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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. 21
SAMARNAN INVESTMENT CORPORATION
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Exact Name of Registrant as Specified in Charter
214 NORTH RIDGEWAY DRIVE, CLEBURNE, TEXAS 76031
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Address of Principal Executive Offices (Number, Street, 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 DR., CLEBURNE, TEXAS 7603
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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
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ITEM OF FORM N-2 PAGE IN FORM N-2*
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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 2-4
Item 9. Management 4-13
Item 10. Capital Stock, Long-Term Debt, and Other Securities 14
Item 11. Defaults and Arrears on Senior Securities 14
Item 12. Legal Proceedings 15
Item 13. Table of Contents of the Statement of Additional Information 15
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 16
Item 18. Management 16
Item 19. Control Persons and Principal Holders of Securities 16
Item 20. Investment Advisory and Other Services 16
Item 21. Brokerage Allocation and Other Practices 16
Item 22. Tax Status 16
Item 23. Financial Statements 16
(i)
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PART C
Item 24. Financial Statements and Exhibits 17-18
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 18
Item 29. Indemnification 18
Item 30. Business and Other Connections of Investment Adviser 19
Item 31. Location of Accounts and Records 19
Item 32. Management Services Not Applicable
Item 33. Undertakings Not Applicable
Signatures 20
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* 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-SB-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 1998, is to maintain its qualification as a
"regulated investment company" under Subchapter M of the
Internal Revenue Code.
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This objective may not be changed without the vote of the
holders of a majority of the Registrant's outstanding voting
securities.
(b) During fiscal 1998, 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 preceding
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 "1998 Proxy Statement") to which reference is made and
which material is hereby incorporated by such reference.
To facilitate the change in investment objective the Board
of Directors of the Registrant approved a plan in January
1999 pursuant to which a portion of the Registrant's
portfolio will consist of equity securities and will be
designated the "Equity Portfolio" and the remainder of the
portfolio consisting of debt securities will be designated
the "Debt Portfolio". This plan and related matters is more
fully described under the captions "Investment Advisory
Agreements", "Proposal 1 The Amendment to the Voyageur
Agreement", and "Proposal 2 The Westwood Agreement" on pages
3, 4, 5, 6, 7, 8 and 9 of the Registrant's Proxy Statement,
dated March 29, 1999, filed with the Commission (the "1999
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
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paragraph (b) above, are set forth under the caption "Change
in Investment Objective on pages 3, 4, 5 and 6 of the 1998
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 1998 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 1998 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 1998 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.
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(b) INVESTMENT ADVISERS:
(A) During fiscal 1998, the Registrant had one investment
advisor, Voyageur Asset Management LLC ("VAM") whose
principal business address is 90 South Seventh Street, Suite
4300 Minneapolis, Minnesota 55402.
VAM is a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
VAM is a majority owned subsidiary of Dougherty Financial
Group, L.L.C. ("DFG"). Thirty three percent (33%) of VAM is
owned in equal parts by Frank C. Tonnemaker, James C. King
and Louis V. Nanne, senior executives of VAM and 67% by DFG.
DFG is owned by Michael E. Dougherty 37%, and 37% is owned
in equal parts by James O. Pohlad, Robert C. Pohlad and
William M. Pohlad. The remaining 26% of DFG is owned by
three of its employees.
Under the Investment Advisory Agreement, dated as of April
1, 1991 (the "VAM 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
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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.
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 may from time to time have 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
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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 VAM Agreement, the Registrant paid VAM an advisory
fee of $12,000 per quarter ($48,000 per annum), payable
quarterly within five days after the end of each calendar
quarter. The Registrant has paid VAM under the VAM Agreement
an advisory fee of $48,000 in each of the three years ended
December 31, 1998. At December 31, 1998, the Registrant had
net assets of $18,683,529 and the annual fee payable under
the VAM Agreement represented approximately .26% of the
Registrant's net assets at that date.
