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Previous: ARTISTDIRECT INC, S-8, EX-99.2, 2001-01-04 |
Next: VALGRO FUNDS INC, 485BPOS, EX-99.JOTHEROPININ, 2001-01-04 |
| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | [ | x | ] |
| Pre-Effective Amendment No. _____ | [ | ] | |
| Post-Effective Amendment No. 3 | [ | x | ] |
| and/or | |||
| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | [ | x | ] |
| Amendment No. 6 | [ | x | ] |
| Exact Name of Registrant as Specified in Charter: | Valgro Funds, Inc. |
| Address of Principal Executive Offices: | 377 Warren Drive |
| San Francisco, CA 94131-1033 | |
| Registrant's Telephone Number, including Area Code: | (415) 665-5520 |
| Name and Address of Agent for Service | Robert Allen Rintel |
| 377 Warren Drive | |
| San Francisco, CA 94131-1033 |
| It is proposed that this filing will become effective: | |||
| [ | x | ] | immediately upon filing pursuant to rule 485(b) |
| [ | ] | on (date) pursuant to rule 485(b) | |
| [ | ] | 60 days after filing pursuant to rule 485(a)(1) | |
| [ | ] | on (date) pursuant to rule 485(a)(1) | |
| [ | ] | 75 days after filing pursuant to rule 485(a)(2) | |
| [ | ] | on (date) pursuant to rule 485(a)(2) | |
| If appropriate, check the following box: | |||
| [ | ] | this post-effective amendment designates a new effective date for a previously filed post-effective amendment | |
As with any mutual fund, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Valgro is a registered service mark of Valgro Investments, Inc.
Goal: Growth in the value of the fund's shares
Principal strategies:
*The fund considers a company computer-related if it derives at least 50% of its revenue from the use of the internet or from the manufacture or sale of computers, computer components, computer peripherals, or software. In contrast, the fund defines the biotech industry based on assets instead of revenue, since some small biotech firms have no revenue. So the fund considers a company to be biotech if at least 50% of its assets are employed in the research or production of innovative devices, substances, processes or services that are either intended to alter, or derived from, living or dead organisms or their components. The potential applications of biotechnolgoy are almost unlimited, as scientists discover ways of using it to improve existing products and services and to develop new ones. Just some of its current or potential future uses include improvements in medicine and health care, agriculture, computation, fabrication and building materials, chemical production and analysis, waste processing, mineral extraction, and various kinds of industrial production.
**ADRs are American Depository Receipts. These trade on US markets in dollars, but they represent ownership of foreign stock. They pay dividends in dollars, the result of translating the foreign dividend into dollars, minus any foreign withholding tax.
Principal risks:
Also note that an investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
This fund may be inappropriate for you if you are any of the following:
Performance:
The fund is too new to show calendar-year performance data. However, when data is listed, it will undoubtedly illustrate the variability of the fund's returns. This information will provide some indication of the risks of investing in the fund by showing changes in the fund's performance from year to year and by showing how the fund's average annual returns for 1, 5, and 10 years compare with those of several broad measures of market performance. Even when data becomes available, investors should note that how the fund has performed in the past is not necessarily an indication of how the fund will perform in the future.
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
| Maximum Sales Charge (Load) Imposed on Purchases: | None |
| Maximum Deferred Sales Charge (Load): | None |
| Maximum Sales Charge (Load) Imposed on Reinvested Distributions: | None |
| Redemption fee: | None |
| Exchange fee: | None |
| Maximum Account fee: | None |
| Management Fees: | 0.91% | |
| Distribution (12b-1) Fees: | None | |
| Other Expenses, consisting of: | 1.16% | |
| Auditing: | 0.57% | |
| Government Fees: | 0.41% | |
| Other: | 0.18% | |
| Total Annual Fund Operating Expenses: | 2.07% |
The percentages above were extrapolated to a full year from the figures in the most recent annual report, which contains audited data from 2/9/00 inception through 10/31/00. The "Other Expenses" figures may overstate the expected annual amounts because a full year's Auditing expenses were incurred during the partial year, and because Government Fees are incurred as shares are issued and most of the shares were issued at the very beginning of the partial year. The example below is based on the extrapolated percentages above.
