Filed with the SEC on 11/9/95
File Numbers: 2-78931 and 811-3551
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X_
__
Post-Effective Amendment No. 30 X_
and/or
__
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X_
__
Amendment No. 30 X_
(Check appropriate box or boxes)
THE WORLD FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1500 Forest Avenue, Suite 223, Richmond, VA 23229
(Address of Principal Executive Offices)
(804) 285-8211
(Registrant's Telephone Number, including Area Code)
John Pasco, III, 1500 Forest Ave., Suite 223, Richmond, VA 23229
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Upon effectiveness of
this amendment.
It is proposed that this filing will become effective (check appropriate
box).
immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
X 75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a) of Rule 485.
No additional shares being registered at this time. Registrant has
previously elected to register an indefinite number of shares pursuant to
Rule 24f-2. The Notice for the fiscal year ended December 31, 1994 was filed
on February 24, 1995.
Please send copies of communications to: Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103<PAGE>
THE WORLD FUNDS, INC.
TABLE OF CONTENTS
TO FORM N-1A
1.Cross Reference Sheet
2.Part A
Prospectus for the Vontobel Eastern European Equity series of
The World Funds, Inc.
(No changes were made in the Prospectuses for the Vontobel
EuroPacific Fund series, the Vontobel U.S. Value Fund series,
the Vontobel International Bond Fund series or the Sand Hill
Portfolio Manager Fund series - they are hereby Incorporated
by Reference from Post Effective Amendment No. 28, filed April
27, 1995).
3.Part B
Statement of Additional Information for the Vontobel Eastern
European Equity Fund series of The World Funds, Inc.
(No changes were made in the Statements of Additional
Information for the Vontobel EuroPacific Fund series, the
Vontobel U.S. Value Fund series, the Vontobel International
Bond Fund series or the Sand Hill Portfolio Manager Fund
series - they are hereby Incorporated by Reference from Post-
Effective Amendment No. 28, Filed April 27, 1995.
4.Part C - Other Information
5.Signature Page
6.Exhibits
CROSS-REFERENCE SHEET
PART A
N-1A Item No. Prospectus Caption
1 Cover Page
2 Prospectus Summary; Estimated Fund Expenses
3 Not Applicable
4 Cover Page; General Information About the
Fund; Investment Objective; Asset Allocation
Policies; Additional Information on
Investments, Policies and Risks
5 The Fund's Management
6 Taxes; Dividends and Capital Gains Distri-
butions; General Information About the Fund
7 How to Invest; How Net Asset Value is
Determined
8 How to Redeem Shares
9 Not Applicable
PART B
N-1A Item No. SAI Caption
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Objective and Policies; Special
Investment Considerations; Investment
Techniques; Investment Restrictions
14 Directors and Officers
15 Directors and Officers
16 Investment Advisor; Administrator; and
Transfer Agent
17 Portfolio Transactions
18 Not Applicable (Information appears in the
Prospectus)
19 Special Shareholder Services; Net Asset Value
20 Taxes
21 Distribution
22 Performance
23 Financial Statements are Incorporated by
Reference Only
<PAGE>
PART A
The Prospectus for the Vontobel Eastern European Equity Fund
series of The World Funds, Inc.
The Registrant hereby Incorporates by Reference from Post-
Effective Amendment No. 28 as filed on April 27, 1995 (and which
became effective on May 1, 1995) the Prospectuses for the Vontobel
EuroPacific Fund series, the Vontobel U.S. Value Fund series, the
Vontobel International Bond Fund series and the Sand Hill Portfolio
Manager Fund series of The World Funds, Inc.
<PAGE>
VONTOBEL EASTERN EUROPEAN EQUITY FUND
OF
THE WORLD FUNDS, INC.
A "SERIES" INVESTMENT COMPANY
1500 Forest Avenue PROSPECTUS DATED JANUARY 1, 1996
Suite 223
Richmond, Virginia 23229
Telephone: 1-800-527-9500
This Prospectus offers shares of the Vontobel Eastern
European Equity Fund (the "Fund"), a series of The World Funds,
Inc. (the "World Funds"), an open-end diversified management
investment company commonly known as a "mutual fund." A "series"
fund offers investors a choice of investment objectives, with each
series having its own separate and distinct portfolio of
investments and operating much like a separate mutual fund. The
objective of the Fund is to seek to achieve capital appreciation
by investing in a carefully selected and continuously managed
diversified portfolio consisting primarily of equity securities
(which includes securities convertible into equity securities, such
as warrants, convertible bonds, debentures or convertible preferred
stock). Shareholders redeeming shares held less than six months
will be charged a 2% redemption fee paid to the Fund to offset
transaction costs of buying and selling portfolio securities. The
World Funds is currently composed of five series. Investors will
be able to exchange all or part of their investment from one fund
to another or to certain other mutual funds, under conditions set
by the World Funds.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE
FUND WHICH A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. IT
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. MORE INFORMATION
ABOUT THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS CONTAINED IN THE "STATEMENT OF ADDITIONAL
INFORMATION," DATED JANUARY 1, 1996 WHICH IS AVAILABLE AT NO CHARGE
UPON WRITTEN REQUEST TO THE FUND. THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION IS INCORPORATED HEREIN BY REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.<PAGE>
TABLE OF CONTENTS PAGE
PROSPECTUS SUMMARY
TABLE OF FUND EXPENSES
FINANCIAL HIGHLIGHTS
THE WORLD FUNDS, INC.
INVESTMENT OBJECTIVE
INVESTMENT POLICIES
INVESTMENT STRATEGY
INVESTMENT RESTRICTIONS
PERFORMANCE
SPECIAL RISK CONSIDERATIONS
THE WORLD FUNDS' MANAGEMENT
HOW TO INVEST
HOW TO REDEEM SHARES
HOW TO TRANSFER SHARES
ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS
SPECIAL SHAREHOLDER SERVICES
HOW NET ASSET VALUE IS DETERMINED
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXATION CONSIDERATIONS
GENERAL INFORMATION ABOUT THE WORLD FUNDS
MORE INFORMATION
<PAGE>
VONTOBEL EASTERN EUROPEAN EQUITY FUND
P R O S P E C T U S S U M M A R Y
The following summary is qualified in its entirety by the more
detailed information appearing in the body of this Prospectus.
Investment Objective: The objective of the Fund is to seek
to achieve capital appreciation by
investing in a carefully selected
and continuously managed diversified
portfolio consisting primarily of
equity securities (which includes
securities convertible into equity
securities, such as warrants,
convertible bonds, debentures or
convertible preferred stock). See
"Investment Objective" and
"Investment Policies" on Page 5.
Principal Investments: Invests primarily in equity
securities of issuers in Eastern
Europe. See "Investment Objective"
and "Investment Policies" on Page 5.
The Advisor : Vontobel USA Inc. is the Advisor.
See "The World Funds' Management" on
Page 8.
Distributions/Dividends: Paid annually from available capital
gains and income. See "Dividends
and Capital Gains Distributions" on
Page 13.
Reinvestment : Distributions may be reinvested
automatically without a sales
charge. See "Dividends and Capital
Gains Distributions" on Page 13.
Initial Purchase : $1,000 minimum. See "How to Invest"
on Page 10.
Subsequent Purchase : $100 minimum. See "How to Invest"
on Page 10.
Net Asset Value : Quoted daily in the financial
section of most newspapers under
World Funds: ________. Information
may also be obtained by calling 1-
800-527-9500; and through most
broker dealers. See "How the Net
Asset Value is Determined" on Page
12.
Principal Risk Factors: There can be no assurance that the
Fund will achieve its investment
objective. Other factors which
should be considered by an investor
include: The Fund invests in
foreign securities, and therefore
may be affected by foreign currency
fluctuations or exchange controls,
differences in accounting
procedures, and other risks. The
markets in which the Fund invests
include newly reorganized capital
markets, which may also involve
added risk. See "Special Risk
Considerations" on Page 8. The Fund
also may acquire repurchase
agreements, and shares of other
investment companies.
Shares of the Fund are offered for sale without a sales charge
(see "How to Invest" on Page 10) from the distributor, First
Dominion Capital Corp.
THE ADVISOR: Vontobel USA Inc. (the "Advisor") manages the
investments of the Fund according to its investment objective.
<PAGE>
TABLE OF FUND EXPENSES
The following table illustrates all expenses and fees that a
shareholder of the Fund will incur. The expenses set forth are
estimated below:
Shareholder Transaction Expenses Vontobel Eastern
European Equity Fund
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested DividendsNone
Redemption Fees 2% on shares held less
than six months*
Exchange Fees None
* Shares held more than six months are not
subject to the redemption fee. A shareholder
electing a wire transfer of funds or placing a
telephone redemption request will be charged
$10 for each service.
Estimated Annual Fund Operating Expenses (as % of average net
assets)
Management Fee 1.25%
12b-1 Fees None
Other Operating Expenses .74
Total Fund Operating Expenses 1.99%
The purpose of this table is to assist investors in
understanding the various costs and expenses that they will bear
directly or indirectly.
The following examples illustrate the expenses that an
investor would pay on a $1,000 investment over various time periods
assuming (1) a 5% annual rate of return, and (2) redemption at the
end of each time period.
1 Year 3 Years
$20 $62
These examples should not be considered a representation of
past or future expenses or performances. Actual expenses may be
greater or lesser than those shown.
<PAGE>
THE WORLD FUNDS, INC.
The Vontobel Eastern European Equity Fund (the "Fund") is a
series of The World Funds, Inc. (the "World Funds"), an open-end
diversified management investment company incorporated in Maryland
in 1983. The World Funds currently consists of five series, and
the Board of Directors may elect to add more series in the future.
A minimum initial investment of $1,000 is required to open a
shareholder account in the Fund, and each subsequent investment
must be $100 or more.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek to achieve
capital appreciation by investing in a carefully selected and
continuously managed diversified portfolio consisting primarily of
equity securities (which are securities convertible into equity
securities, such as warrants, convertible bonds, debentures or
convertible preferred stock). The investments of the Fund will
consist principally of equity securities of Eastern European
countries.
The investment objective of the Fund may not be changed
without the approval of shareholders. All investments entail some
risks (see "Special Risk Considerations"), and there is no
assurance that the investment objective of the Fund can be
achieved.
INVESTMENT POLICIES
The Fund is designed for individuals and institutions who wish
to diversify their investment programs in international equities to
take advantage of opportunities in the newly reorganized capital
and securities markets of Central/Eastern Europe. The Fund
normally will invest at least 65% of its assets in equity
securities of companies located in or which conduct a significant
portion of their business in countries which are generally
considered to comprise Eastern Europe, i.e., the member countries
of the former Warsaw Pact, including the European successor states
of the former Soviet Union. It is expected that the Fund's initial
investment activities will be focused on Hungary, the Czech
Republic, Poland and Slovakia. These countries are already at a
relatively advanced stage in their transition to a market-based
economy. The Adviser believes that their relatively well developed
capital and stock markets can handle transactions of a large enough
size to permit fund investment. However, trading volume of the
stock exchanges of these markets may be substantially lower than
that in developed markets, and the purchase and sale of portfolio
securities may not always be made at an advantageous price. The
Advisor generally will decide when and how much to invest in these
developing markets based upon its assessment of their continuing
development.
As stock markets in the region develop and more investment
opportunities emerge, the Fund will broaden its portfolio to
include securities of companies located in or which conduct a
significant portion of their business in countries in this region.
As noted above, investments in equity securities issued by
companies in these "developing countries" or "emerging markets,"
involve exposure to economic structures that are generally less
diverse and mature, with political systems which may have less
stability than those of "developed countries."
The Advisor believes that economic and political developments
in Europe have helped to create new opportunities. In recent years
a number of economies in developed and developing countries have
grown faster than the U.S. economy, and the return on equity
investments in these markets has often been superior to similar
investments in the U.S. In addition, the U.S. stock market
presently represents approximately 40% of the capitalization of the
world's stock markets compared to approximately two-thirds in 1970.
Significant growth of European securities markets, coupled with
advances in technology and lower cost of communications, have
increased the globalization of securities trading. Therefore, over
the past few years, the number of investment opportunities outside
of the U.S. has grown rapidly. Despite this trend, however,
Central and Eastern European stocks are generally underrepresented
in investment portfolios. Therefore, the Fund offers a means to
achieve equity exposure to this region.
It is the policy of the Fund to invest primarily in equity
securities which may achieve capital appreciation by selecting
companies with superior potential based on a series of macro and
micro economic analyses. The Fund may select its investments from
companies which are listed on a securities exchange or from
companies whose securities have an established over-the-counter
market, and may make limited investments in "thinly traded"
securities (please refer to the Investment Restrictions on Page 6
of the Statement of Additional Information).
The Fund may invest in other investment companies which invest
in Eastern European stocks. By investing in shares of such
investment companies which invest exclusively in such countries,
the Fund would indirectly pay a portion of the operating expenses,
management expenses, and brokerage costs of such companies, as well
as those of the Fund. Federal and state securities laws impose
limits on such investments with which the Fund will comply, and may
affect the ability of the Fund to acquire or dispose of such
shares.
The Fund intends to diversify investments broadly among
countries and normally will have represented in the portfolio
business activities of not less than three different countries.