At the annual meeting of the Registrant's shareholders held
on April 16, 1999, the shareholders approved an amendment,
dated April 1, 1999 (the "Amendment"), to the VAM Agreement.
The Amendment, which became effective on April 16, 1999,
limits VAM's investment advisory services and
responsibilities under the VAM Agreement to those of debt
securities and the management of the Debt Portfolio. As a
result of the Amendment, VAM will not render any investment
advice to the Registrant with respect to equity securities
nor will it be responsible for the management of the Equity
Portfolio.
The Amendment changes the fee paid to VAM under the VAM
Agreement from the fixed amount described above to a fee
based upon the value of the assets in the Debt Portfolio as
of the last day of each fiscal quarter of the Registrant on
which the New York Stock Exchange (the "NYSE") is open for
trading (the "Appraisal Date"). The fee is 0.27% of the
appraised value of the assets in the Debt Portfolio, which
is payable on a quarterly basis in arrears with a minimum
fee of $3,000 per annum. If VAM serves for less
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than the whole of any fiscal quarter, the fee is to be pro-
rated for the portion of such quarter that VAM served as
investment adviser.
The Amendment provides that the quarterly fee is to be paid
within ten days after the Registrant's receipt of VAM's
appraisal of the Debt Portfolio and its statement of the fee
due thereunder.
The Amendment further provides that in making any appraisal,
securities listed on any national securities exchange will
be valued at the last quoted sales price, regular way, on
the Appraisal Date on the principal exchange on which the
security is listed; securities listed in the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or traded in the over-the-counter market will be
valued at the closing price or the highest reported bid
price on the Appraisal Date, whichever is available; and
securities not listed on any exchange or in NASDAQ or not
traded in the over-the-counter market, as well as trades
that have not been settled on the Appraisal Date, shall be
valued as of the Appraisal Date at fair value as determined
in good faith by VAM in accordance with policies approved by
the Board of Directors.
Except as amended and modified by the Amendment, the VAM
Agreement will remain in full force and effect.
(B) At the annual meeting of the Registrant's shareholders on
April 16, 1999, the shareholders approved an investment
advisory agreement, dated as of April 1, 1999 (the "WMC
Agreement"), between the Registrant and Westwood Management
Corp. ("WMC") providing for WMC to be the Registrant's
investment advisor with respect to equity securities and to
manage its Equity Portfolio.
WMC's principal business address is 300 Crescent Court,
Suite 1300, Dallas, Texas 75201.
WMC is a registered investment advisor under the Investment
Advisers Act of 1940, as amended.
WMC is a New York corporation which is a wholly owned
subsidiary of Southwest Securities Group, Inc., a Delaware
corporation ("Southwest Securities"). Southwest Securities
is a publicly owned holding company with subsidiaries
engaged in providing securities clearing, securities
brokerage, investment
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banking and investment advisory services. To the knowledge
of Southwest Securities no person owns 10% or more of its
voting securities. The address of Southwest Securities is
1201 Elm Street, Suite 3500, Dallas, Texas 75270.
The WMC Agreement provides that WMC will render investment
advice to the Registrant with respect to equity securities
and will manage the Equity Portfolio. WMC will not render
any investment advice with respect to debt securities nor
will it be responsible for the management of the Debt
Portfolio.
The WMC Agreement provides for an advisory fee based upon
the appraised value of the assets in the Equity Portfolio on
the Appraisal Date (which is the same date provided for in
the Amendment to the VAM Agreement discussed above). The fee
is 0.75% of the appraised value of the assets in the Equity
Portfolio which is payable quarterly in arrears. If WMC
serves for less than the whole of any quarter, the fee is to
be pro rated for the portion of such quarter that WMC served
as investment adviser.
The quarterly fee is to be paid to WMC within ten days after
the Registrant's receipt of WMC's appraisal of the Equity
Portfolio and its statement of the fee due thereunder.
The criteria for WMC's appraisal of the assets of the Equity
Portfolio is the same as that for VAM's appraisal of the
Debt Portfolio described above.