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example below assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| 1 year: | 3 years: | 5 years: | 10 years: |
| $207 | $653 | $1144 | $2604 |
The investment objective of the Valgro Fund is growth in the value of the fund's shares. This objective, and the strategies below to implement the objective, may be changed with 60 days' prior notice to shareholders, but without requiring shareholder approval. The only exception is that the choice of which industry groups to concentrate in, and the definitions of those groups below, can't be changed without shareholder approval.
It is a policy of the fund to keep only enough of a cash reserve to accomodate anticipated expenses, redemptions, and purchases without having to disrupt its investments too frequently. Except for this, the fund tries to remain fully invested in the market at all times. In other words, the fund does not try to time the market by selling securities when it expects the market to decline. The cash reserve consists of cash, bank and brokerage deposits, and money market funds.
Other than this, the fund invests only in common stocks, including stocks of small-capitalization companies. Although the fund invests mostly in US stocks, it also invests in the stock of some foreign companies that have shares or ADRs trading in the US.
ADRs are American Depository Receipts. These trade on US markets in dollars, but they represent ownership of foreign stock. They pay dividends in dollars, the result of translating the foreign dividend into dollars, minus any foreign withholding tax.
The fund generally has a buy-and-hold approach to stock picking. The fund buys a stock when it belives in the prospects of the underlying company. The fund sells all of its shares in a company only if it no longer believes in the company, not merely in resopnse to changes in the company's stock price. In fact, the fund does the opposite, periodically buying more shares of stocks it already owns that have declined in value. It gets the money to do this by selling some of its shares in stocks that have risen in value. This is called rebalancing.
Thus, the fund is actively managed. For retirement accounts, this has no tax consequences. For non-retirement accounts, this requires investors to pay capital gains taxes on the profits the fund makes from selling shares, even for investors who haven't themselves sold fund shares. Also, for both types of accounts, the more often a fund executes trades, the more commissions it pays that subtract from fund profits.
The fund is considered "diversified" from a legal standpoint. This means that at least 75% of the fund's assets are invested in cash, government securities, investment companies, and other stock holdings, where each of these other stock holdings is limited to 5% of the fund's total assets and 10% of the issuer's shares.
However, the fund's investments are not broadly diversified across industries. Instead, of the fund's assets invested in stock, 25-40% of that is invested in computer-related companies and 25-40% in biotech companies. The fund considers a company computer-related if it derives at least 50% of its revenue from the use of the internet or from the manufacture or sale of computers, computer components, computer peripherals, or software. In contrast, the fund defines the biotech industry based on assets instead of revenue, since some small biotech firms have no revenue. So the fund considers a company to be biotech if at least 50% of its assets are employed in the research or production of innovative devices, substances, processes or services that are either intended to alter, or derived from, living or dead organisms or their components. The potential applications of biotechnolgoy are almost unlimited, as scientists discover ways of using it to improve existing products and services and to develop new ones. Just some of its current or potential future uses include improvements in medicine and health care, agriculture, computation, fabrication and building materials, chemical production and analysis, waste processing, mineral extraction, and various kinds of industrial production. If the change in stock prices causes deviation from the 25-40% ranges, the fund will restore them within 60 days.
Morningstar defines "growth" to mean a high stock price relative to earnings and book value, and they define "value" as a low price relative to these things. Neither of these classifications has anything to do with the investment objectives or strategies of the fund. The fund looks for companies with a sustainable competitive advantage. For example, a company with superior patented technology would be favored by the fund. Such an advantage can occur in a big company, or in a small company trying to become big. It can occur in a company whose stock is favored by the market, and it can also occur in a company whose stock or industry is presently out of favor with investors. Therefore, the classification of the fund may change as market conditions change, without that implying any change in the fund's objective or strategy.