The securities the Fund purchases may not always be purchased on
the principal market. For example, American Depository Receipts
("ADR's"), European Depository Receipts ("EDR's"), or Global
Depository Receipts ("GDR's") may be purchased if trading
conditions make them more attractive than the underlying security.
ADR's are receipts typically issued in the U.S. by a bank or trust
company evidencing ownership of an underlying foreign security.
The Fund may invest in ADR's which are structured by a U.S. bank
without the sponsorship of the underlying foreign issuer. In
addition to the risks of foreign investment applicable to the
underlying securities, such unsponsored ADR's may also be subject
to the risks that the foreign issuer may not be obligated to
cooperate with the U.S. bank, may not provide additional financial
and other information to the bank or the investor, or that such
information in the U.S. market may not be current. Similarly,
EDR's and GDR's represent receipts for a foreign security issued in
a location outside the U.S., and may involve risks comparable to
ADR's, as well as the fact that the EDR or GDR is itself issued
outside the U.S. For temporary defensive purposes, the Fund may
hold cash or debt obligations denominated in U.S. dollars or
foreign currencies. These debt obligations include U.S. and
foreign government securities and investment grade corporate debt
securities, or bank deposits of major international institutions.
Please refer to the Statement of Additional Information for more
information on ADR's, EDR's, and GDR's.
The selection of the securities in which the Fund will invest
will not be limited to companies of any particular size, or to
securities traded in any particular marketplace, and will be based
only upon the expected contribution such security will make to its
investment objective.
Since the Fund seeks to achieve capital appreciation, it will
dispose of a security, regardless of the time it has been held, to
establish gains, to avoid anticipated reductions of value, or to
reduce or eliminate a position in a security which is no longer
believed to offer the potential for suitable gains. Portfolio
turnover is expected not to exceed an annual rate of 100% under
normal circumstances. Such a turnover rate may reflect substantial
short term trading and corresponding brokerage costs which the Fund
must pay.
INVESTMENT STRATEGY
The Advisor will seek to identify those countries in the
Central/Eastern European region where economic and political
factors are likely to produce above average long term returns, as
well as those companies in such countries that are best positioned
to take advantage of such developments or are most attractively
valued. The Fund's assets will be allocated primarily to the
equity markets of those countries whose economies are likely to
benefit from strengthening macroeconomic forces as a result of
their transition from a centrally planned to a market-based
economy, the orderly functioning of democratized political
institutions, flexible and viable economic policies, persistent
privatization efforts, modernized legal, banking and regulatory
frameworks, as well as from widespread domestic and foreign support
for their respective national policies.
The equity selections of the Fund will be based on a
combination of macro- and micro- economic analysis. The Advisor
combines macro-economic forecasts for GDP growth, industrial
production, interest rates, and exchange rates, among other
factors, with fundamental analysis of specific securities to shape
its viewpoint about where investment opportunity presents itself in
Eastern European securities markets. These markets present
analysts with several problems which normally are not encountered
in developed markets, foremost among them the scarcity of reliable
financial information. Another problem involves accounting methods
and reporting standards, which may vary widely from country to
country, and even within an individual country. Company financial
data must be converted so that it corresponds to either U.S.
generally accepted accounting principles ("U.S. GAAP") or
International Accounting Standards ("IAS"). Although
macroeconomic data often paint a more reliable picture of these
markets than that provided by company data, selecting the most
attractive stocks still requires detailed stock analysis.
Fundamental analysis is particularly important since these markets
are not very efficient and may be relatively unaffected by
developments in other markets. The performance of individual
stocks shows a greater deviation from the general market
performance than in developed markets, and price/earnings multiples
or price/book value ratios are not always calculated in a uniform
manner across country markets.
From the micro-economic viewpoint, equity selection is not
tied to any particular strict "style." The Advisor will usually
tend to focus on a company's ability to generate strong cash flow,
rather than earnings, as a more meaningful valuation measure. This
is of particular importance when evaluating investment
opportunities within a particular industry across country borders.
Aside from traditional valuation methods based on earnings
ratios and book values, equity selection will be based on thorough
bottom-up analysis of individual companies, with an emphasis on the
following:
- - Viable products and services in a growing market.
- - Sizable domestic market share and/or export prospects.
- - Substantial free-cash-flow-generating capacity.
- - Rising return on equity.
- - Experienced, shareholder-oriented management.
In selecting investments for the Fund, the Advisor will
usually include large capitalization companies in attractive
markets, with positive industry fundamentals and capable
management. The Advisor will also include faster growing, medium-
and small-sized companies that offer higher potential returns at a
slightly higher risk level, either because of their smaller size or
because they are not as widely researched. Subject to the policies
and limitations governing the investments of the Fund, the Adviser
may also select investment opportunities in other markets.
Strategic Transactions
The Advisor does not, as a general rule, intend to regularly
enter into strategic transactions for the purpose of reducing
currency and market risk, for two reasons. First, since financial
derivatives in Eastern European markets currently must be tailor-
made to the Fund's specifications, they are extremely costly and
illiquid instruments, and as such do not offer a cost-effective way
to reduce currency and market risk. Second, the Fund is intended
for investors with a long-term investment horizon and it is the
Advisor's view that any short-term losses due to fluctuations in
local currencies or stock market values will be compensated over
the long term by the capital appreciation of the portfolio
securities. Notwithstanding the foregoing, the Adviser may, from
time to time as circumstances dictate, engage in strategic
transactions as described below.
Currency risk is assessed separately from equity analysis. To
balance undesirable currency risk the Fund may enter into forward
contracts to purchase or sell foreign currencies in anticipation of
the Fund's currency requirements, and to protect against possible
adverse movements in foreign exchange rates. Although such
contracts may reduce the risk of loss due to a decline in the value
of the currency which is sold, they also limit any possible gain
which might result should the value of the currency rise. Foreign
investments which are not U.S. dollar denominated may require the
Fund to convert assets into foreign currencies or convert assets
and income from foreign currencies to dollars. Normally, exchange
transactions will be conducted on a spot or cash basis at the
prevailing rate in the foreign exchange market. However, the
investment policies permit the Fund to enter into forward foreign
currency exchange contracts in order to provide protection against
changes in foreign exchange rates. Any transactions in foreign
currencies will be designed to protect the dollar value of the
assets composing or selected to be acquired or sold for the
investment portfolio of the Fund; the Fund will not speculate in
foreign currencies. In addition, because the exchange rate of some
Eastern European currencies may be linked to a basket of
convertible currencies including the U.S. dollar and the
deutschemark, the Adviser may elect, from time to time as
circumstances dictate, to reduce the effect of currency
fluctuations on the value of existing or anticipated holdings or
sales proceeds of portfolio securities by proxy hedging. For more
information, see sections on forward foreign currency contracts and
proxy hedging in the Statement of Additional Information.
The Fund may purchase and write covered call options on
foreign currencies for the purpose of protecting against declines
in the dollar value of foreign securities. The purchase of an
option on foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of
rate movements adverse to the Fund's position, the Fund may forfeit
the entire amount of the premium plus related transaction costs.
In connection with such transactions, the Fund will segregate
assets sufficient to meet its obligations: when the Fund's
obligation is denominated in a foreign currency, the Fund will own
that currency or assets denominated in that currency, or a currency
or securities which the Advisor determines will move along with the
hedged currency or portfolio securities.
The Fund may enter into contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against
anticipated future changes in exchange rates which otherwise might
adversely affect the value of the portfolio securities or adversely
affect the prices of securities that the Fund intends to purchase
or sell at a later date. The successful use of currency futures
will usually depend on the Advisor's ability to forecast currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
The Fund is authorized to use financial futures, currency
futures, and options on such futures for certain hedging purposes
subject to conditions of regulatory authorities (including margin
requirements) and limits established by the World Funds' Board of
Directors to avoid speculative use of such techniques.
INVESTMENT RESTRICTIONS
The investments of the Fund are subject to investment
limitations which may not be changed without the approval of at
least a majority of the outstanding voting securities, as that term
is defined in the Investment Company Act of 1940. (See the
Statement of Additional Information for the specific definition.)
Certain of these policies are detailed below, while other
policies which prohibit or limit particular practices are set forth
in the Statement of Additional Information. The investment
restrictions of the Fund specifically provide that it may not:
* As to 75% of its assets, purchase the securities of any
issuer (other than obligations issued or guaranteed as to
principal and interest by the Government of the United States
or any agency or instrumentality thereof) if, as a result of
such purchase, more than 5% of its total assets would be
invested in the securities of such issuer.
* Purchase stock or securities of an issuer (other than the
obligations of the United States or any agency or
instrumentality thereof) if such purchase would cause the Fund
to own more than 10% of any class of the outstanding stock or
securities or more than 10% of any class of voting securities
of such issuer.
* Act as an underwriter of securities of other issuers,
except that it may invest up to 10% of the value of its total
assets (at time of investment) in portfolio securities which
the Fund might not be free to sell to the public without
registration of such securities under the Securities Act of
1933 or any foreign law restricting distribution of securities
in a country of a foreign issuer ("restricted securities").
* Buy or sell commodities or commodity contracts provided,
however, that it may utilize not more than 1% of its assets
for deposits or commissions required to enter into a financial
futures contract for hedging purposes as described under
"Investment Policies." (Such deposits or commissions are not
presently required in the markets the Fund will use.)
* Borrow money except for temporary or emergency purposes
and then only in an amount not in excess of 5% of the lower of
value or cost of its total assets, in which case it may
pledge, mortgage or hypothecate any of its assets as security
for such borrowing but not to an extent greater than 5% of its
total assets.
* Make loans, except that it may: (1) lend portfolio
securities; and (2) enter into repurchase agreements secured
by the U.S. Government or Agency securities.
Percentage limitations in the "Investment Policies" and
"Investment Restrictions" sections are determined at the time the
Fund makes a purchase or loan subject to such percentage.
PERFORMANCE
From time to time the World Funds may advertise information
regarding the performance of the Fund. Such statements of
performance will consist of the Fund's current "yield,"
"distribution rate" (to be included in sales literature only), and
"total return." These performance figures are based upon
historical results and are not intended to indicate future
performance.
"Yield" is the ratio of income per share derived from the
portfolio investments to the current maximum offering price
expressed in terms of a percentage. "Distribution rate" is the
amount of distribution per share made over a twelve-month period
divided by a current maximum offering price. "Total return" is the
total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a
percentage of the purchase price.
Please refer to the Statement of Additional Information for
more information on Performance.
SPECIAL RISK CONSIDERATIONS
Investing in foreign securities involves special risk
considerations which normally are not associated with investing in
United States securities. These considerations include: changes
in currency rates; exchange control regulations; costs incurred in
connection with conversions between various currencies;
availability of less financial information than comparable United
States companies; lack of uniform accounting, auditing and
financial reporting requirements; less liquidity and more
volatility than securities listed on the New York Stock Exchange
due to substantially lower trading volume; possibly lower sales
prices in the event of forced liquidation of securities in order to
meet unanticipated cash requirements; fixed commissions on foreign
stock exchanges which are generally higher than negotiated
commissions on United States exchanges, in addition to less
supervision and regulation of such exchanges; difficulty in
enforcing judgments abroad; and the possibility of expropriation of
assets, confiscatory taxation, imposition of withholding of taxes
prior to payment of dividends or other distributions, political or
social instability, or diplomatic developments which could affect
United States investments in those countries.
THE WORLD FUNDS' MANAGEMENT
The World Funds' Board of Directors is responsible for the
supervision of the general business of the Fund. The Directors act
as fiduciaries for shareholders under the laws of the State of
Maryland. The Board has appointed Arpad Pongracz to serve as
President of the Fund. The World Funds employs the following
persons to provide it with investment advice and to conduct its on-
going business:
Advisor - Vontobel USA Inc. (the "Advisor") manages the
investments of the Fund pursuant to an Investment Advisory
Agreement (the "Advisory Agreement" ), dated December __, 1995.
The Advisory Agreement is effective for an initial term of two
years and thereafter may be continued annually by a majority of the
Board of Directors of the World Funds or the shareholders of the
Fund, and by a majority of the directors who are not interested
persons of the World Funds.
The Advisor is a wholly owned and controlled subsidiary of
Vontobel Holding Ltd., a Swiss bank holding company, having its
registered offices in Zurich, Switzerland. The Advisor currently
manages in excess of $900 million (which includes the assets of the
Fund, the Vontobel U.S. Value Fund, the Vontobel EuroPacific Fund,
and the Vontobel International Bond Fund series of the Fund, and an
International Equity series of an unaffiliated fund). The Advisor
also acts as the investment advisor to three series of a Luxembourg
fund organized by an affiliate of the Advisor. That fund does not
accept investments from the U.S.
Mr. Arpad Pongracz, who is a Vice President of the Advisor,
is the President and portfolio manager of the Fund. Pursuant to
the Advisory Agreement the Advisor provides the Fund with
investment management services, subject to the supervision of the
World Funds' Board of Directors, and with office space, and pays
the ordinary and necessary office and clerical expenses relating to
investment research, statistical analysis, supervision of its
portfolio and certain other costs. The Advisor also bears the cost
of fees, salaries and other remuneration of the World Funds'
directors, officers or employees who are officers, directors, or
employees of the Advisor. The Fund is responsible for all other
costs and expenses, such as, but not limited to, brokerage fees and
commissions in connection with the purchase and sale of securities,
legal, auditing, bookkeeping and record keeping services, custodian
and transfer agency fees and fees and other costs of registration
of its shares for sale under various state and Federal securities
laws.