Under the WMC Agreement, WMC has agreed to furnish the
Registrant investment advice and statistical services
regarding equity securities, including placing orders for
the purchase and sale of equity securities for the
Registrant's account. The Registrant will continue to pay
all of its expenses, including legal and accounting fees,
fees and expenses of-the Registrant's transfer agent,
dividend disbursing agent and custodian, director fees, and
the expenses of directors and shareholders meetings. The
Registrant will also pay any brokers' commissions, transfer
taxes or other charges directly relating to the purchase or
sale of equity securities by WMC for the Registrant's
account.
WMC will pay all of its own administrative costs and
expenses necessary and incident to its providing the
investment advisory services to the Registrant under the WMC
Agreement.
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The WMC Agreement became effective on April 16, 1999 and
will continue in effect for one year therefrom, and
thereafter for successive one year periods, provided that
each yearly continuation of the WMC Agreement is
specifically approved, at least annually by (i) the Board of
Directors of the Registrant or by the vote of a majority of
the outstanding voting securities of the Registrant, and
(ii) by the vote of a majority of the directors who are not
parties to the WMC Agreement or "interested persons" (as
defined in the 1940 Act) of WMC or of the Registrant cast in
person at a meeting duly called for the purpose of voting on
such approval.
The WMC Agreement provides that WMC will not be liable to
the Registrant or third parties for acts or omissions not
caused by WMC's willful misfeasance, bad faith or gross
negligence or by the acts or omissions of any bank, trust
company, broker, or other person with whom or into whose
possession any monies or securities and investments may be
deposited under the WMC Agreement, nor will it be liable for
any action taken or omitted to be taken by WMC on the advice
of its counsel, provided such counsel is reasonably
acceptable to the Registrant.
The WMC Agreement further provides that WMC will indemnify
the Registrant against actions, litigation or other
proceedings of any kind or nature and against any loss,
liability, judgment, cost or penalty imposed as a result of
such actions, litigation or proceedings arising out of any
willful misfeasance, bad faith or gross negligence on the
part of WMC in the performance of its duties under the WMC
Agreement.
Under the WMC Agreement, WMC is free to render services to
other clients similar to those it renders to the Registrant
and it may give advice and take action with respect to those
other clients that may differ from the advice given or the
timing it may recommend to the Registrant. Furthermore, WMC
will not have any obligation to purchase or sell for the
Registrant's account any security that it or its principals,
affiliates or employees may purchase for themselves or other
clients.
The WMC Agreement may be terminated at any time without
penalty by the Board of Directors of the Registrant or by
the vote of a majority of its outstanding voting securities,
or by WMC, on not more than 60 days' written notice to the
other party. The
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WMC Agreement will automatically terminate in the event of
its "assignment" as that term is defined in the 1940 Act.
Under the WMC Agreement, WMC will make decisions with
respect to placing orders for the purchase and sale of the
Registrant's portfolio of equity securities. The primary
consideration in making these decisions will be obtaining
the most favorable prices for the Registrant and efficiency
in executing orders. WMC has advised the Registrant that in
effecting transactions on the Registrant's behalf, WMC will
seek the most favorable price consistent with best
execution.
WMC receives from brokers in-house research, certain third
party research (generally of economic data), and certain
information providing historic and current market data. WMC
has informal arrangements with certain brokers who provide
"soft dollar" credits for the purchase of research services.
Commissions paid to these brokers are competitive. Accounts
receiving benefit from the research share the cost. A budget
for this research is determined annually and reviewed
periodically. Supplemental to selecting a broker on the best
execution basis, this budget may be considered.
Each potential soft dollar arrangement is analyzed by WMC to
determine whether the use of client brokerage is appropriate
and falls under the "safe harbor" rules of Section 28(e) of
the Securities Exchange Act of 1934.
WMC will not effect any brokerage transaction in the
Registrant's portfolio of equity securities with any broker-
dealer affiliated directly or indirectly with WMC.