As with any stock fund, the price of the fund's shares may decline, so the investor risks losing money. Furthermore, because the computer-related and biotech industry groups relate to technologies, the fund may be more volatile, and hence more risky, than the market as a whole. In addition, these industry groups may go in and out of favor with investors more often or severely than other industries do. And companies in these industries face heavy competition, high research costs, patent considerations, rapidly shifting demand & obsolescence, and biotech companies are heavily regulated by the government. In addition, any small-capitalization stocks bought by the fund also will be more volatile, and hence more risky, than the market as a whole. In fact, some technology companies which the fund invests in have no current earnings and may hit snags in their research, may be denied regulatory approval (such as FDA approval for biotech companies), may be beaten to market by other technologies, or may simply run out of money, potentially causing them to go bankrupt. Also, because the fund isn't broadly and evenly diversified across many different industries, there is the risk that the industries in which the fund is concentrated could fall out of favor with investors, causing the fund's shares to decline in price. There is also the risk that management may make some unforeseeable mistakes, given its inexperience running a fund.
Additionally, since some of the fund's investments are in foreign companies, the fund pays withholding taxes that decrease the fund's return. Also, for foreign companies and for US companies with significant foreign operations, there are extra political and economic risks. These can result from political instability, or from foreign government actions, such as confiscation, restrictions on money leaving the country, regulatory or tax changes, or military or diplomatic activity. Even if a foreign company or operation performs well, its value in US dollars could decline if the dollar rises relative to the foreign country's currency. In addition, foreign markets may be more volatile than US markets.
The fund's performance is presented in its semiannual and annual reports. The most recent annual report, containing audited data through 10/31/00, is being supplied with this prospectus and is incorporated here by reference. To get a free additional copy of this report, please visit our web site at valgro.com, or e-mail [email protected], or call us collect at (415) 665-5520.
The fund's Registered Investment Adviser is Valgro Investments, Inc., 377 Warren Drive, San Francisco, CA 94131-1033. It is as new as this fund, having no prior experience as an investment adviser. It determines and places securities trades for the fund. On each business day that the fund computes a figure for NAV, the adviser accrues a fee of 1/250th of 0.9% of net assets before its fee. This works out to slightly more than 0.9% of average net assets for the year, depending on the actual number of business days in the year.
Robert Allen Rintel, President of Valgro Funds, Inc., and of Valgro Investments, is the adviser's portfolio manager for the fund. He is as new to that role as the fund, having no prior experience managing investments other than his own. He did financial software development as an Associate at J.P. Morgan & Co. from 3/94 to 10/95 and as an Assistant Vice President at First Chicago from 10/95 to 2/96. From then until 5/99, he worked on various software projects while growing the value of his personal investments. From 5/99 to the present, he has been working on building Valgro Funds and Valgro Investments.
Everywhere they're used, the terms "Valgro Fund" and "the fund" refer to Valgro Funds, Inc. This corporation has only one class of shares, common stock without par value and for which certificates are not issued, and it is authorized to issue up to 1 quadrillion (1015) shares.
The price of fund shares is based on the fund's net asset value (NAV). This value is computed each business day that the New York Stock Exchange (NYSE) is open for trading. The value is based on the closing price of each stock or ADR owned by the fund. Each closing price used is the official closing price during regular-hours trading on the principal US exchange or US market where the stock or ADR is traded, or the average of the closing bid & ask prices when no trades occurred. Thus, it excludes after-hours trading, and, for an NYSE stock as an example, it takes the closing NYSE floor price rather than the composite price at the close of the NYSE floor. The NAV calculation is considered to occur at the time of the first close of regular-hours trading for any of the stocks or ADRs owned by the fund, even if it isn't completed until later. The NAV is also affected by various expenses and amortized costs, which are computed in accordance with generally accepted accounting principles for registered investment companies.
The price at which a purchase or redemption is effected is based on the next NAV calculation after receipt of the order and, in the case of a purchase, receipt of a check or other form of payment. The investor's ownership of the shares begins or ends at the time the order is priced. The proceeds of a redemption made after a purchase may be delayed for up to 10 business days from the purchase date to ensure that the funds for the purchase have cleared.