Under the Advisory Agreement the monthly compensation paid to
the Advisor is accrued daily at a rate equal to a fee at the annual
rate of 1.25% of the net assets of the Fund. This fee is higher
than that charged to many other investment companies. If the
assets of the Fund exceed $500,000,000, the fee for such assets
will be computed at the annual rate of 1% on such excess. The fee
is paid monthly, within five (5) business days after the end of the
month. The Advisory Agreement provides that the fee paid by the
Fund will be reduced to the extent necessary to comply with any
applicable state expense limitation provision to which the Fund may
be subject. All expenses not specifically assumed by the Advisor
are assumed by the Fund. The address of the Advisor is 450 Park
Avenue, New York, N.Y. 10022.
The Advisory Agreement contemplates the authority of the
Advisor to place orders for the Fund pursuant to its investment
determinations either directly with the issuer or with any broker
or dealer. The Advisor may allocate brokerage to an affiliated
dealer in accordance with written policies and procedures adopted
by the Board of Directors. In placing orders with brokers or
dealers, the Advisor will attempt to obtain the best price and
execution of its orders. The Advisor may purchase and sell
securities to and from brokers and dealers who provide the Advisor
with research advice and other services, or who sell shares of the
Fund. From time to time, and subject to the Advisor obtaining the
best price and execution for the Fund, the Board may authorize the
Advisor to allocate brokerage transactions to a broker in
consideration: (1) of investment research or statistical services,
or (2) in consideration of a payment of an obligation otherwise
payable by the Fund.
Administrator - Commonwealth Shareholder Services, Inc.
("CSS"), serves as Administrator to the Fund pursuant to an
Administrative Services Agreement. CSS provides certain
recordkeeping and shareholder servicing functions required of
registered investment companies, and will assist the World Funds in
preparing and filing certain financial and other reports and
performs certain daily functions required for ongoing operations.
CSS may furnish personnel to act as the World Funds' officers to
conduct its business subject to the supervision and instructions of
its Board of Directors.
The Administrative Services Agreement provides that CSS will
be paid a monthly fee: (1) of $30 per hour for shareholder
servicing; (2) $30 per hour for blue sky matters; (3) the greater
of 20 basis points of the average daily net assets of the Fund or
$85,000 per year for administration (which includes regulatory
matters, backup of the pricing of the Fund, administrative duties
in connection with the execution of portfolio trades, and certain
services in connection with Fund accounting); and (4) certain out-
of-pocket expenses. CSS has agreed to reduce the minimum amount
specified in clause three above to $42,500 during the first two
fiscal years of the Fund's operations. John Pasco, III, Chairman
of the Board of the World Funds, owns the stock of CSS, which
therefore may be deemed to be an affiliate of the World Funds. The
address of CSS is 1500 Forest Avenue, Suite 223, Richmond, VA
23229.
Custodian and Accounting Services Agent - Brown Brothers
Harriman & Co. ("BBH") is the World Funds' Custodian and Accounting
Services Agent. BBH collects income when due and holds all of the
World Funds' portfolio securities and cash. (BBH, with the World
Funds' consent, has designated The Depository Trust Company of New
York, as its agent to secure some of the assets of the Fund.) BBH
is authorized to appoint other entities to act as sub-custodians to
provide for the custody of foreign securities which may be acquired
and held by the World Funds outside the U.S. Such appointments are
subject to appropriate review by the World Funds' Board of
Directors. BBH as the Accounting Services Agent maintains and
keeps current the books, accounts, records, journals or other
records of original entry relating to the World Funds' business.
The address of BBH is 40 Water Street, Boston, Massachusetts 02109.
Transfer and Dividend Disbursing Agent - Fund Services, Inc.
("FSI") is the World Funds' Transfer and Dividend Disbursing Agent.
John Pasco, III, Chairman of the Board of the World Funds, owns one
third of the stock of FSI, and, therefore, FSI may be deemed to be
an affiliate of the World Funds. FSI provides all the necessary
facilities, equipment and personnel to perform the usual and
ordinary services of Transfer and Dividend Disbursing Agent,
including: administrative receipt and processing of orders and
payments for purchases of shares, opening shareholder accounts,
preparing shareholder meeting lists, mailing proxy material,
receiving and tabulating proxies, mailing shareholder reports and
prospectuses, withholding certain taxes on non-resident alien
accounts, disbursing income dividends and capital distributions,
preparing and filing U.S. Treasury Department Form 1099 (or
equivalent) for all shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
redemptions of the Fund's shares and all other confirmable
transactions in shareholders' accounts, recording reinvestment of
dividends and distribution of the Fund's shares. Under the
Agreement between the World Funds and FSI, as in effect on January
1, 1996, FSI is compensated pursuant to a schedule of services and
out-of-pocket expenses. The schedule calls for a minimum payment
of $16,500 per year for each series. The address of the Transfer
and Dividend Disbursing Agent is P.O. Box 26305, Richmond, VA
23260.
Principal Underwriter/Distributor - First Dominion Capital
Corp. (the "Distributor") acts as the Principal Underwriter for the
World Funds pursuant to an agreement dated January 1, 1994. Mr.
John Pasco, III, who is the President, Treasurer, and a Director of
the Distributor, owns 100% of the stock of the Distributor. Mr.
Pasco is also the Chairman and a director of the World Funds. The
address of the Distributor is 1500 Forest Avenue, Suite 223,
Richmond, VA 23229.
HOW TO INVEST
Shares of the Fund may be purchased directly from the
Distributor or through members of the National Association of
Securities Dealers, Inc. who are registered, if required, in the
state where the purchase is made and who have a sales agreement
with the Distributor. After a shareholder account is established,
subsequent orders for shares may be mailed directly to the Transfer
Agent. Such purchases of shares are made at the net asset value.
A minimum initial investment of $1000 is required to open a
shareholder account in the Fund, and each subsequent investment
must be $100 or more. Under certain circumstances the World Funds
may waive the minimum initial investment for purchases by certain
retirement accounts (such as IRA's), and for purchases by officers,
directors and employees of the World Funds and its affiliated
entities and for certain related advisory accounts. The offering
price per share is equal to the net asset value per share next
determined after receipt of a purchase order.
When an investor acquires shares of the Fund from a securities
dealer, the investor may be charged a transaction fee for shares
purchased and/or redeemed at net asset value through that broker.
To facilitate the handling of transactions with shareholders,
the World Funds uses an open account plan. The Transfer Agent will
automatically establish and maintain an open account for the Fund's
shareholders. Under the open account plan your shares are
reflected in your open account. This service facilitates the
purchase, redemption or transfer of shares, and eliminates the need
to safeguard certificates and reduces time delays in executing
transactions.
Purchase by Mail. For initial purchases the Account
Application form which accompanies this Prospectus should be
completed, signed, and mailed to the Transfer Agent, together with
your check or other negotiable bank draft drawn on and payable by
a U.S. Bank payable to the Vontobel Eastern European Equity Fund.
For subsequent purchases include with your check the tear-off stub
from a prior purchase confirmation, or otherwise identify the
name(s) of the registered owner(s) and the social security number.
Investing by Wire. You may purchase shares by requesting your
bank to transmit "Federal Funds" by wire directly to the Transfer
Agent. To invest by wire please call the Transfer Agent for
instructions, then notify the Distributor by calling 800-527-9500.
Your bank may charge you a small fee for this service. The Account
Application which accompanies this Prospectus should be completed
and promptly forwarded to the Transfer Agent. This application is
required to complete the World Funds' records in order to allow you
access to your shares. Once your account is opened by mail or by
wire, additional investments may be made at any time through the
wire procedure described above. Be sure to include your name and
account number in the wire instructions you provide your bank.
Stock Certificates - Certificates for full shares will be
issued by the Transfer Agent upon written request but only after
payment for the shares is collected by the Transfer Agent.
HOW TO REDEEM SHARES
Shares may be redeemed at any time and in any amount by mail
or telephone. For your protection, the Transfer Agent will not
redeem your shares until it has received all information and
documents necessary for your request to be in "proper order." (See
"Signature Guarantees.") You will be notified promptly by the
Transfer Agent if your redemption request is not in proper order.
If a shareholder redeems shares of the Fund which have been held
less than six months (including shares to be exchanged), the World
Funds will deduct from the proceeds a redemption charge of 2% of
the amount of the redemption. This amount is retained by the Fund
to offset the Fund's costs of purchasing or selling securities.
The World Funds' procedure is to redeem shares at the net
asset value next determined after receipt by the Transfer Agent of
the redemption request in proper order as described herein.
Payment will be made promptly, but no later than the seventh day
following receipt of the request in proper order. Please note that
(1) the Transfer Agent cannot accept redemption requests which
specify a particular date for redemption, or which specify any
special conditions; and (2) if the shares you are redeeming were
purchased by you less than fifteen (15) days prior to the receipt
of your redemption request, the Transfer Agent must ascertain that
your check in payment of the shares you are redeeming has cleared
prior to disbursing the redemption proceeds. If you anticipate the
need to redeem before fifteen (15) days, you should make your
purchase by Federal Funds wire, or by a certified, treasurer's or
cashier's check.
The World Funds may suspend the right to redeem shares for any
period during which the New York Stock Exchange is closed or the
Securities and Exchange Commission determines that there is an
emergency. In such circumstances you may withdraw your redemption
request or permit your request to be held for processing at the net
asset value per share next computed after the suspension is
terminated.
Redemption by Mail - To redeem shares by mail, send the
following information to the Transfer Agent: (1) a written request
for redemption signed by the registered owner(s) of the shares,
exactly as the account is registered; (2) the stock certificates
for the shares you are redeeming, if any were issued; (3) any
required signature guarantees (See "Signature Guarantees"); and (4)
any additional documents which might be required for redemption by
corporations, executors, administrators, trustees, guardians, etc.
The Transfer Agent will mail the proceeds to your currently
registered address, payable to the registered owner(s) unless you
specify otherwise in your redemption request. There is no charge to
shareholders for redemptions by mail.
Redemption by Telephone - You may redeem your shares by
telephone if you request this service at the time you complete your
initial Account Application. If you do not request this service at
that time, you must request approval of telephone redemption
privileges in writing (sent to the World Funds' Transfer Agent)
with a signature guarantee before you can redeem shares by
telephone. There is no charge for establishing this service, but
the Transfer Agent will charge your account a $10.00 service fee
each time you make a telephone redemption. Once your telephone
authorization is in effect, you may redeem shares by calling the
Transfer Agent at (800) 628-4077. By establishing this service,
you authorize the Transfer Agent to act upon any telephone
instructions it believes to be genuine, to (1) redeem shares from
your account and (2) mail or wire redemption proceeds. If you
request that your redemption proceeds be wired to you, the Transfer
Agent will charge your account with a wire service charge,
currently $10.00. This charge is in addition to the $10.00 service
fee for making a telephone redemption. The amount of these service
charges may be changed at any time, without notice, by the Transfer
Agent.
You cannot redeem shares by telephone if you hold a stock
certificate representing the shares you are redeeming or if you
paid for the shares with a personal, corporate, or government check
and your payment has been on the books of the World Funds for less
than 15 days.
If it should become difficult to reach the Transfer Agent by
telephone during periods when market or economic conditions lead to
an unusually large volume of telephone requests, a shareholder may
send a redemption request to the Transfer Agent by overnight mail.
The World Funds employs reasonable procedures designed to
confirm the authenticity of your instructions communicated by
telephone and, if it does not, it may be liable for any losses due
to unauthorized or fraudulent transactions. As a result of this
policy, a shareholder authorizing telephone redemption bears the
risk of loss which may result from unauthorized or fraudulent
transactions which the World Funds believes to be genuine. When
you request a telephone redemption or transfer, you will be asked
to respond to certain questions designed to confirm your identity
as a shareholder of record. Your cooperation with these procedures
will protect your account and the Fund from unauthorized
transactions.
Signature Guarantees - To protect you and the Fund from fraud,
signature guarantees are required for: (1) all redemptions ordered
by mail if you require that the check be payable to another person
or that the check be mailed to an address other than the one
indicated on the account registration; (2) all requests to transfer
the registration of shares to another owner; and (3) all
authorizations to establish or change telephone redemption service,
other than through your initial account application.
In the case of redemption by mail, signature guarantees must
appear either: (a) on the written request for redemption; (b) on a
separate instrument of assignment (usually referred to as a "stock
power") specifying the total number of shares being redeemed. If
shares held by the Transfer Agent are being redeemed, the signature
guarantee must be on the written request or stock power. The World
Funds may waive these requirements in certain instances.
The following institutions are acceptable guarantors: (a)
participants in good standing of the Securities Transfer Agents
Medallion Program ("STAMP"); (b) commercial banks which are members
of the Federal Deposit Insurance Corporation ("F.D.I.C."); (c)
trust companies; (d) firms which are members of a domestic stock
exchange; (e) eligible guarantor institutions qualifying under Rule
17Ad-15 of the Securities Exchange Act of 1934 that are authorized
by charter to provide signature guarantees; and (f) foreign
branches on any of the above. In addition, the World Funds will
guarantee your signature if you personally visit its offices at
1500 Forest Avenue, Suite 223, Richmond, VA 23229. The Transfer
Agent cannot honor guarantees from notaries public, savings and
loan associations, or savings banks.