Pursuant to the conditions set forth in the rules of the
Securities and Exchange Commission, the Registrant may
purchase securities from an underwriting syndicate of which
an affiliated broker-dealer of WMC 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 quality of the
issuer. The rules further require that such purchases take
place in accordance with the procedures adopted and reviewed
periodically by the Board of Directors of the Registrant,
particularly those directors who are not "interested
persons" of the Registrant.
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WMC may purchase securities for clients in block trades.
This practice allows the client to participate in volume
transactions which may produce better executions. The same
price is allocated to each client.
(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 Executive Vice President/Senior Portfolio Manager
of VAM 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 20 years
experience in portfolio management.
Susan M. Byrne, President of WMC, will be the Registrant's
portfolio manager for equity securities. Ms. Byrne, a
founder of WMC in 1983, has over 15 years experience in
equity portfolio management.
(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:
Westwood Trust
300 Crescent Court, Suite 1300
Dallas, Texas 75201
Transfer Agent and Dividend Paying Agent:
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(f) EXPENSES:
The Registrant pays 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 directors
and shareholders meetings. These expenses are in addition to
the advisory fees
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paid to VAM under the VAM Agreement or the advisory fees
that will be paid to VAM as a result of the Amendment to
the VAM Agreement or to WMC under the WMC Agreement.
(g) AFFILIATED BROKERAGE:
All portfolio transactions in the Registrant's securities
during the three years ended December 31, 1998, 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 purchased any underwritten
issues of securities for its portfolio during the three year
period ended December 31, 1998.
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 pages 10 and 11 of the 1999 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 16, 1999.
Reference is made to the caption "Election of Directors" on pages 9
and 10 of the 1999 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 page 11 of the 1999 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 16, 1999.
Reference is made to the subcaption "Stock Ownership of Directors and
Officers" on pages 10 and 11 of the 1999 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 16, 1999.
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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 1998, 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 1998 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.
5. OUTSTANDING SECURITIES:
As of April 16, 1999, the authorized and outstanding shares of the
Registrant's Common Stock was as follows:
AUTHORIZED OUTSTANDING
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2,000,000 shares 1,201,768 shares
6. SECURITIES RATINGS:
Not applicable.
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES
Not applicable. The Registrant does not have any Senior Securities.
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ITEM 12. LEGAL PROCEEDINGS
None
ITEM 13. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Not applicable.
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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.
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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,
1998.
(ii) Portfolio of Investment Securities as of December 31,
1998.
(iii) Statement of Operations for the Year ended December 31,
1998.
(iv) Statement of Changes in Net Assets for the Years ended
December 31, 1998 and 1997.
(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, 1998.
All of the foregoing are in Registrant's Annual Report to
Shareholders for 1998, 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 Contracts (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
-17-
<PAGE>
incorporated by reference.
(2) Registrant's Investment Advisory Agreement, dated as of April 1,
1991, with Voyageur Fund Managers was attached as Exhibit A to
the Registrant's Proxy Statement, dated April 8, 1991, filed in
preliminary form with the Commission on or about March 20, 1991,
which Agreement is hereby incorporated by reference. The
Amendment, dated as of April 1, 1999, to such Investment Advisory
Agreement was attached as Exhibit A to the Registrant's Proxy
Statement, dated March 29, 1999, filed in definitive form with
the Commission on or about March 29, 1999, which Amendment is
hereby incorporated by reference.
Registrant's Investment Advisory Agreement, dated as of April 1,
1999, with Westwood Management Corp. was attached as Exhibit B to
the Registrant's Proxy Statement, dated March 29, 1999, filed in
definitive form with the Commission on or about March 29, 1999,
which Agreement is hereby incorporated by reference.
(3) Registrant's Custodian Agreement, dated August 14, 1992, with
Trust Company of Texas (the predecessor of Westwood Trust) 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 AF 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 12, 1999, the outstanding shares of the Registrant's Common
Stock were held of record by 149 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.
