diversified, closed-end, management investment company. The fund seeks tax
free income and preservation of capital through a diversified portfolio of
bonds. The significant accounting policies followed by the Company are
summarized as follows:
(a) SECURITIES
Investments in securities are carried at market value. Security
transactions are accounted for on the trade date. The costs of
securities sold is based on identifying specific issues delivered
against each sale.
Fixed-income securities are valued at prices obtained from a pricing
service, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or
at prices for securities of comparable maturity, quality and type.
(b) DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
(c) BOND PREMIUMS AND DISCOUNTS
Bond premiums are amortized to the maturity date of the bond on a
straight-line basis. Bond discounts are not amortized; these are
included as realized gains when the bond is sold or matures. The
amortization for any one year is not material.
(d) ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) INVESTMENT ADVISORY CONTRACT
Effective April 1, 1991, the Company contracted with the Voyageur
Managers to provide investment advisory services. Under this contract,
the Company is furnished investment, clerical and statistical services
regarding its investments. In addition, all orders for purchasing and
selling the Company's portfolio securities are placed by Voyageur Fund
Managers. The cost of these investment advisory services is $48,000 per
annum.
(3) FEDERAL INCOME TAXES
No provision has been made for Federal income taxes since it is the plan
of the Company to distribute substantially all of its investment income,
including the net realized gains on investments, and to qualify as a
"regulated investment company" under the applicable sections of the
Internal Revenue Code.
(4) SECURITIES TRANSACTIONS
In 1997, cost of purchases and proceeds from sales or maturities of
securities, other than short-term securities, amounted to $4,961,511 and
$4,230,950, respectively.
There were no differences between the cost bases of securities for
Federal income tax and financial statement purposes. The aggregate
unrealized appreciation and depreciation for all securities as of
December 31, 1997 were $864,967 and $6,692, respectively.
(5) DIVIDENDS AND DISTRIBUTIONS
Cash dividends paid during the years ended December 31, 1997 and 1996
amount to $.75 and $.72 per share, respectively.
Cash dividends of $.20 per share from the balance of undistributed net
investment income were declared by the Company's Board of Directors on
January 27, 1998, payable to shareholders of record February 6, 1998.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Portfolio of Investment Securities
December 31, 1997
<TABLE>
Cost (net of
Amortization
Coupon Maturity Principal of Bond Market
Municipal Bonds (100.0%) Rate Date Amount Premium) Value
- - ------------------------ ----- ------- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
Carmel Clay School G.O. 6.10 1-15-98 500,000 500,000 500,270
Tempe, Arizona G.O. 8.00 7-01-99 500,000 509,637 529,510
IL Health - Univ of Chicago Hospital 4.75 8-15-99 825,000 823,020 833,093
Cook County, Illinois Schaumburg G.O. 6.20 1-01-00 500,000 500,000 510,285
Naperville, Illinois Electric 6.20 11-01-00 500,000 500,000 517,285
Wisconsin Public Power 6.40 7-01-01 500,000 496,350 535,005
Cook County, Illinois ISD 5.90 12-01-01 450,000 445,999 476,444
King County, Washington ISD #408 6.10 12-01-01 300,000 300,000 319,230
Indiana Municipal Power 5.25 1-01-02 500,000 498,215 517,960
Nevada State G.O. Series A 6.00 5-01-02 400,000 397,182 426,700
Maricopa County, Arizona SD #4 6.125 7-01-02 500,000 496,399 510,815
Lake Preston SD-Ottertail Pwr 5.00 12-01-02 555,000 555,000 569,613
Kitsap County Washington SD #401 4.70 12-01-03 500,000 489,765 509,000
Bedford Park, IL - G.O. 5.20 12-01-04 500,000 489,500 520,570