Small Accounts - Due to the relatively higher cost of
maintaining small accounts, the World Funds reserves the right to
redeem shares in your account if, as a result of redemption or
transfer, the total investment remaining in the account has a value
less than the minimum initial investment. However, before the
World Funds redeems your shares and sends you the proceeds, you
will be notified in writing that the value of your shares is less
than the minimum and that you have 60 days to make an additional
investment to meet the required minimum. A decline in market value
alone would not require you to bring your investment up to the
minimum.
HOW TO TRANSFER SHARES
If you wish to transfer shares to another owner, send a
written request to the Transfer Agent. Your request should include
(1) the name of the Fund and existing account registration; (2)
signature(s) of the registered owner(s); (3) the new account
registration, address, Social Security Number or taxpayer
identification number and how dividends and capital gains are to be
distributed; (4) any stock certificates which have been issued for
the shares being transferred; (5) signature guarantees (See
"Signature Guarantees"); and (6) any additional documents which are
required for transfer by corporations, administrators, executors,
trustees, guardians, etc. If you have any questions about
transferring shares, call the Transfer Agent at (800) 628-4077.
ACCOUNT STATEMENTS AND SHAREHOLDER REPORTS
Each time you purchase, redeem or transfer shares of the Fund,
you will receive a written confirmation. You will also receive a
year-end statement of your account if any dividends or capital
gains have been distributed, and an annual and a semi-annual
report.
SPECIAL SHAREHOLDER SERVICES
The World Funds offers the following four services for its
shareholders:
Regular Account - allows shareholders to make voluntary
additions and withdrawals to and from their account as often as
they wish;
Invest-A-Matic - permits automatic monthly investments into
the Fund from your checking account on a fixed or flexible
schedule;
Individual Retirement Accounts (IRA's); and
Exchange Privileges - allows the shareholder to exchange his
or her shares for shares of certain other funds having a different
investment objective from that of the Fund, provided the shares of
the fund the shareholder is exchanging into are registered for sale
in the shareholder's state of residence. A shareholder's account
may be charged a ten dollar exchange fee. An exchange is treated
as a redemption and a purchase, and may result in the realization
of a gain or loss on the transaction. More information on any of
these services is available upon written request to the World
Funds.
HOW NET ASSET VALUE IS DETERMINED
The Fund's Net Asset Value ("NAV") is determined as of the
close of trading of the New York Stock Exchange (currently 4:00
P.M., Eastern Time) on each business day from Monday to Friday or
on each day (other than a day during which no security was tendered
for redemption and no order to purchase or sell such security was
received by the Fund) in which there is a sufficient degree of
trading in the portfolio securities of the Fund that the current
NAV of the shares might be materially affected by changes in the
value of such portfolio security. The Fund's NAV is calculated at
the 4:00 p.m. time set by the Board of Directors based upon a
determination by the Board that this is the most appropriate time
to price the securities.
NAV per share is determined by dividing the total value of the
assets, less its liabilities, by the total number of shares then
outstanding. Generally, securities owned by the Fund are valued at
market value.
Investments in securities traded on a national securities
exchange or included in the NASDAQ National Market System are
valued at the last reported sales price; other securities traded in
the over-the-counter market and listed securities for which no sale
is reported on that date are valued at the last reported bid price.
Short-term debt securities (less than 60 days to maturity) are
valued at their fair market value using amortized cost pricing
procedures set, and determined to be fair, by the Board of
Directors. Other assets for which market prices are not readily
available are valued at their fair value as determined in good
faith under procedures set by the Board of Directors.
ADR's, EDR's, and GDR's will be valued at the closing price of
the instrument last determined prior to the valuation time unless
the World Funds is aware of a material change in value. Items for
which such a value cannot be readily determined on any day will be
valued at the closing price of the underlying security adjusted for
the exchange rate.
The World Funds' management may compute the NAV per share more
frequently in order to protect shareholders' interests.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
It is the policy of the World Funds to distribute
substantially all of its net investment income and all of its net
profits realized from the sale of portfolio securities. Income
dividends received and capital gains realized, if any, will be
distributed to shareholders annually.
The sale of securities held by the Fund will be made with a
view to the maintenance of a portfolio believed by the Advisor to
be the most likely to achieve its objective. Such sales, and any
resulting gains and losses may vary considerably from year to year.
Although the Fund does not intend generally to trade for
short-term profits, its portfolio securities will be sold whenever
the Advisor believes that it is appropriate to do so, without
regard to the length of time a particular security may have been
held.
Unless you elect otherwise, dividends and capital gain
distributions will be reinvested in additional shares of the Fund
at no charge. Changes in your election must be sent to the
Transfer Agent.
TAXATION CONSIDERATIONS
The Fund will seek to qualify under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). As a regulated
investment company under the Code, the Fund is not liable for
federal income taxes on income or gains which are distributed to
its shareholders or imputed to shareholders under the Code. The
distribution to shareholders each year of investment income and
capital gains will represent taxable income to the shareholders.
The Fund is a series corporation. Each series is taxed as a
separate taxable entity under the Code. Shareholders will receive
a written advice from the World Funds within sixty (60) days after
the end of the year furnishing them with the information required
under the Code.
GENERAL INFORMATION ABOUT THE WORLD FUNDS
The World Funds is authorized to issue up to 500,000,000
shares of $0.01 par value common stock, of which it has presently
allocated 50,000,000 shares to the Vontobel EuroPacific Fund
series, 50,000,000 to the Vontobel U.S. Value Fund series,
50,000,000 to the Vontobel International Bond Fund series,
50,000,000 to the Sand Hill Portfolio Manager Fund series, and
50,000,000 to the Vontobel Eastern European Equity Fund series.
The Board of Directors can allocate the remaining authorized but
unissued shares to any series of the World Funds or may create
additional series and allocate shares to such series. A share of
the Fund has priority in the assets of the Fund in the event of a
liquidation. The shares of the Fund will be fully paid and non-
assessable, will have no preference over other shares of the Fund
as to conversion, dividends, or retirement, and will have no
preemptive rights. Shares of the Fund will be redeemable from the
assets of the Fund at any time.
Each outstanding share of the World Funds is entitled to one
vote for each full share of stock and a fractional vote for
fractional shares of stock. All shareholders vote on matters which
concern the corporation as a whole. The World Funds is not
required to hold a meeting of shareholders each year, and may elect
not to hold a meeting in years when no meeting is necessary. The
Fund shall vote separately on matters which affect only the
interest of the Fund. The World Funds' shares do not have
cumulative voting rights, which means that the holders of more than
50% of the shares voting for the election of directors can elect
all of the directors if they choose to do so. Shareholders may
utilize procedures described in the Statement of Additional
Information to call a meeting.
Limitation on Use of Name - The Advisory Agreement for the
Fund authorizes the World Funds to utilize the name "Vontobel."
The World Funds agrees that if the Advisory Agreement is terminated
it will promptly redesignate the name of the Fund to eliminate any
reference to the name "Vontobel" or any derivation thereof unless
the Advisor waives this requirement in writing.
MORE INFORMATION
For further information on the Fund please contact
Commonwealth Shareholder Services, Inc., P.O. Box 8687, Richmond,
VA 23226, telephone: (800) 527-9500.
Additional information may also be obtained by requesting a
copy of the Fund's Statement of Additional Information.
<PAGE>
Advisor: Vontobel USA Inc.
450 Park Avenue
New York, N.Y. 10022
Distributor: First Dominion Capital Corp.
1500 Forest Ave., Suite 223
Richmond, VA 23229
Independent Auditors:Tait, Weller & Baker
2 Penn Center Plaza
Suite 700
Philadelphia, PA 19102
Marketing Services: For general information on the Fund and
Marketing Services, call the Distributor
at (800) 527-9500 Toll Free
Transfer Agent: For account information, wire purchase or
redemptions, call or write to the World
Funds' Transfer Agent:
Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23286-8172
(800) 628-4077 Toll Free
More Information:For 24 hour, 7 days a week price information
call 1-800-527-9500.
For information on any series of the World Funds,
investment plans, or other shareholder services,
call 1-800-527-9500 during normal business hours,
or write the World Funds at 1500 Forest Avenue,
Suite 223, Richmond, VA 23229.
<PAGE>
NEW ACCOUNT APPLICATION - THE WORLD FUNDS, INC.
VONTOBEL EASTERN EUROPEAN EQUITY FUND
1. NAME:
Individual
First Middle Last
Joint Owner
First Middle Last
Gift to Minors as custodian for
Name of Custodian Name of Minor
under the Uniform Gifts to Minors Act
State (show minor's Soc. Sec. # below)
Other
Name of Corporation , Partnership or other Organization.
(NOTE: These accounts require additional information.
Please call Fund Services, Inc. at 1-800-628-4077)
To open a Trust account please include the pages of the Trust
document which shows the date the Trust was established, the
name(s) of the Trustee(s), and the dated signature page.
ADDRESS AND CITIZENSHIP:
( )
Street Area Code Daytime Telephone
City State Zip Code
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER:
CITIZENSHIP OF OWNER, MINOR OR TRUST BENEFICIARY: U.S.
Citizen Resident Alien Non-Resident Alien:
Country of Residence
CITIZENSHIP OF JOINT OWNER: U.S. Citizen
Resident Alien
Non-Resident Alien:
Country of Residence
2. INITIAL INVESTMENT (Minimum $1,000) $
(Please make check payable to Vontobel Eastern European Equity
Fund and mail your investment to P.O. Box 26305, Richmond, VA
23286-8172)
3. DISTRIBUTION OPTION: Income dividends and capital gains are
automatically reinvested, unless you check one of the following:
Dividends in cash, with capital gains reinvested in shares.
All distributions in cash.
4. TELEPHONE PRIVILEGES: To use the telephone to authorize the
transactions below, please check the appropriate box(es):
I (we) hereby authorize Fund Services, Inc. to honor
telephone instructions for my (our) account. Neither the World
Funds nor Fund Services, Inc. will be liable for properly acting
upon telephone instructions believed to be genuine which are
confirmed in accordance with the World Funds' procedures
described in this prospectus. I (we) understand that redemptions
authorized by telephone are paid by check and mailed to me (us).
To exchange into shares of other World Funds series. If
an exchange is the initial investment, the new fund account will
automatically carry the same account registration, and these
telephone privileges will apply.
5. AUTOMATIC INVESTMENT PLAN: To make automatic monthly
investments from your bank account, check the box below (Minimum
monthly investment is $100.00)
This plan allows me (us) to make automatic monthly
investments from my (our) bank account. Fund Services, Inc. will
transfer money from my (our) bank account into the Fund. There
is no charge, and I may cancel at any time. Invest $
into my (our) account of the 15th day of each month by transfer
from my (our) bank account. (Please include a blank voided
check.)
6. EMPLOYMENT INFORMATION: We are required by the National
Association of Securities Dealers (NASD) to ask for this
information.
Owner's Occupation, Employer & Employer's Address:
I am affiliated with, or work for, a member firm
of the NASD.
Joint Owner's Occupation, Employer & Employer's Address:
I am affiliated with, or work for, a member firm
of the NASD.
7. SIGNATURES: Each Owner Must Sign This Section.
The undersigned warrants(s) that I (we) have full authority
to make this application, am (are) of legal age, and have
received and read a current prospectus and agree to be bound by
its terms. I (we) understand that all shares will be held in
uncertificated form. Share certificates may be requested, but
Telephone Privileges will not then be available. I (we)
understand that it is my (our) responsibility to read the
prospectus of any fund into which I (we) exchange and that all
information provided in sections 1 and 7 will apply to any new
fund into which my (our) shares may be exchanged. I (we)
understand that neither the World Funds nor First Dominion
Capital Corp. is a bank, and shares of the Fund are not backed or
guaranteed by any bank or insured by the FDIC. I (we) ratify any
instructions (including telephone instructions) given on this
account and agree that neither the Fund, First Dominion Capital
Corp. or Fund Services, Inc. will be liable for any loss, cost or
expense for acting upon any instruction (including telephone
instructions) believed to be genuine which are confirmed in
accordance with the procedures described in the prospectus. If I
(we) am a (are) U.S. Citizen(s) or Resident Alien(s), as
indicated above, I (we) certify under penalties of perjury that
(1) the Social Security or taxpayer identification number
provided above is correct, and (2) I (we) are not subject to IRS
backup withholding because (a) I (we) am (are) exempt from backup
withholding, or (b) I (we) have not been notified by the IRS that
I (we) am (are) subject to backup withholding, or (c) I (we) have
been notified by the IRS that I (we) am (are) no longer subject
to backup withholding. (Please cross out item 2 if it does not
apply to you.) If I (we) am a (are) Non-Resident Alien(s), as
indicated above, I (we) certify under penalties of perjury that I
(we) am not (are not) a U.S. Citizen(s) or Resident Alien(s), and
that I (we) am an (are) "exempt foreign person(s)" as defined
under IRS regulations.
This application is not effective until it is received and
accepted by the Fund.