To invest in the fund, you can visit our web site, valgro.com, and read our prospectus and Statement of Additional Information. Then you can fill out the personal information online and send a check to Valgro Funds, Inc., 377 Warren Drive, San Francisco, CA 94131-1033. You can also wire us money, following the instructions on our web site. The purchase order is considered received when the money is received. To redeem shares, you can indicate the dollar amount or number of shares on the web site, and a check will be sent to your address. You can also change your address, phone number, and other information on our web site, all of which is password-protected. You can also do any of these things by calling us collect at (415) 665-5520 or writing to the above address.
The minimum initial purchase of fund shares is $1000. Subsequent purchases are unrestricted. Legally, purchases are limited by the number of authorized shares, but the fund does not anticipate approaching the current limit of 1 quadrillion (1015) shares. A partial redemption is not permitted if the investor's account would have a value below $1000 after the redemption. This does not prevent a full redemption, though. There are no redemption charges or involuntary redemptions.
The fund may make arrangements to allow investors to purchase or redeem fund shares through one or more broker-dealers. Currently, the fund has no such arrangements; any future arrangements will be listed on valgro.com, the fund's web site. The share price will be based on the next NAV calculation after the order and any necessary payment are received by the broker-dealer. The fund will not impose any charges for such service, though the broker-dealers may impose their own charges. There are also no charges or restrictions on transferring shares held in street name accounts.
An investor can choose to receive a check for dividends and distributions, or they can be automatically reinvested in the fund. Other arrangements will be considered upon request.
The fund intends to make distributions that may be taxed as ordinary income and capital gains. Capital gains distributions may be taxed at different rates depending on the length of time the fund holds its assets. Given the fund's emphasis on technology companies, many of which pay no dividends, the fund expects a large part of its distributions to consist of capital gains.
The fund's distributions, whether received in cash or reinvested in additional shares of the fund, may be subject to federal, state and local income taxes. As with any mutual fund, the size of a taxable distribution is based on the fund's income and capital gains from sales of stock since its last distribution, after adjusting for expenses, reporting periods, and changes in the number of fund shares outstanding. It is not based on the amount of a rise or fall in the value of your fund shares since you bought them. So it is even possible to have to pay taxes despite seeing a fall in the value of your investment.
An exchange of the fund's shares for shares of another fund will be treated as a sale of the fund's shares, and any gain on the transaction may be subject to federal, state and local income taxes. Although Valgro Funds has no other funds at this time, this would apply even if the exchange were to another Valgro Funds fund.
The fund's financial hightlights are included in its semiannual and annual reports. The most recent annual report, containing audited data through 10/31/00, is being supplied with this prospectus and is incorporated here by reference. To get a free additional copy of this report, please visit our web site at valgro.com, or e-mail [email protected], or call us collect at (415) 665-5520.
This fund chooses stocks solely based on our expectation that they will rise in price. Rather than trading off profit for a good environmental record in the past, we believe we can have more impact by reforming companies from within. Therefore, we pledge to vote for or against all shareholder-sponsored resolutions, and we pledge to vote for all pro-environment resolutions.
Unfortunately, pro-environment resolutions generally don't pass. However, as more people trade their old mutual funds for funds that vote for the environment, or for stocks people can vote themselves, this may change.
In the interest of full disclosure, we should point out the possible downside to this policy. Companies often oppose a pro-environment resolution by saying it will cost them money. If the companies are right, and if resolutions we vote for pass, this could adversely affect the companies' stock prices and therefore adversely affect the price of this fund. If this is a concern to you, feel free to invest elsewhere; if you cheer our policy, tell your friends about us.
The SAI (Statement of Additional Information) includes additional information which we encourage you to read, since you may find it useful when deciding whether to invest in the fund. Additional information about the fund's investments is also available in the fund's annual and semiannual reports to shareholders. These reports contain a discussion of the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
The SAI is incorporated by reference into this prospectus. To see the SAI, click here. To get a free copy of the SAI or the annual and semiannual reports, or to request other information about the fund or make shareholder inquiries, please visit our web site at valgro.com, or e-mail [email protected], or call us collect at (415) 665-5520.