-18-
<PAGE>
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 Management LLC as filed with the
Commission, which is hereby incorporated by reference.
For information as to the other business or employment of the
Registrant's investment advisor, reference is made to Form ADV, as
amended, of Westwood Management Corp. 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.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment No. Twenty One 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 26th day of
April 1999.
SAMARNAN INVESTMENT CORPORATION
By: /s/ George S. Walls, Jr.
---------------------------------
GEORGE S. WALLS. JR.
PRESIDENT
-20-
<PAGE>
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 3, 1999
<PAGE>
SAMARNAN
INVESTMENT CORPORATION
P.O. BOX 651 / CLEBURNE, TX 76033
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1998
<PAGE>
CHESHIER & FULLER, L.L.P.
Certified Public Accountants & Consultants
MEMBERS:
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS 14175 PROTON ROAD
SEC & PRIVATE COMPANIES DALLAS, TEXAS 75244-3692
SECTION OF AICPA TEL (972) 387-4300
TEXAS SOCIETY OF CERTIFIED FAX (972) 960-2810
PUBLIC ACCOUNTANTS (800) 834-8586
ACCOUNTING FIRMS ASSOCIATED, INC. WWW.CHESHIER-FULLER.COM
AN AFFILIATE OF HORWATH INTERNATIONAL
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, 1998, 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, 1998, 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 respects, the
financial position of Samarnan Investment Corporation as of December 31,
1998, 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/ CHESHIRE & FULLER, L.L.P.
CHESHIRE & FULLER, L.L.P.
Dallas, TX
March 3, 1999
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Assets:
Cash $ 31,077
Investments in securities at market (cost, net of amortization
of bond premium $17,600,771) 18,607,325
Accrued interest receivable 270,109
-----------
Total assets 18,908,511
-----------
Liabilities:
Payables:
Accounts payable 13,300
Investments purchased 211,682
-----------
Total liabilities 224,982
-----------
Net assets applicable to outstanding capital shares, equivalent
to $15.55 per share $18,683,529
-----------
-----------
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 $1,075,115 less accumulated
distribution of $1,154,071 (78,956)
Unrealized appreciation of investments 1,006,552
Undistributed net investment income 747,856
Retained earnings at April 29, 1978, commencement of operations
as an investment company 15,806,309
-----------
$18,683,529
-----------
-----------
SAMARNAN INVESTMENT CORPORATION
Statement of Operations
Year Ended December 31, 1998
Investment income - interest $ 970,959
-----------
Expenses:
Investment advisory fee 48,000
Legal and professional fees 36,593
Audit fees 7,932
Directors fees 9,900
Custodian expense 6,000
Administrative fees 12,977
Office and printing supplies 1,679
-----------
Total expenses 123,081
-----------
Net investment income 847,878
-----------
Realized and unrealized gain on investments:
Realized gain from security transactions - excluding short-term securities:
Proceeds from sales 5,326,281
Cost of securities sold, net of amortization of bond premiums 5,293,154
-----------
Net realized gain 33,127
-----------
Unrealized appreciation of investments: 858,275
Beginning of period
End of period 1,006,552
-----------
Increase in unrealized appreciation on investments 148,277
-----------
Net realized and unrealized gain on investments 181,404
-----------
Increase in net assets from investment activities $1,029,282
-----------
-----------
Total expenses as a percentage of total investment income 12.7%
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Statement of Changes in Net Assets
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Investment activities:
Net investment income $ 847,878 $ 881,330
Net realized gain (loss) from security transactions 33,127 (37,441)
Increase (decrease) in unrealized appreciation
of investments 148,277 396,714
----------- -----------
Increase in net assets from investment activities 1,029,282 1,240,603
----------- -----------
Dividends and distributions to shareholders:
Net investment income (853,255) (901,326)
Capital gains -0- -0-
----------- -----------
Decrease in net assets from dividends and distributions
to shareholders (853,255) (901,326)
----------- -----------
Increase (decrease) in net assets 176,027 339,277
Net assets:
Beginning of period 18,507,502 18,168,225
----------- -----------
End of period $18,683,529 $18,507,502
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Notes to Financial Statements
December 31, 1998
(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 cost 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 to, 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
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 Voyageur Fund 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 1998. cost of purchases and proceeds from sales or maturities of
securities, other than short-term securities, amounted to $5,424,846 and
$5,326,281, 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, 1998
were $1,008,589 and $2.037, respectively.