SIGN HERE:
Signature of Individual (or Custodian)
DATE: 19
Signature of Joint Registrant, if any
DATE: 19
PLEASE SEND YOUR COMPLETED APPLICATION AND CHECK, MADE PAYABLE
TO VONTOBEL EASTERN EUROPEAN EQUITY FUND, TO:
FUND SERVICES, INC.
P.O. BOX 26305
RICHMOND, VA 23286-8172
Registered Rep. Name EP. Number Branch Wire Code
( )
Branch Address Telephone Number
CORRESPONDENT FIRM IDENTIFICATION:
Firm Name and Address
Authorized Signature <PAGE>
PART B
The Statement of Additional Information for the Vontobel
Eastern European Equity Fund series of The World Funds, Inc.
The Registrant hereby Incorporates by Reference from Post-
Effective Amendment No. 28, as filed on April 27, 1995 (and which
became effective on May 1, 1995) the Statements of Additional
Information for the Vontobel EuroPacific Fund series, the
Vontobel U.S. Value Fund series, the Vontobel International Bond
Fund series and the Sand Hill Portfolio Manager Fund series of
The World Funds, Inc.
<PAGE>
THE WORLD FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 1, 1996
VONTOBEL EASTERN EUROPEAN EQUITY FUND
The World Funds, Inc. ("TWF") is a diversified, open-end,
management investment company commonly known as a "mutual fund."
This Statement of Additional Information is not a prospectus but
supplements the information contained in the current Prospectus
of the Vontobel Eastern European Equity Fund (the "Fund"), which
is dated January 1, 1996. This Statement of Additional
Information has been designed to provide you with further
information which is not contained in the Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS STATEMENT OF
ADDITIONAL INFORMATION. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND SHOULD BE READ IN CONJUNCTION WITH THE FUND'S PROSPECTUS,
DATED JANUARY 1, 1996. A PROSPECTUS OF THE FUND MAY BE OBTAINED
AT NO CHARGE UPON REQUEST TO THE FUND. RETAIN THIS STATEMENT OF
ADDITIONAL INFORMATION FOR FUTURE REFERENCE.
<PAGE>
CONTENTS PAGE
VONTOBEL EASTERN EUROPEAN EQUITY FUND
Investment Policies 1
Special Considerations 2
Hedging with Forward Foreign Currency
Contracts and Futures 3
Covered Call and Put Options 4
INVESTMENT RESTRICTIONS 6
VALUATION AND CALCULATION OF NET ASSET VALUE 7
DIVIDENDS, DISTRIBUTIONS AND TAXES 9
DIRECTORS AND OFFICERS 10
ADVISOR 12
TRANSFER AGENT 12
ADMINISTRATOR 13
ELIGIBLE BENEFIT PLANS 13
DISTRIBUTION 13
EXPENSES OF THE FUND 14
SPECIAL SHAREHOLDER SERVICES 14
ALLOCATION OF PORTFOLIO BROKERAGE 15
GENERAL INFORMATION AND HISTORY 16
PERFORMANCE 17
FINANCIAL STATEMENTS 20
THE WORLD FUNDS, INC.
VONTOBEL EASTERN EUROPEAN EQUITY FUND
There is some market risk inherent in any investment, due in
part to changes in general economic and market conditions, and
therefore there is no assurance that the Fund's investment
objective will be realized. However, the investment policies of
the Fund are intended to provide the flexibility to take
advantage of opportunities while accepting only what Vontobel USA
Inc. (the "Advisor") believes to be reasonable risks.
Investment Policies
The Fund will select its non-equity investments from among
securities and obligations of all kinds including preferred
stocks, warrant rights, bonds (of any class or rating),
repurchase agreements, money market investments (such as U.S.
Government securities [see the description below] issued by the
U.S. Treasury, agencies or other instrumentalities) and other
evidences of indebtedness.
Under normal circumstances the Fund will have at least 65%
of its assets invested in a portfolio of common stocks or
securities convertible into common stocks of issuers from not
less than three countries, one of which may be the U.S. However,
when the Advisor believes that investments should be deployed in
a temporary defensive posture because of economic or market
conditions, the Fund may invest up to 100% of its assets in U.S.
Government securities (such as bills, notes, or bonds of the U.S.
Government and its agencies) or other forms of indebtedness such
as bonds, certificates of deposit or repurchase agreements.
The Fund may also acquire fixed income investments where
these fixed income securities are convertible into equity
securities (and which may therefore reflect appreciation in the
underlying equity security), and where anticipated interest rate
movements, or factors affecting the degree of risk inherent in a
fixed income security are expected to change significantly so as
to produce appreciation in the security consistent with the
Fund's objective. The fixed income securities in which the Fund
may invest will be rated at the time of purchase Baa or higher by
Moody's Investor Service, Inc., or BBB or higher by Standard and
Poor's Corporation, or if they are foreign securities which are
not subject to standard credit ratings the fixed income
securities will be "investment grade" issues (in the judgement of
the Advisor) based on available information. Securities rated as
BBB are regarded as having adequate capacity to pay interest and
repay principal.
The Fund may enter into repurchase agreements (which enables
it to employ its assets pending investment) during very short
periods of time. Ordinarily these agreements permit the Fund to
maintain liquidity and earn higher rates of return than would
normally be available from other short-term money market
instruments.
Under a repurchase agreement, a fund buys a money market
instrument and obtains a simultaneous commitment from the seller
to repurchase the investment at a specified time and at an agreed
upon yield to the fund. The seller is required to pledge cash
and or collateral which is equal to at least 100 percent of the
value of the commitment to repurchase. The collateral is held by
the fund's custodian. The Fund will only enter into repurchase
agreements involving U.S. Government securities in which it may
otherwise invest.
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States
Treasury, by various agencies of the United States Government,
and by various instrumentalities which have been established or
sponsored by the United States Government. U.S. Treasury
securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal
agencies and the U.S. Government sponsored instrumentalities may
or may not be backed by the full faith and credit of the United
States. In the case of securities not backed by the full faith
and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, and may not
be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment.
An instrumentality of the U.S. Government is a government agency
organized under Federal charter with government supervision.
It is the Fund's practice to enter into repurchase
agreements with selected banks and securities dealers, depending
upon the availability of the most favorable yields. The Fund
will always seek to perfect its security interest in the
collateral. If the seller of a repurchase agreement defaults,
the Fund may incur a loss if the value of the collateral securing
the repurchase agreement declines. The Advisor monitors the
value of the collateral to ensure that its value always equals or
exceeds the repurchase price and also monitors the financial
condition of the issuer of the repurchase agreement. If the
seller defaults, the Fund may incur disposition costs in
connection with liquidating the collateral of that seller. If
bankruptcy proceedings are commenced with respect to the seller,
realization upon the collateral by the Fund may be delayed or
limited.
The Fund is designed to take advantage of the opportunities
provided by the ability to invest overseas, and therefore may be
subject to some of the special risks described below.
As noted in the Prospectus, the Fund has the right to invest
in securities which may be considered to be "thinly traded" if
they are deemed to offer the potential for appreciation, but it
does not presently intend to invest more than 15% of its assets
in such securities. The trading volume of such securities is
generally lower and their prices may be more volatile as a
result, and such securities are less likely to be exchange-listed
securities. The Fund may also invest, subject to certain
restrictions described below, in options (puts and calls) and, to
a limited extent, in restricted securities.
The Fund may invest in the shares of other open- or closed-
end investment companies which acquire equity securities of
Eastern/Central European countries in which the Fund may invest.
By investing in shares of such investment companies, the Fund
would indirectly pay a portion of the operating expenses,
management expenses, and brokerage costs of such an investment
company as well as the expenses of the Fund. The Advisor will
recommend such investments when it believes that this would allow
the Fund to achieve a greater diversification at an economically
more advantageous price than through the acquisition of
individual securities, or when such company is able to achieve an
investment in a country which the Fund cannot acquire for legal
or economic reasons.
The Fund may utilize American Depository Receipts ("ADR's"),
European Depository Receipts ("EDR's") and Global Depository
Receipts ("GDR's"). Generally, ADR's are dollar denominated
securities issued in registered form and designed for use in the
United States securities markets. They represent and may be
converted into the underlying foreign security. EDR's, in bearer
form, are similarly designed for use in the European securities
markets. For purposes of determining the country of origin,
ADR's and closed-end investment companies will not be deemed to
be domestic securities.
It is the Fund's policy not to lend its portfolio securities
at the present time, although it is not restricted from so doing.
The Fund's investments will be subject to the market
fluctuations and risks which are inherent in all investments, and
although the Advisor will seek to attain the Fund's stated
objective there can be no assurance that the objective will be
achieved.
Special Considerations Regarding Investments In Foreign
Securities
Investment in securities of issuers domiciled outside the
United States involves investment risks different from those
encountered in investing in securities of United States issuers.
Elements of risk and opportunity which must be recognized and
evaluated by the Advisor include trade balances and imbalances,
and related economic policies; currency exchange rate
fluctuations; foreign exchange control policies; expropriation or
confiscatory taxation; limitation on the removal of funds or
other assets of the Fund; political or social instability; the
diverse structure and liquidity of securities markets in various
countries and regions; policies of governments with respect to
possible nationalization of their own industries; and other
specific local political and economic considerations. Investment
decisions made in the context of the Fund's objective and
policies necessarily require particular attention to
opportunities and risks presented by probable future currency
relationships, especially during periods of broad adjustments in
such relationships.
It is contemplated that most foreign securities will be
purchased on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various
securities are located, if that is the best available market.
Foreign securities markets may not be as developed or as
efficient as those in the United States. While growing in
volume, foreign exchanges usually have substantially less volume
than the New York Stock Exchange, and securities of some foreign
companies are less liquid and more volatile than securities of
comparable United States companies. Similarly, there is less
volume and less liquidity in most foreign bond markets than in
the United States, and at times, volatility of price can be
greater in the United States.
Additional costs may be incurred which are related to the
Fund's international investment policy. Foreign brokerage
commissions are generally higher than in the United States and
the custodial costs associated with maintaining foreign portfolio
securities are higher. Fee expense may also be incurred on
currency exchanges when the Fund changes investments from one
country to another. Foreign companies and foreign investment
practices are not generally subject to uniform accounting,
auditing and financial reporting standards and practices or
regulatory requirements comparable to those applicable to United
States companies. There may be less public information available
about foreign companies.
At various times United States Government policies, through
imposition of interest equalization taxes and other restrictions,
have discouraged certain investments abroad by United States
investors such as the Fund. While such taxes or restrictions are
not presently in effect, they may be reinstituted from time to
time as a means of fostering a favorable United States balance of
payments. In addition, foreign countries may impose withholding
and taxes on dividends and interest received by the Fund.
Hedging with Forward Foreign Currency Contracts and Futures
The Fund's investment objective (as described in the
Prospectus) contemplates investment in securities of issuers
domiciled or operating outside the United States. Such foreign
investments may require the Fund to temporarily hold funds in
foreign currencies prior to, during or following the completion
of investment programs. In such circumstances the value of the
Fund's assets, as measured in United States dollars, may be
affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations.
The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign exchange market or, when deemed
necessary to "hedge" the Fund's anticipated cash movements,
through entering into forward contracts to purchase or sell
foreign currencies. A forward foreign currency contract involves
an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually
large, commercial banks) and their customers. A forward foreign
currency contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
The Fund's custodian bank segregates cash or equity or debt
securities in an amount not less than the value of the Fund's
assets committed to forward foreign currency exchange contracts
entered into under this second type of transaction. If the value
of the securities segregated declines, additional cash or
securities is added so that the segregated amount is not less
than the amount of the Fund's commitments with respect to such
contracts. Under normal circumstances, the Fund expects that any
appreciation (depreciation) on such forward exchange contracts
will be approximately offset by the depreciation (appreciation)
in translation of the underlying foreign investment arising from
fluctuations in foreign currency exchange rates. Where the
Advisor determines a hedge is no longer necessary the Fund may
enter into a closing transaction.
The Fund may enter into forward foreign currency contracts
for two reasons. First, a desire to preserve the United States
dollar price of a security when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency.
The Fund will be able to protect itself against possible losses
resulting from changes in the relationship between the United
States dollar and foreign currencies during the period between
the date the security is purchased or sold and the date on which
payment is made or received by entering into a forward contract
for the purchase or sale, for a fixed amount of dollars, of the
amount of the foreign currency involved in the underlying
security transactions. Second, when the Advisor believes that
the currency of a particular foreign country may suffer a
substantial decline against the United States dollar, the Fund
may enter into a forward foreign currency contract to sell, for a
fixed amount of dollars, the amount of foreign currency
approximating the value of some or all of its portfolio
securities denominated in such foreign currency. The precise
matching of the forward foreign currency contract amount and the
value of the portfolio securities involved may not have a perfect
correlation since the future value of the securities hedged will
change as a consequence of market movements between the date the
forward contract is entered into and the date it matures. The
projection of short-term currency market movement is difficult,
and the successful execution of this short-term hedging strategy
is uncertain.
Although forward foreign currency contracts tend to reduce
the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.