The prospectus, SAI, and related documents have been filed with the SEC (Securities and Exchange Commission). Information about the fund (including the SAI) can be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at 1-202-942-8090. Reports and other information about the fund are available on the Commission's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the Comission, Washington, D.C. 20549-0102, or by electronic request at [email protected].
Investment Company Act file number 811-09635
The SAI (Statement of Additional Information) is not a prospectus. To see the 1/4/01 prospectus to which the SAI relates, click here. To get a free copy of the prospectus please visit our web site at valgro.com, or e-mail [email protected], or call us collect at (415) 665-5520.
Every time the SAI refers to information in the prospectus, the SAI provides a link to the exact location of that information within the prospectus. Click on the link to go directly there.
Valgro is a registered service mark of Valgro Investments, Inc.
Valgro Fund is represented by common stock in Valgro Funds, Inc., which was incorporated in Illinois on 9/2/99. Although it is only engaged in business as an investment company, it also performs some of the services it requires. For example, it is also a Registered Transfer Agent for its own securities.
The fund is an open-end, management investment company. It is considered diversified, as defined in the "Principal Strategies & Risks" section of the prospectus. The fund uses no strategies other than the principal strategies whose risks are explained in the "Principal Strategies & Risks" section of the prospectus. That section also describes the fund's investment objective.
The fund does not issue senior securities. The fund borrows money only short-term, for the clearance of transactions. The fund does not underwrite the securities of other issuers. The fund does concentrate investments in the computer-related and biotech industry groups, as defined in the "Principal Strategies & Risks" section of the prospectus, incorporated here by reference. That section of the prospectus describes the risks of such concentration, which can affect up to 80% of the fund's assets. The fund does not purchase or sell real estate or commodities. The fund does not make loans. The fund may lend securities, affecting up to 100% of the fund's assets, with the risk that the securities are not returned or not returned on time and appreciate in value beyond their collateral. All of these are fundamental policies which may not be changed without shareholder approval, meaning a majority vote of the outstanding fund shares.
The fund does not take temporary defensive positions that contradict any of these policies. The fund is too new to have historical portfolio turnover rates to compare with the 28.82% reported in the 10/31/00 annual report.
The fund's board of directors is responsible for periodically meeting to consider the effects of management's practices on the long-term and short-term interests of the corporation and its shareholders. The board does not participate in managing the fund's operations day to day, but it periodically receives updates on the fund's actions from the fund's management. It examines this information in several ways. It seeks assurance that the relevant laws are being complied with. It also seeks assurance that the fund's investments conform with the objectives and strategies described in the prospectus, SAI and other filings. And it seeks assurance that fund policies set out in public disclosures are implemented. In addition, it may consider other matters or take various actions from time to time as necessary to further the interests of the corporation.
The board is also legally required to approve certain kinds of contracts and relationships the fund has with outside parties, as well as to approve certain kinds of legal actions the fund takes. On some matters, the whole board votes, while on other matters only directors who are not considered "interested persons" vote. Things that the board approves include the fund's contract with its investment adviser, the accountants who audit the fund's financial statements, and any distribution relationships the fund might develop in the future with brokers or underwriters.
The fund has no advisory board other than the board of directors. The fund has no executive or investment committee. Fund shares have no sales loads for the public, so naturally that applies to directors and other affiliated persons as well. The directors and officers of the fund are the two people listed below. An asterisk indicates anyone legally considered an "interested person" of the fund.
*Robert Allen Rintel, 36 years old, is Chairman of the board of directors and President of Valgro Funds, Inc., and of its investment adviser, Valgro Investments, Inc. He also currently occupies the position of all other officers of these two companies. His business address is at the fund: 377 Warren Drive, San Francisco, CA 94131-1033. He did financial software development as an Associate at J.P. Morgan & Co. from 3/94 to 10/95 and as an Assistant Vice President at First Chicago from 10/95 to 2/96. From then until 5/99, he worked on various software projects while growing the value of his personal investments. From 5/99 to the present, he has been working on building Valgro Funds and Valgro Investments.