(5) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Cash dividends paid during the years ended December 31, 1998 and 1997
amount to $.71 and $.75 per share. respectively.
Cash dividends of $.19 per share from the balance of undistributed net
investment income were declared by the Company's Board of Directors on
January 26, 1999, payable to shareholders of record February 8, 1999.
<PAGE>
SAMARNAN INVESTMENT CORPORATION
Portfolio of Investment Securities
December 31, 1998
<TABLE>
<CAPTION>
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>
Cook County, Illinois Schaumburg G.O. 6.20 1-01-99 500,000 500,000 500,000
Tempe, Arizona G.O. 8.00 7-01-99 500,000 502,619 511,570
Naperville, Illinois Electric 6.20 11-01-00 500,000 500,000 510,450
Wisconsin Public Power 6.40 7-01-01 500,000 496,350 531,485
Palatine, IL - SD #15 G.O. 5.90 12-01-01 450,000 445,999 476,267
King County, Washington ISD #408 6.10 12-01-01 300,000 300,000 318,678
Indiana Municipal Power 5.25 1-01-02 500,000 498,215 519,135
Nevada State G.O. Series A 6.00 5-01-02 400,000 397,182 422,544
Lake Preston SD-Ottertail Pwr 5.00 12-01-02 200,000 200,000 208,186
Kitsap County Washington SD #401 4.70 12-01-03 150,000 146,929 154,904
Bedford Park, IL - G.O. 5.20 12-01-04 500,000 499,500 525,315
Alaska State Housing Finance Corp. 5.90 12-01-04 600,000 620,038 634,260
North Branch Minn. ISD #138 5.20 2-01-05 475,000 476,494 504,118
Henderson, NV - G.O. 5.25 5-01-05 500,000 501,181 526,715
Box Elder, UT. G.O. 5.15 6-15-05 300,000 299,250 312,663
Indiana St. Ed. 4.80 10-01-05 500,000 415,475 518,895
Chicago, IL, Wastewater Rev. 5.40 1-01-06 500,000 495,000 536,315
North Miami, FL Health Fac Rev Catholic 5.30 8-15-06 200,000 198,468 215,676
Clark County Nevada School District 5.50 6-15-07 800,000 790,536 865,144
North Miami, FL Health Fac Rev Catholic 5.40 8-15-07 375,000 371,933 408,424
Alabama Clg & Univ Tuskegee 5.50 9-01-07 500,000 500,000 541,940
Wisconsin Health & Education - Sinai 5.50 8-15-08 600,000 592,248 651,558
Missouri State Health/Ed 5.55 2-01-09 200,000 198,302 211,858
North Dakota Bldg. Auth. 4.875 12-01-09 250,000 249,117 259,438
Goodhue Cnty., MN EDA Lease 5.60 2-01-10 310,000 310,000 331,523
Illinois Health Fac Auth 6.00 2-15-11 500,000 497,580 542,185
Harmony, MN MFHR-Zedakah Found. 5.70 3-01-11 260,000 260,000 274,518
Harmony, MN MFHR-Zedakah Found. 5.70 9-01-11 265,000 265,000 279,798
Volusia Cnty. Health Fac. 6.00 6-01-12 600,000 611,230 666,900
Montgomery County PA IDA 5.625 11-15-12 500,000 480,920 523,825
Douglas County, NE SD 466 5.25 12-01-13 250,000 250,000 259,588
W. Washington Univ. Housing 5.00 10-01-14 300,000 300,940 308,523
Douglas County, NE SD #66 5.30 12-01-14 250,000 250,000 259,678
S. Dakota Health & ED 5.00 7-01-15 500,000 487,500 502,505
Louisiana Housing Fin. Agency 6.00 9-01-15 670,000 670,000 709,135
Illinois Health Fac. 5.12 12-01-15 250,000 246,390 249,705
Missouri State Health/Ed. 5.75 2-01-17 250,000 245,375 259,755
MPLS-St. Paul Airport 5.00 01-01-19 800,000 785,616 803,020