The Fund may also seek to use certain financial futures for
"hedging" purposes. The use of futures for hedging is intended
to protect the Fund from (i) the risk that the value of its
portfolio of investments in a foreign market may decline before
it can liquidate its interest, or (ii) the risk that a foreign
market in which it proposes to invest may have significant
increases in value before it can cause its cash to be invested in
that market. In the first instance, the Fund will sell a future
based upon a broad market index which it is believed will move in
a manner comparable to the overall value of securities in that
market. In the second instance, the Fund will purchase the
appropriate index as an "anticipatory" hedge until it can
otherwise acquire suitable direct investments in that market. As
with the hedging of foreign currencies, the precise matching of
financial futures on foreign indices and the value of the cash or
portfolio securities being hedged may not have a perfect
correlation. The projection of future market movement and the
movement of appropriate indices is difficult, and the successful
execution of this short-term hedging strategy is uncertain.
Regulatory policies governing the use of such hedging techniques
require the Fund to provide for the deposit of initial margin and
the segregation of suitable assets to meet its obligation under
futures contracts.
The Fund will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions
intended wholly or partially to offset other transactions, than
the aggregate market value (at the time of entering into the
transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into
such currency, other than with respect to proxy hedging as
described below.
The Fund may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are
expected to decline in value relative to other currencies to
which the Fund has or in which the Fund expects to have portfolio
exposure.
To reduce the effect of currency fluctuations on the value
of existing or anticipated holdings of portfolio securities, the
Fund may also engage in proxy hedging. Proxy hedging is often
used when the currency to which a fund's portfolio is exposed is
difficult to hedge or to hedge against the dollar. Proxy hedging
entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a
currency or currencies in which some or all of the fund's
portfolio securities are or are expected to be denominated, and
to buy U.S. dollars. The amount of the contract would not exceed
the value of the Fund's securities denominated in linked
currencies. For example, if the Advisor considers that the
Austrian schilling is linked to the German deutschemark (the "D-
mark"), the Fund holds securities denominated in schillings and
the Advisor believes that the value of schillings will decline
against the U.S. dollar, the Advisor may enter into a contract to
sell D-marks and buy dollars. Currency hedging involves some of
the same risks and considerations as other transactions with
similar instruments. Currency transactions can result in losses
to a fund if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, there
is the risk that the perceived linkage between various currencies
may not be present or may not be present during the particular
time that a fund is engaging in proxy hedging. If a fund enters
into a currency hedging transaction, the fund will comply with
the asset segregation requirements described above. Cross
currency hedges may not be considered "directly related" to the
Fund's principal business of investing in stock or securities (or
options and futures thereon), resulting in gains therefrom not
qualifying under the less that 30% of gross income test of
Subchapter M of the Internal Revenue Code of l986, as amended
(the "Code").
INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the
current Prospectus, the Fund has adopted the investment
restrictions set forth below which, along with the investment
objective, cannot be changed without the approval of a majority
of the outstanding voting securities of the Fund. As provided in
the Investment Company Act of 1940 a "vote of a majority of the
outstanding voting securities" means the affirmative vote of the
lesser of (i) more than 50% of the outstanding shares of the Fund
or (ii) 67% or more of the shares present at a meeting if more
than 50% of the outstanding shares are represented at the meeting
in person or by proxy. These investment restrictions provide
that the Fund will not:
* Invest in companies for the purpose of exercising
control.
* Invest in securities of other investment companies
except by purchase in the open market involving only
customary broker's commissions, or as part of a merger,
consolidation, or acquisition of assets, or in
connection with the purchase of not more than three
percent of the shares of a "country fund" which invests
in a country in which the Fund may invest.
* Purchase or sell commodities or commodity contracts.
* Invest in interests in oil, gas, or other mineral
explorations or development programs.
* Purchase securities on margin, except that it may
utilize such short-term credits as may be necessary for
clearance of purchases or sales of securities.
* Issue senior securities.
* Act as an underwriter of securities of other issuers.
* Concentrate its investments in any industry.
* Participate on a joint or a joint and several basis in
any securities trading account.
* Engage in short sales.
* Purchase or sell real estate, provided that liquid
securities of companies which deal in real estate or
interests therein will not be deemed to be investment
in real estate.
In order to satisfy certain state regulatory requirements
the Fund has agreed that, so long as shares of the Fund are
offered for sale in such state(s), it will not:
1. Purchase restricted securities (securities of issuers
which the Fund would be restricted from selling to the
public without registration under the Securities Act of
1933), if such purchase would cause the aggregate
value of restricted issues to exceed 10% of the Fund's
total assets;
2. Purchase the securities of foreign issuers which are
not listed on a recognized domestic or foreign
securities exchange, restricted securities referred to
in 1 above, and issues which are not readily
marketable, if such purchase would cause the Fund to
own such securities in excess of 15% of its net assets;
3. Purchase warrants if the portion of the Fund's assets
held in warrants following such purchase would exceed
5% of the Fund's net assets, including, within that
limitation, 2% of the Fund's net assets of warrants not
listed on the New York or American Stock Exchanges.
For the purpose of this limitation, warrants acquired
by the Fund in units or attached to securities may be
deemed to be without value;
4. Engage in arbitrage transactions;
5. Purchase restricted securities referred to in 1 above,
and securities of unseasoned issuers, if such purchase
would cause the value of all such securities to exceed
15% of the Fund's net assets;
6. Purchase restricted securities, securities which are
not readily marketable or repurchase agreements
maturing in more than seven days if more than 15% of
the Fund's assets would be invested in such securities;
7. Purchase or sell options (puts or calls written by
others) unless the following conditions are met: (a)
the value of its investment in puts, calls, straddles,
spreads or any combination thereof is limited to 5% of
the Fund's net assets and the premiums paid therefore
may not exceed 2% of the Fund's net assets; and (b)
options must be listed on a national securities
exchange or, for foreign securities, on comparable
exchanges in the country of issuance of the underlying
security;
8. Purchase or retain the securities of any issuer if, to
the knowledge of TWF, the officers and/or directors of
TWF or its advisors who individually own beneficially
more than one-half of one percent of the securities of
such issuer, together beneficially own more than 5% of
the securities of such issuers;
9. Purchase the securities of any issuer(s), if such
purchase at the time thereof would cause more than ten
percent of the voting securities of such issuer(s) to
be held by TWF;
10. Borrow money, or pledge, mortgage, or hypothecate the
assets of the Fund in excess of one-third of the total
assets of the Fund.
VALUATION AND CALCULATION OF NET ASSET VALUE
The Fund's Net Asset Value ("NAV") per share is calculated
daily each business day from Monday through Friday. The New York
Stock Exchange is currently closed on weekends and on the
following holidays: New Years Day, Washington's Birthday, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and
Christmas Day, and the NAV is not computed those days. The NAV
is calculated at the time set by the Board of Directors based
upon a determination of the most appropriate time to price the
Fund's securities.
The NAV is determined as of the close of trading of the New
York Stock Exchange (currently 4:00 P.M., Eastern Time) on each
business day from Monday to Friday or on each day (other than a
day during which no security was tendered for redemption and no
order to purchase or sell such security was received) in which
there is a sufficient degree of trading in the Fund's portfolio
securities that the current NAV of the shares might be materially
affected by changes in the value of such portfolio security.
NAV per share is determined by dividing the total value of
the Fund's securities and other assets, less liabilities, by the
total number of shares then outstanding. Generally, the Fund's
securities are valued at market value.
Portfolio securities, including ADR's, EDR's and GDR's,
which are traded on stock exchanges, are valued at the last sale
price, prior to the Fund's valuation time, on the exchange on
which such securities are traded, unless the Fund is aware of a
material change in the value prior to the time it values its
securities, or, lacking any sales, at the last available bid
price. ADR's, EDR's and GDR's, for which such a value cannot be
readily determined on any day will be valued at the closing price
of the underlying security adjusted for the exchange rate.
Shares of other open-end investment companies will be valued at
the net asset value of such shares each day, and shares of
closed-end investment companies will be valued at the closing
market price of the shares on such day.
In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated by
TWF's Board of Directors as the primary market. Securities
traded on a national securities exchange are valued at the last
reported sales price. Securities traded in the over-the-counter
market and listed securities for which no sale is reported on
that date are valued at the last reported bid price. Securities
and assets for which market quotations are not readily available
(including restricted securities which are subject to limitations
as to their sale) are valued at fair market value as determined
in good faith by or under the direction of TWF's Board of
Directors.
U.S. Treasury bills, and other short-term obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities, with original or remaining maturities in
excess of 60 days are valued at the mean of representative quoted
bid and asked prices for such securities or, if such prices are
not available, are valued at the mean of representative quoted
bid and asked prices for securities of comparable maturity,
quality and type. Short-term securities, with 60 days or less to
maturity, are amortized to maturity based on their cost if
acquired within 60 days of maturity or, if already held, on the
60th day, based on the value determined on the 61st day.
Trading in securities on European securities exchanges and
over-the-counter markets is normally completed well before the
close of the business day in New York. Furthermore, trading may
take place in a foreign market on a Saturday or Sunday which is
not a business day in New York and on which the Fund's NAV is not
calculated.
The calculation of NAV may not take place contemporaneously
with the determination of the prices of portfolio securities used
in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not
be reflected in the Fund's calculation of NAV unless TWF's Board
of Directors deems that the particular event would materially
affect the NAV, in which case an adjustment will be made. Assets
or liabilities initially expressed in terms of foreign currencies
are translated prior to the next determination of the NAV of the
Fund's shares into U.S. dollars at the prevailing market rates.
The fair value of all other assets is added to the value of
securities to arrive at the total assets.
The Fund's liabilities, including proper accruals of taxes
and other expenses, are deducted from its total assets and the
net assets so obtained are then divided by the total number of
shares outstanding, and the result, rounded to the nearer cent,
is the NAV per share.
The Fund's management may compute its NAV per share more
frequently if necessary to protect shareholders' interests.
Any purchase order may be rejected by the Distributor or by
the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of the Fund to distribute substantially all
of its net investment income and net realized capital gains, if
any, shortly before the close of the fiscal year (December 31st).
All dividend and capital gains distributions, if any, will
be reinvested in full and fractional shares based on NAV (without
a sales charge) as determined on the ex-dividend date for such
distributions. Shareholders may, however, elect to receive all
such payments, or the dividend or distribution portion thereof,
in cash, by sending written notice to this effect to the Transfer
Agent. This written notice will be effective as to any
subsequent payment if received by the Transfer Agent prior to the
record date used for determining the shareholders' entitlement to
such payment. Such an election will remain in effect unless or
until the Transfer Agent is notified by the shareholder in
writing to the contrary.
The Fund must withhold 31% from dividends or redemptions
that occur in certain shareholder accounts if the shareholder has
not properly furnished a correct Taxpayer Identification Number
or a properly completed claim for exemption of IRS Form W-8 or
W-9. Amounts withheld are applied against the shareholder's tax
liability and a refund may be obtained from the Internal Revenue
Service, if withholding results in overpayment of taxes. A
shareholder should contact the Fund or the Transfer Agent if
he/she is uncertain whether a proper Taxpayer Identification
Number is on file with the Transfer Agent.
Status As a "Regulated Investment Company": The Fund seeks
to be treated under the Internal Revenue Code of 1986 ("IRC") as
a "regulated investment company" for purposes of the IRC. To
qualify for the tax treatment afforded a "regulated investment
company" under the IRC, the Fund must annually distribute at
least 90% of its investment company taxable income and meet
certain diversification of assets and other requirements of the
IRC. If the Fund qualifies for such tax treatment it will not be
subject to Federal income tax on the part of its ordinary income
and its net realized capital gains which are distributed to
shareholders, provided that it pays at least 98% of its
investment company taxable income and net capital gains in order
to avoid any excise tax.
Distributions of Net Investment Income: Dividends from net
investment income (including net short-term capital gains) are
taxable as investment company taxable income to shareholders who
are citizens and residents of the United States. If, as
anticipated, the Fund does not receive any dividend income from
U.S. corporations, dividends from the Fund will not be eligible
for the dividends received deduction allowed to corporations.
Dividends will be taxed for Federal income tax purposes in the
same manner, whether they are received as shares or in cash.
Net Realized Long-Term Capital Gains: Any distributions
designated as being made from the Fund's net realized long-term
capital gains will be taxable to shareholders who are citizens or
residents of the United States as long-term capital gains,
regardless of the holding period of the shareholders of the
Fund's shares.
Foreign Tax Credit to Shareholders: Dividends and interests
received by the Fund may give rise to withholding and other taxes
imposed by foreign countries, generally at rates 10% to 40%. Tax
conventions between certain countries and the United States may
reduce or eliminate such taxes. Foreign countries generally do
not impose taxes on capital gains in respect of investments by
non-resident investors.
If at the close of the Fund's fiscal year more than 50% of
its total assets consists of securities of foreign corporations,
it will be eligible to, and may, file elections with the Internal
Revenue Service pursuant to which its shareholders will be
required to include its pro rata portion as taxes paid by it, and
deduct such pro rata portion in computing its taxable income or,
alternatively, use them as a foreign tax credit against its
United States income taxes.