F. Joseph Moretti, 71 years old, is a member of the board of directors of Valgro Funds, Inc. His business address is at Syllogy Corp., 2 University Plaza, Suite 200, Hackensack, NJ 07601. From 1994 until 2/99, he was the Project Director in Malawi (a country in Africa) for the Jesuit Refugee Service, a humanitarian organization. After that, he returned to his former software career as a Senior Software Developer at Syllogy Corp., a software development and consulting firm.
Officers and directors who are interested persons of the fund receive no compensation or retirement benefits from the fund, though they may receive compensation or retirement benefits from the fund's investment adviser, in accordance with 15 USC 80a-10(d)(7). Mr. Moretti will receive no compensation or retirement benefits during the current fiscal year ending October 31, 2001, though he may be paid in future fiscal years depending on the fund's net asset level. A specific level and compensation amount for those future years has not been determined. This is summarized in the following table:
| Pension or | Estimated | Total | ||
|---|---|---|---|---|
| retirement | annual | compensation | ||
| Name of | Aggregate | benefits | benefits | from fund |
| person | compensation | accrued as | upon | and fund |
| & position | from fund | fund expenses | retirement | complex |
| Robert Rintel (Chairman & President) |
$0 | $0 | $0 | $0 |
| F. Joseph Moretti (Director) |
$0 | $0 | $0 | $0 |
The fund and its investment adviser have adopted codes of ethics designed to hinder insiders from putting their interests above the fund's interest. As long as the rules are followed, insiders are permitted to buy or sell securities, including the same securities traded by the fund.
Anyone owning more than 25% of the fund is considered a "control person." As of 12/31/00, this included Stanley Rintel (47.8%) and Ruth Rintel (34.7%). Since they are the parents of the fund's President, mail to them can be sent to the fund's address. The effect on other security holders is to make others' votes moot, until such time as more shares are sold to others.
Anyone owning at least 5% of the fund is considered a "principal holder." As of 12/31/00, this included Stanley & Ruth Rintel, above, as well as Robert Rintel (5.8%) and Gary Rintel (5.4%). The address of Robert Rintel, the fund's President, is in the "Management" section of the SAI. Since Gary Rintel is the brother of the fund's President, mail to him can be sent to the fund's address. The securities are owned of record.
As of 12/31/00, the fund's officers, directors, and members of any advisory boards owned 5.8% of the shares of the fund as a group. Thus, the officers and directors owned more than 1%.
The fund's only investment adviser is Valgro Investments, Inc., incorporated in California on 6/29/00. It is the successor to the company of the same name which was incorporated in Illinois on 8/25/99. Robert Allen Rintel, described in the "Management" section of the SAI as an affiliated person of the fund, is also Chairman of the board of directors, President, holder of all other offices, and 100% stockholder of this company.
The approximately 0.9% annual adviser fee is accrued each business day that the New York Stock Exchange is open for trading, calculated as 0.9% of 1/250 of that day's closing net assets (before adviser fees). During the period covered by the most recent annual report (2/9/00 inception through 10/31/00), the fund incurred advisory expenses of $9,587.60. The advisory contract doesn't contain any credits to reduce advisory fees, and it doesn't contain any expense limitation provisions.
The fund distributes its own securities without an underwriter, as permitted by 15 USC 80a-12(b) for companies qualifying under 15 USC 80a-10(d). So, in accordance with 15 USC 80a-10(d)(5), the fund incurs no sales or promotion expenses in selling shares to other than current shareholders, except for expenses incurred in complying with laws regulating the issue or sale of securities. Sales and promotion expenses are instead incurred by the fund's officers or investment adviser.
As stated in the "History" section of the SAI, the fund is a Registered Transfer Agent for its securities. It also acts as its own dividend-paying agent and its own custodian. The fund's independent public accountant is Grant Thornton LLP, One Prudential Plaza, Suite 700, Chicago, IL 60601.
During the period covered by the most recent annual report (2/9/00 inception through 10/31/00), the fund paid aggregate brokerage commissions of $2,167.20. The fund is too new to have historical commissions to compare this with.