Alaska State Housing Finance Corp. 5.90 12-01-04 600,000 623,424 637,938
North Branch Minn. ISD #138 5.20 2-01-05 475,000 476,739 499,330
Henderson, NV - G.O. 5.25 5-01-05 500,000 501,358 522,685
Box Elder, UT - G.O. 5.15 6-15-05 300,000 299,250 310,773
Indiana St. Ed. 4.80 10-01-05 500,000 415,475 509,675
Owasso OK Public Works Auth 4.50 11-01-05 400,000 400,000 400,000
Chicago, IL, Wastewater Rev. 5.40 1-01-06 500,000 495,000 530,655
North Miami, FL Health Fac Rev Cathol 5.30 8-15-06 200,000 198,468 212,522
Clark County Nevada School District 5.50 6-15-07 800,000 790,536 856,928
Memphis, TN - G.O. 6.80 7-01-07 700,000 730,450 723,758
North Miami, FL Health Fac Rev Cathol 5.40 8-15-07 375,000 371,933 401,588
Alabama Clg & Univ Tuskegee 5.50 9-01-07 500,000 500,000 535,710
Wisconsin Health & Education - Sinai 5.50 8-15-08 600,000 592,248 639,702
Missouri State Health/Ed 5.55 2-01-09 200,000 198,302 201,306
Goodhue Cnty., MN EDA Lease 5.60 2-01-10 310,000 310,000 326,842
Illinois Health Fac Auth 6.00 2-15-11 500,000 497,580 526,720
Harmony, MN MFHR-Zedakah Cound. 5.70 3-01-11 260,000 260,000 271,003
Harmony, MN MFHR-Zedakah Cound. 5.70 9-01-11 265,000 265,000 276,215
Volusia Cnty. Health Fac. 6.00 6-01-12 600,000 612,067 659,082
Montgomery County PA IDA 5.625 11-15-12 500,000 480,920 511,785
Douglas County, NE SD #66 5.25 12-01-13 250,000 250,000 254,693
Douglas County, NE SD #66 5.30 12-01-14 250,000 250,000 254,903
Louisiana Housing Fin. Agency 6.00 9-01-15 670,000 670,000 705,818
Missouri State Health/Ed. 5.75 2-01-17 250,000 245,375 257,945
----------- -----------
Total $17,445,192 $18,303,467
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Selected per Share Data and Ratios
For Each of the Years in the Five-Year Period Ended
December 31, 1997
<TABLE>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Investment income - interest $ .82 $ .82 $ .86 $ .93 $ 1.00
Expenses (.08) (.08) (.07) (.07) (.07)
---------- ---------- ---------- ---------- ----------
Net investment income .74 .74 .79 .86 .93
Net realized and unrealized gains
(losses) on investments .30 (.16) .52 (.97) .14
Dividends from net investment income (.75) (.71) (.74) (.80) (.93)
Distributions from net realized
long-term gains on securities -- (.01) (.01) -- (.15)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net asset value .29 (.14) .56 (.91) (.01)
Net asset value:
Beginning of period 15.11 15.25 14.69 15.60 15.61
---------- ---------- ---------- ---------- ----------
End of period $ 15.40 $ 15.11 $ 15.25 $ 14.69 $ 15.60
---------- ---------- ---------- ---------- ----------
RATIOS
Expenses to average net assets .52 .51 .49 .50 .48
Investment income from operations
to average net assets 5.36 5.45 5.74 6.27 6.39
Portfolio turnover 23.72 19.05 28.20 13.05 23.75
---------- ---------- ---------- ---------- ----------
Average share outstanding 1,201,768 1,201,768 1,201,768 1,201,768 1,201,768
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
INVESTMENT CORPORATION
P.O. BOX 651 CLEBURNE, TEXAS 76033
BOARD OF DIRECTORS LEGAL COUNSEL
George S. Walls, Jr. Richard S. Whitesell, Jr.
Nancy Walls Devaney 4211 Arcady
Martha Walls Murdoch Dallas, Texas 75205
O.P. Leonard, Jr.
Joe Monteleone
Steve Sikes INDEPENDENT AUDITORS
Roland Walden
Cheshier & Fuller, L.L.P.
14175 Proton Road
OFFICERS Dallas, TX 75244
George S. Walls, Jr., President
Jerry D. Wheatley, Secretary/Treasurer CUSTODIAN
Westwood Trust
INVESTMENT ADVISORS 200 Crescent Court, Suite 1300
Voyageur Asset Management Dallas, TX 75201
90 South Seventh St.
Suite 4400
Minneapolis, MN 55402
REGISTRAR/TRANSFER AGENT
Securities Transfer Corporation
16910 Dallas Pky. Suite 100
Dallas, TX 75248
ANNUAL MEETING
The Annual Meeting of Stockholders of Samarnan Investment Corporation will be
held April 28, 1998, at 11:00 A.M., in the Bellevue Room I of the Fort Worth
Club, 306 W. Seventh, Fort Worth, Texas.