Non-U.S. Shareholders: It is anticipated that the Fund,
under normal conditions, will derive more than 80% of its gross
income from sources outside the United States, so that dividends
out of net investment income and any distributions of net
realized long-term capital gains to shareholders who are non-
resident aliens and foreign corporations and which dividends are
not effectively connected with their United States trade or
business, if any, will not be subject to United States Federal
income tax. Similarly, undistributed net realized long-term
capital gains allocable to such shareholders will not be included
in their long-term gains from U.S. sources, and such shareholders
will be entitled to a refund or credit, as the case may be, for
the tax paid by the Fund on the undistributed gains. In the
event that 20% or more of the Fund's income is derived from U.S.
sources, distributions of net investment income to non-resident
aliens and foreign corporations (which are deemed to include, for
this purpose, each shareholder's pro rata share of foreign taxes
paid by the Fund - see the discussion above of the "pass through"
of the foreign tax credit to U.S. shareholders), will be subject
to U.S. tax. For shareholders who are not engaged in a trade or
business in the U.S. to which the distribution is effectively
connected, this tax would be imposed at the rate of 30% upon the
gross amount of the distribution in the absence of a Tax Treaty
providing for a reduced rate or exemption from U.S. taxation.
Distributions of net long-term capital gains realized by the Fund
are not subject to tax unless the distribution is effectively
connected with the conduct of the shareholder's trade or business
within the United States, or the foreign shareholder is a non-
resident alien individual who was physically present in the U.S.
during the tax year for more than 182 days.
General: Forward Contracts that are subject to section 1256
of the Code (other than Forward Contracts that are part of a
"mixed straddle") ("Section 1256 Forward Contracts") and that are
held by the Fund at the end of its taxable year generally will be
required to be "marked to market" for federal income tax
purposes, that is deemed to have been sold at market value.
Sixty percent of any net gain or loss recognized on these deemed
sales and 60% of any net realized gain or loss from any actual
sales of section 1256 Forward Contracts, will be treated as long-
term capital gain or loss, and the balance will be treated as
short-term capital gain or loss.
Code section 988 also may apply to Forward Contracts and
options on foreign currencies. Under section 988, each foreign
currency gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap
between sections 1256 and 988, special provisions determine the
character and timing of any income, gain, or loss. The Fund
attempts to monitor section 988 transactions to avoid any adverse
tax impact.
The foregoing is a general abbreviated summary of present
Federal income taxes on dividends and distribution. Investors are
urged to consult their own counsel for more detailed information
and for information regarding any state and local taxes
applicable to dividends and distributions received.
DIRECTORS AND OFFICERS
The following is a list of TWF's Directors and Officers and
a brief statement of their present positions and principal
occupations during the past five years.
*John Pasco, III;
Chairman, Director, and Treasurer
1500 Forest Ave, Suite 223; Richmond, VA 23229
Mr. Pasco is Treasurer and Director of Commonwealth
Shareholder Services, Inc., TWF's Administrator, since 1985.
Director and Shareholder of Fund Services, Inc., TWF's
Transfer and Disbursing Agent, since 1987. Mr. Pasco is
also a certified public accountant.
Samuel Boyd, Jr.
Director
10808 Hob Nail Court, Potomac, MD 20854
Mr. Boyd is presently the Manager of the Customer Services
Operations and Accounting Division of the Potomac Electric
Power Company. Mr. Boyd is also a certified public
accountant.
William E. Poist
Director
5272 River Road, Bethesda, MD 20816
Mr. Poist is a financial and tax consultant through his firm
Management Consulting for Professionals. Mr. Poist is also
a certified public accountant.
Paul M. Dickinson
Director
8704 Berwickshire Drive, Richmond, VA 23229
Mr. Dickinson is presently the President of Alfred J.
Dickinson, Inc., Realtors.
*Edwin D. Walczak
Vice President of TWF and President of the Vontobel U.S.
Value Fund
450 Park Avenue, New York, N.Y. 10022
First Vice President and Chief Investment Officer of
Vontobel USA Inc., since July 1988. From 1984 to 1988 Mr.
Walczak was an institutional portfolio manager at Lazard
Freres Asset Management, New York.
*Sven Rump
Vice President of TWF and President of the Vontobel
International Bond Fund
Vice President of Vontobel USA Inc. since October 1993. Mr.
Rump is also a Vice President of Vontobel Asset Management,
Switzerland, and is responsible for managing fixed income
mutual funds. From October 1990 to October 1991 he was a
Vice President of Bank Vontobel (Switzerland) and a fixed
income specialist for the private banking group. From
September 1988 to October 1990 he was an Associate with J.P.
Morgan Securities (Switzerland) Ltd. Mr. Rump is a
Chartered Financial Analyst.
*Fabrizio Pierallini
Vice President of TWF and President of the Vontobel
EuroPacific Fund
450 Park Avenue, New York, N.Y. 10022
Vice President of Vontobel USA Inc. since April 1994. From
1991 to 1994 Mr. Pierallini was Associate-Director/Portfolio
Manager with Swiss Bank Corporation in New York; from 1988
to 1991 he was a Vice-President/Portfolio Manager with SBC
Portfolio Management Ltd. in Zurich, Switzerland; and from
1986 to 1988 he was an Associate/Institutional Consultant
with Bank Julius Baer in Zurich, Switzerland.
*Arpad Pongracz
Vice President of TWF and President of the Vontobel Eastern
European Equity Fund
450 Park Avenue, New York, N.Y. 10022
Vice President of Vontobel USA Inc., since January 1996.
Mr. Pongracz joined Vontobel Asset Management, Switzerland,
in 1990 as an equity analyst. He was subsequently appointed
portfolio manager for all European equity institutional
accounts and mutual funds. Since 1995 he has been head of
Vontobel Assets Management's international equities team.
Prior to joining the Vontobel group, he worked at Union Bank
of Switzerland in Canada and in Switzerland as an equity
analyst. Mr. Pongracz is a Chartered Financial Analyst.
*F. Byron Parker, Jr.
Secretary
810 Lindsay Court, Richmond, VA 23229
Secretary of Commonwealth Shareholder Services, Inc. since
1986. Partner in the Law Firm Mustian & Parker.
* Persons deemed to be "interested" persons of TWF, Vontobel
USA Inc. or First Dominion Capital Corp. under the Investment
Company Act of 1940.
The directors and officers of TWF, as a group, do not own 1% or
more of the Fund. ______% of the shares of record are held by
Bank J. Vontobel for the benefit of its customers.
THE ADVISOR
Vontobel USA Inc. (the "Advisor") manages the investment of
the assets of the Fund pursuant to an Investment Advisory
Agreement (the "Advisory Agreement"). The Advisory Agreement is
described in the Fund's Prospectus.
The Advisory Agreement is effective for a period of two
years from December ___, 1995. The Advisory Agreement will be
renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by TWF's Board of
Directors or by vote of a majority of the outstanding voting
securities of TWF, provided the continuance is also approved by a
majority of the Directors who are not "interested persons" of TWF
or the Advisor by vote cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement is
terminable without penalty on sixty days notice by TWF's Board of
Directors or by the Advisor. The Advisory Agreement provides
that it will terminate automatically in the event of its
assignment.
The Advisor is a wholly owned subsidiary of Vontobel Holding
Ltd., a Swiss bank holding company. TWF has designated Mr. Arpad
Pongracz, a Vice President of the Advisor, as a Vice President of
TWF and President of the Fund.
The Advisor is compensated at the annual rate of 1.25% of
the average daily net assets of the Fund on the first $500
million of assets and at the annual rate of 1% of the average
daily net assets of the Fund over that level. This fee is
subject to reduction in accordance with state expense limitation
provisions.
The Advisory Agreement contemplates the authority of the
Advisor to place Fund orders, pursuant to its investment
determinations, either directly with the issuer or with any
broker or dealer. See "Allocation of Portfolio Brokerage"
below.
The address of the Advisor is 450 Park Avenue, New York,
N.Y. 10022.
TRANSFER AGENT
Fund Services, Inc. ("FSI") is TWF's Transfer and Disbursing
Agent, pursuant to a Transfer Agent Agreement. The Transfer
Agent Agreement is dated September 1, 1987, and has been renewed
each year thereafter by the Board of Directors, including a
majority of the directors who are not interested persons of World
Funds or the Transfer Agent.
John Pasco, III, Chairman of the Board of TWF and an officer
and shareholder of Commonwealth Shareholder Services, Inc. (the
Administrator of the Fund) owns one third of the stock of FSI,
and, therefore, FSI may be deemed to be an affiliate of TWF and
Commonwealth Shareholder Services, Inc. Pursuant to the Transfer
Agent Agreement the minimum annual fee for the Fund is $16,500.
ADMINISTRATOR
Commonwealth Shareholder Services, Inc. is the Fund's
Administrator pursuant to an Administrative Services Agreement
described in the Fund's Prospectus. The agreement is initially
effective for one year from its effective date, and may be
continued thereafter only if the Board of Directors, including a
majority of the directors who are not interested persons of TWF
or the Administrator, approve the extension at least annually.
ELIGIBLE BENEFIT PLANS
An eligible benefit plan is an arrangement available to the
employees of an employer (or two or more affiliated employers)
having not less than 10 employees at the plan's inception, or
such an employer on behalf of employees of a trust or plan for
such employees, their spouses and their children under the age of
21 or a trust or plan for such employees, which provides for
purchases through periodic payroll deductions or otherwise. There
must be at least 5 initial participants with accounts investing
or invested in shares of the Fund and/or certain other funds.
The initial purchase by the eligible benefit plan and prior
purchases by or for the benefit of the initial participants of
the plan must aggregate not less than $5,000 and subsequent
purchases must be at least $50 per account and must aggregate at
least $250. Purchases by the eligible benefit plan must be made
pursuant to a single order paid for by a single check or federal
funds wire and may not be made more often than monthly. A
separate account will be established for each employee, spouse or
child for which purchases are made. The requirements for
initiating or continuing purchases pursuant to an eligible
benefit plan may be modified and the offering to such plans may
be terminated at any time without prior notice.
DISTRIBUTION
Shares of the Fund are sold at net asset value on a
continuous basis, without a sales charge.
First Dominion Capital Corp. (the "Distributor"), 1500
Forest Avenue, Suite 223, Richmond, VA 23229, is the Fund's
principal underwriter pursuant to a Distribution Agreement
between TWF and the Distributor.
EXPENSES OF THE FUND
The Fund will pay its expenses not assumed by the Advisor,
including, but not limited to, the following: custodian; stock
transfer and dividend disbursing fees and expenses; taxes;
expenses of the issuance and redemption of Fund shares (including
stock certificates, registration and qualification fees and
expenses); legal and auditing expenses; and the cost of
stationery and forms prepared exclusively for the Fund.
The allocation of TWF's general expenses is made on a basis
that the Board of Directors deems fair and equitable, which may
be based on the relative net assets of each series of TWF or the
nature of the services performed and relative applicability to
each series.
Under the Advisory Agreement, the Advisor agreed to
reimburse the Fund if its annual ordinary operating expenses
exceed the most stringent limits prescribed by any state in which
the Fund's shares are offered for sale. This expense limitation
is calculable based on the Fund's aggregate net assets. Expenses
which are not subject to this limitation are interest, taxes and
extraordinary expenses. Expenditures, including costs incurred
in connection with the purchase or sale of portfolio securities,
which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses.
Reimbursement, if any, will be on a monthly basis, subject to
year-end adjustment and limited to the amount of the advisory fee
due from the Fund.
Investors should understand that the Fund's expense ratio
can be expected to be higher than investment companies investing
in domestic securities since the cost of maintaining the custody
of foreign securities and the rate of advisory fees paid by the
Fund is higher.
SPECIAL SHAREHOLDER SERVICES
As described briefly in the Prospectus, TWF offers the
following shareholder services:
Regular Account: The regular account allows for voluntary
investments to be made at any time. Available to individuals,
custodians, corporations, trusts, estates, corporate retirement
plans and others, investors are free to make additions and
withdrawals to or from their account as often as they wish.
Simply use the Account Application provided with the Fund's
Prospectus to open your account.
Telephone Transactions: You may redeem shares or transfer
into another fund if you request this service at the time you
complete the initial Account Application. If you do not elect
this service at that time, you may do so at a later date by
putting your request in writing to the Transfer Agent and having
your signature guaranteed.
The Fund employs reasonable procedures designed to confirm
the authenticity of your instructions communicated by telephone
and, if it does not, it may be liable for any losses due to
unauthorized or fraudulent transactions. As a result of this
policy, a shareholder authorizing telephone redemption bears the
risk of loss which may result from unauthorized or fraudulent
transactions which the Fund believes to be genuine. When you
request a telephone redemption or transfer, you will be asked to
respond to certain questions designed to confirm your identity as
a shareholder of record. Your cooperation with these procedures
will protect your account and the Fund from unauthorized
transactions.
Invest-A-Matic Account: Any shareholder may utilize this
feature, which provides for automatic monthly investments into
your account. Upon your request, the Transfer Agent will
withdraw a fixed amount each month from your checking account for
investment into your account. This does not require you to make
a commitment for a fixed period of time. You may change the
monthly investment, skip a month or discontinue your Invest-A-
Matic Plan as desired by notifying the Transfer Agent. This
feature requires a separate Plan application, in addition to the
Account Application. To obtain an application, or to receive
more information, please call the Transfer Agent.