The fund executes securities trades through brokers not affiliated with the fund. These brokers are also not affiliated with the fund's investment adviser, and they're not affiliated with any affiliated person of the fund or its adviser.
The principal factors the fund considers in choosing a broker are low commissions, timely execution, and fair pricing of market orders. The fund compares these factors for different brokers based on the fund's and its officers' experience with those brokers and based on those brokers' published fee schedules. In choosing brokers, the fund does not consider other products or services provided by brokers, such as research services. Given that low commissions aren't the only factor considered, it follows that persons acting on the fund's behalf are authorized to pay a broker a higher commission than another broker may have charged for the same transaction in recognition of the value of brokerage services provided by the broker. The fund has not held securities of any broker, dealer, underwriter, or investment adviser it has used, nor of the parents of any such entity.
Everywhere they're used, the terms "Valgro Fund" and "the fund" refer to Valgro Funds, Inc. This corporation has only one class of shares, common stock without par value and for which certificates are not issued, and it is authorized to issue up to 1 quadrillion (1015) shares.
The fund has no authorized securities other than capital stock. There are no restrictions on the right freely to retain or dispose of the fund's shares. There are no material obligations or potential liabilities associated with owning the fund's shares, not including investment risks. All shares have equal dividend rights; the specifics of such distributions are described in the "Shares" section of the prospectus. All shares have equal voting rights, which can't be modified by other than a majority vote. All shares have equal and full liquidation rights. There are no preemptive rights, conversion rights, or sinking fund provisions. There is no liability to further calls or to assessment by the fund. The redemption provisions are described in the "Shares" section of the prospectus.
Fund shares are offered to the public principally through our web site valgro.com, in the manner described in the "Shares" section of the prospectus. We have not set up any special purchase plans, letters of intent, accumulation plans, withdrawal plans, or exchange privileges, but customers wishing special arrangements can inquire about the possibility of arranging something.
We are not currently an IRA trustee, though we may become one in the future. As a result, we cannot open IRA accounts at this time. However, we can accept funds from those 401(k) plans that impose no restrictions on which mutual funds investors can choose. There are currently many such plans, such as the "Standard 401(k)" from Massachusetts Mutual Life Insurance Company. Employers wishing to set up such a plan should contact an actuary, such as Larry Finkelstein at Intac Actuarial Services, 545 Route 17 South, Suite 2001, Ridgewood, NJ 07450, (201) 447-2525 extension 205. Employers then need an investment account, such as the "Fidelity Non-Prototype Retirement Account," through which Fidelity provides investment services but not the plan documents, trustee services, or recordkeeping services. This allows employees to choose any Fidelity fund or to have Fidelity send a check to any other mutual fund company, such as Valgro Funds. Because a related person to us has a business relationship with these entities, we must stress that we in no way require an investor to use this particular setup. We only mention the names here in case an employer wishing to set up such a plan has no idea where to begin and is in need of an example.
Since the fund has no sales load, the offering price of fund shares is the net asset value (NAV). So the offering price equals the net amount invested. The NAV is computed as described in the "Shares" section of the prospectus. Basically, the NAV is the net assets (assets minus liabilities) divided by the number of fund shares outstanding. Securities are offered to the public at the same price as they are offered to all other individuals and for all other transactions.
The fund intends to qualify under Subchapter M of the Internal Revenue Code. This means that the fund is treated as a registered investment company, paying no taxes on its net income and capital gains if it distributes the income and gains to its shareholders. The shareholders then pay tax at their own personal tax rates, but the fund shares go down in value by the amount of the distribution, reducing any capital gains the shareholder would have to pay at the time the fund shares are sold.
In contrast, if the fund failed to qualify under Subchapter M, the fund would pay taxes on its net income in addition to the shareholders paying tax on any distributions and any capital gains from selling shares. Roughly speaking, investors would be double-taxed.