Austin, TX Utility 5.25 5-15-19 200,000 208,901 207,902
Austin, TX Utility 5.25 5-15-19 200,000 208,940 207,902
Detroit Metro Airport 4.875 12-01-23 750,000 716,835 728,475
Long Island Power 5.25 12-01-26 625,000 610,708 626,850
----------- -----------
Total $17,600,771 $18,607,325
----------- -----------
----------- -----------
</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, 1998
<TABLE>
<CAPTION>
Per share data 1998 1997 1996 1995 1994
- -------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Investment income - interest $ .81 $ .82 $ .82 $ .86 $ .93
Expenses (.10) ( .08) (.08) (.07) (.07)
------ ------ ------ ------ ------
Net investment income .71 .74 .74 .79 .86
Net realized and unrealized gains
(losses) on investments .15 .30 (.16) .52 (.97)
Dividends from net investment income (.71) (.75) (.71) (.74) (.80)
Distributions from net realized
long-term gains on securities -- -- (.01) (.01) --
------ ------ ------ ------ ------
Net increase (decrease) in
net asset value .15 .29 (.14) .56 (.91)
Net asset value:
Beginning of period 15.40 15.11 15.25 14.69 15.60
------ ------ ------ ------ ------
End of period $15.55 $15.40 $15.11 $15.25 $14.69
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratios
- ------
Expenses to average net assets .66 .66 .51 .49 .50
Investment income from operations
to average net assets 5.22 5.22 5.45 5.74 6.27
Portfolio turnover 29.00 23.72 19.05 28.20 13.05
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Average shares 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
P.O. Box 651 Cleburne, Texas 76033-0651 / Tel: 817.645-2108
Fax: 817.641-7884 / Email: [email protected] / Internet: www.samarnan.com
(pending)
BOARD OF DIRECTORS LEGAL COUNSEL
- ------------------ -------------
Nancy Walls Devaney Richard S. Whitesell
Joe Monteleone 4211 Arcady
Martha Walls Murdoch Dallas, Texas 75205
Steve Sikes
Roland Walden INDEPENDENT AUDITORS
Sam Walls, Chairman --------------------
Tommy Yater Cheshier & Fuller, L.L.P.
14175 Proton Road
OFFICERS Dallas, Texas 75244
- --------
Sam Walls, President INVESTMENT ADVISORS
Jerry Wheatley, Secretary/Treasurer -------------------
Voyageur Asset Management
CUSTODIAN 90 South Seventh Street, Suite 4400
- --------- Minneapolis, Minnesota 55402
Westwood Trust
300 Crescent Court, Suite 1300 REGISTRAR/TRANSFER AGENT
Dallas, Texas 75201 ------------------------
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
ANNUAL MEETING Dallas, Texas 75248
- --------------
The Annual Meeting of Shareholders of Samarnan Investment Corporation will be
held April 16,1999, at 10:30 AM, in the Bellevue Room I, Twelfth Floor, The Fort
Worth Club Building, 306 West Seventh Street, Fort Worth, Texas.
- -------------------------------
SAMARNAN INVESTMENT CORPORATION is registered under the Investment Company Act
of 1940 as a diversified, closed end management company. Copies of the
Company's Annual Report to Shareholders and the Mid-Year Report to Shareholders
are available upon written request to the Secretary at the Company's address
shown above.