However, qualification under Subchapter M is based on things entirely within the fund's control. For example, the fund is required to distribute at least 90% of its net income (excluding capital gains). This fund intends to distribute closer to 100%. The fund is also required to be 50% diversified. This fund intends to be at least 75% diversified, to meet the stricter SEC definition as described in the "Principal Strategies & Risks" section of the prospectus. There are other requirements too, and the fund fully expects to meet all of them.
Since the fund invests in some foreign companies whose shares or ADRs trade in the US, the fund expects to pay foreign withholding taxes. Since the fund does not invest more than 50% of its assets in the securities of foreign corporations, it can't elect to let fund shareholders themselves take a credit or deduction for these taxes [26 USC 853]. So, instead, the fund will take a credit or deduction on its own tax return, reducing any taxable income declared on behalf of fund shareholders. If the shareholder could take the deduction or credit, the fund would declare on IRS form 1099 more income or capital gains than the fund actually distributed, in addition to listing a compensating adjustment for foreign taxes. But for this fund, which takes the credit or deduction itself, the 1099 lists the actual fund distribution and indicates no adjustment for foreign taxes.
Some of the income tax consequences of holding fund shares are described in the "Shares" section of the prospectus. No information in the prospectus or SAI should be taken as tax advice: an investor should consult a tax adviser since various tax rules affect investors in different ways. For example, an investor's other transactions can affect whether gains and losses are treated as long-term or short-term. Certain state or local governments may impose additional kinds of taxes. And corporate shareholders will be informed of the portion of corporate dividends in fund distributions so they can determine their dividends-received deductions.
The fund's financial statements are included in its semiannual and annual reports. The most recent annual report, containing audited data through 10/31/00, is incorporated here by reference. To get a free copy of this report, please visit our web site at valgro.com, or e-mail [email protected], or call us collect at (415) 665-5520.
Valgro Investments, Inc., the fund's investment adviser, is under common control with the fund. The control of this company is described in the "Services" section of the SAI. The control of the fund is described in the "Owners" section of the SAI. There are no subsidiaries or group financial statements.
The fund's by-laws indemnify its officers and directors against any liability resulting from the performance of their duties, or from the lack of such performance. This indemnification doesn't apply to: (1) willful misfeasance, (2) bad faith, (3) gross negligence, or (4) reckless disregard of the duties involved in the conduct of one's office. These 4 things are referred to as the "Four Offenses" below.
The fund pays all legal bills presented by people claiming indemnification under this provision, provided that they buy surety bonds guaranteeing their written promise to refund any money which the Four Offenses ultimately make them ineligible for. Such eligibility is determined separately for each alleged instance of action or inaction of the defendant. For each eligible instance, the corporation pays the full costs of the defense, including any settlements, and no refund of advances for legal bills is required. An instance is eligible if: (1) the defendant is not accused of any of the Four Offenses in that instance, (2) a court determines on the merits that the defendant is not liable for that instance, (3) a court determines the defendant isn't guilty of the Four Offenses in that instance, or (4) an independent legal counsel determines the defendant isn't guilty of the Four Offenses in that instance.
The indemnification and advances for legal bills also apply to a person who is no longer a director or officer, and they inure to the benefit of the heirs, executors, and administrators of that person.
As a result of this indemnification policy, if shareholders as a group attempt to recover damages from the company or its officers or directors, the shareholders themselves may end up paying some or all of any damages in addition to paying the cost of the defense.
Robert Allen Rintel occupies the position of Chairman, President, and all other offices of the fund's investment adviser, Valgro Investments, Inc. His background is described in the "Management" section of the SAI.
All accounts, books, and documents are maintained by Robert Allen Rintel at the address of the fund: 377 Warren Drive, San Francisco, CA 94131-1033.
Any exhibits listed below as previously filed are hereby incorporated by reference.
Pursuant to the requirements of the Securities Act and the Investment Company Act, the Fund certifies that it meets all of the requirements for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of San Francisco, and State of California on the day of January 4, 2001.
Valgro Fund
By Robert Rintel, President & Chairman
Pursuant to the requirements of the Securities Act, this registration statement has been signed below by the following persons in the capacities and on the date(s) indicated.
Robert Rintel, President & Chairman, January 4, 2001
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