Individual Retirement Account (IRA): All wage earners under
70-1/2, even those who participate in a company sponsored or
government retirement plan, may establish their own IRA. You can
contribute 100% of your earnings up to $2,000 (or $2,250 with a
spouse who is not a wage earner). A special IRA program is
available for corporate employers under which the employers may
establish IRA accounts for their employees in lieu of
establishing corporate retirement plans. Known as SEP-IRA's
(Simplified Employee Pension-IRA), they free the corporate
employer of many of the recordkeeping requirements of
establishing and maintaining a corporate retirement plan trust.
If you have received a lump sum distribution from another
qualified retirement plan, you may rollover all or part of that
distribution into your Fund IRA. Your rollover contribution is
not subject to the limits on annual IRA contributions. By acting
within applicable time limits of the distribution you can
continue to defer Federal Income Taxes on your lump sum
contribution and on any income that is earned on that
contribution.
How to Establish Retirement Accounts: Please call TWF to
obtain information regarding the establishment of individual
retirement plan accounts. The plan custodian charges nominal
fees in connection with plan establishment and maintenance.
These fees are detailed in the plan documents. You may wish to
consult with your attorney or other tax advisor for specific
advice concerning your tax status and plans.
Exchange Privilege: Shareholders may exchange shares of the
Fund for shares of any other series of TWF, provided the shares
of the fund the shareholder is exchanging into are registered for
sale in the shareholders state of residence. Each account must
meet the minimum investment requirements (currently $1,000).
Exchange Privilege Authorization Forms are available by calling
TWF's offices. Your special authorization form must have been
completed and must be on file with the Transfer Agent. To make
an exchange, an exchange order must comply with the requirements
for a redemption or repurchase order and must specify the value
or the number of shares to be exchanged. However, an investment
dealer or the Principal Underwriter who has been authorized by a
shareholder in writing acceptable to and delivered to the
Principal Underwriter, to make exchanges of Fund shares on behalf
of the shareholder may place exchange orders with the Principal
Underwriter by telephone or in writing without a signature
guarantee, or simply call the Transfer Agent at (800) 628-4077
before noon (Eastern Time). Your exchange will take effect as of
the next determination of the net asset value per share of each
fund involved (usually at the close of business on the same day).
The Transfer Agent will charge your account a $10.00 service fee
each time you make such an exchange. TWF reserves the right to
limit the number of exchanges or to otherwise prohibit or
restrict shareholders from making exchanges at any time, without
notice, should TWF determine that it would be in the best
interest of its shareholders to do so. An exchange constitutes
the sale of the shares of one fund and the purchase of those of
the second fund. Consequently, the sale may involve either a
capital gain or loss to the shareholder for Federal Income Tax
purposes. The Exchange Privilege is available only in states
where it is legally permissible to do so.
ALLOCATION OF PORTFOLIO BROKERAGE
It is the Fund's policy to seek the best possible price and
execution for its securities transactions taking into account
both the costs and the ability to complete the order in a manner
which will achieve the Fund's goals. After a purchase or sale
decision is made by the Advisor, the Advisor then arranges for
execution of the transaction in a manner deemed to provide the
best result for the Fund.
Exchange-listed securities are generally traded on their
principal exchange unless another market offers a better result.
Securities traded only in the over-the-counter market may be
executed on a principal basis with primary market makers in such
securities except for fixed price offerings and except where the
Fund may obtain better prices or executions on a commission basis
or by dealing with other than a primary market maker.
While there is no formula, agreement or undertaking to do
so, the Fund may allocate a portion of its brokerage commissions
to persons or firms providing the Advisor with investment
recommendations, statistical, research or similar services useful
to the daily operation of the Fund or other clients of these
persons. Such services are one of the many ways the Fund and its
Advisor can keep abreast of the information generally circulated
among institutional investors by broker-dealers. While this
information is useful in varying degrees, its value is
indeterminable. Such services received on the basis of
transactions for the Fund may be used by the Advisor for the
benefit of other clients, and the Fund may benefit from such
transactions effected for the benefit of other clients. Subject
to obtaining best price and execution, the Fund may consider
sales of its shares as a factor in the selection of brokers to
execute portfolio transactions.
The Advisor is authorized to place Fund transactions with a
broker-dealer with which it is affiliated (Vontobel Securities,
Ltd.) provided that Vontobel Securities, Ltd. stands ready to
demonstrate to TWF that the Fund will receive (1) a price and
execution no less favorable than that available from unaffiliated
persons, and (2) a price and execution equivalent to that offered
to unaffiliated persons by that broker-dealer, in each case on
transactions of a like size and nature. In this regard, TWF's
Board of Directors has adopted policies and procedures which
govern such allocation of brokerage transactions, and the Board
reviews at its meetings details of all transactions which have
been placed pursuant to those policies.
When two or more funds managed by the Advisor are
simultaneously engaged in the purchase or sale of the same
security, the transactions are allocated in a manner deemed
equitable to each fund. It is recognized that in some cases the
procedure could have a detrimental effect on the price or volume
of the security as far as the Fund is concerned. In other cases,
however, it is believed that the ability of the Fund to
participate in volume transactions will be beneficial for the
Fund. It is the opinion of the Board of Directors that these
advantages, when combined with the other benefits available
because of the Advisor's organization, outweigh the disadvantages
that may be said to exist from exposure to simultaneous
transactions.
GENERAL INFORMATION AND HISTORY
TWF is authorized to issue up to 500,000,000 shares of $0.01
par value common stock, of which it has presently allocated
50,000,000 shares to the Fund, 50,000 to the Vontobel EuroPacific
Fund series, 50,000,000 to the Vontobel U.S. Value Fund series,
50,000,000 to the Vontobel International Bond Fund series, and
50,000,000 to the Sand Hill Portfolio Manager Fund series. The
Board of Directors can allocate the remaining authorized but
unissued shares to any series or may create additional series and
allocate shares to such series. Each series is required to have
suitable investment objectives, policies and restrictions, to
maintain a separate portfolio of securities suitable to its
purposes, and to generally operate in the manner of a separate
investment company as required by the Investment Company Act of
1940.
If additional series were to be formed, the rights of
existing Fund shareholders would not change, and the Fund's
objective, policies and investments would not be changed. A
share of the Fund would continue to have a priority in the assets
of the Fund in the event of a liquidation.
The shares of the Fund when issued will be fully paid and
non-assessable, will have no preference over other shares of the
Fund as to conversion, dividends, or retirement, and will have no
preemptive rights. The shares of the Fund will be redeemable
from the assets of the Fund at any time at a shareholder's
request at the current net asset value determined in accordance
with the provisions of the Investment Company Act of 1940 and the
rules thereunder. TWF's general corporate expenses (including
administrative expenses) will be allocated among the series in
proportion to net assets or as determined in good faith by the
Board of Directors.
The advisory fees payable to the Advisor by the Fund and the
Fund's expense limitation guarantee formula will be based upon
the Fund's assets. The Fund's shareholders will have the right to
choose or remove the Advisor of the investments of the Fund.
Voting and Control - Each outstanding share of TWF is
entitled to one vote for each full share of stock and a
fractional share of stock. All shareholders vote on matters
which concern the corporation as a whole. Election of Directors
or ratification of the auditor are examples of matters to be
voted upon by all shareholders. TWF is not required to hold a
meeting of shareholders each year. TWF intends to hold annual
meetings when it is required to do so by the Maryland General
Corporate Law or the Investment Company Act of 1940.
Shareholders have the right to call a meeting to consider the
removal of one or more of the Directors and will be assisted in
shareholder communication in such matter.
The Fund shall vote separately on matters (1) when required
by the General Corporation Law of Maryland, (2) when required by
the Investment Company Act of 1940 and (3) when matters affect
only the interest of the Fund. An example of a matter affecting
only the Fund might be a proposed change in an investment
restriction. The shares will not have cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for the election of directors can elect all of the
directors if they choose to do so.
Limitation on Use of Name - The Advisory Agreement authorizes
TWF to utilize the name "Vontobel." TWF agrees that if the
Advisory Agreement were to terminate it will promptly redesignate
the Fund's name to eliminate any reference to the name "Vontobel"
or any derivation thereof unless the Advisor waives this
requirement in writing.
Code of Ethics - TWF has adopted a Code of Ethics which imposes
certain restrictions on the authority of the portfolio manager
and certain other personnel of the Fund and its advisors
governing personal securities activities and investments of those
persons and has instituted procedures to its Code of Ethics to
require such investment personnel to report such activities to
the compliance officer.
PERFORMANCE
Current yield and total return are the two primary methods
of measuring investment performance. Occasionally, however, the
Fund may include its distribution rate in sales literature.
Yield, in its simplest form, is the ratio of income per share
derived from the Fund's portfolio investments to a current
maximum offering price expressed in terms of percent. The yield
is quoted on the basis of earnings after expenses have been
deducted. Total return, on the other hand, is the total of all
income and capital gains paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in
the value of the original investment, expressed as a percentage
of the purchase price. The distribution rate is the amount of
distributions per share made by the Fund over a twelve-month
period divided by the current maximum offering price.
Generally, performance quotations by investment companies
are subject to certain rules adopted by the Securities and
Exchange Commission. These rules require the use of standardized
performance quotations, or alternatively, that every non-
standardized performance quotation furnished by the Fund be
accompanied by certain standardized performance information
computed as required by the Commission. Current yield and total
return quotations used by the Fund are based on the standardized
methods of computing performance mandated by the Commission.
As indicated below current yield is determined by dividing
the net investment income per share earned during the period by
the maximum offering price per share on the last day of the
period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholder during the 30
day base period. According to the new Securities and Exchange
formula:
Yield = 2 [(a-b + 1) -1]
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
As the following formula indictes, the average annual total
return is determined by multiplying a hypothetical initial
purchase order of $1,000 by the average annual compound rate of
return (including capital appreciation/depreciation and dividends
and distributions paid and reinvested) for the stated period less
any fees charged to all shareholder accounts and annualizing the
result. The calculation assumes that all dividends and
distributions are reinvested on the reinvestment dates during the
period. The quotation assumes the account was
completely redeemed at the end of each one, five and ten year
period and the deduction of all applicable charges and fees.
According to the Securities and Exchange Commission formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
periods (or fractional portion thereof).
Sales literature pertaining to the Fund may quote a
distribution rate in addition to the yield or total return. The
distribution rate is the amount of distributions per share made
by the Fund over a twelve-month period divided by the current
maximum offering price. The distribution rate differs from the
yield because it measures what the Fund paid to shareholders
rather than what the Fund earned from investments. It also
differs from the yield because it may include dividends paid from
premium income from option writing, if applicable, and short-term
capital gains in addition to dividends from investment income.
Under certain circumstances, such as when there has been a change
in the amount of dividend payout, or a fundamental change in
investment policies, it might be appropriate to annualize the
distributions paid over the period such policies were in effect,
rather than using the distributions paid during the past twelve
months.
Occasionally statistics may be used to specify the Fund's
volatility or risk. Measures of volatility or risk are generally
used to compare the Fund's net asset value or performance
relative to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market as
represented by the Standard & Poor's 500 Stock Index. A beta of
more than 1.00 indicates volatility greater than the market, and
a beta of less than 1.00 indicates volatility less than the
market. Another measure of volatility or risk is standard
deviation. Standard deviation is used to measure variability of
net asset value or total return around an average, over a
specified period of time. The premise is that greater volatility
connotes greater risk undertaken in achieving performance.
Sales literature referring to the use of the Fund as a
potential investment for Individual Retirement Accounts (IRAs),
Business Retirement Plans, and other tax-advantaged retirement
plans may quote a total return based upon compounding of
dividends on which it is presumed no federal income tax applies.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used.
Comparisons and Advertisements
To help investors better evaluate how an investment in the
Fund might satisfy their investment objective, advertisements
regarding the Fund may discuss yield, total return, or volatility
as reported by various financial publications. Advertisements
may also compare yield, total return, or volatility (as
calculated above) to yield, total return, or volatility as
reported by other investments, indices, and averages. The
following publications, indices, and averages may be used:
(a) Dow Jones Composite Average or its component averages - an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks (Dow Jones Utilities Average), and 20 transportation
company stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks, and 20 transportation
stocks. Comparisons of performance assume reinvestment of
dividends.
(c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation,
and finance stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index - represents the return on the
market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed
Income Analysis, and Lipper Mutual Fund Indices - measures total
return and average current yield for the mutual fund industry.
Ranks individual mutual fund performance over specified time
periods assuming reinvestment of all distributions, exclusive of
sales charges.
(f) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total
return, and average rate of return (average annual compounded
growth rate) over specified time periods for the mutual fund
industry.
(g) Mutual Fund Source Book and other material, published by
Morningstar, Inc. - analyzes price, yield, risk, and total return
for equity funds.
(h) Financial publications: Business Week, Changing Times,
Financial World, Forbes, Fortune, and Money magazines - rates
fund performance over specified time periods.
(i) Consumer Price Index (or Cost of Living Index), published by
the U.S. Bureau of Labor Statistics - a statistical measure of
change, over time, in the price of goods and services, in major
expenditure groups.
(j) Standard & Poor's 100 Stock Index - an unmanaged index based
on the price of 100 blue-chip stocks, including 92 industrials,
one utility, two transportation companies, and 5 financial
institutions. The S&P 100 Stock Index is a smaller more flexible
index for option trading.
In assessing such comparisons of yield, return, or
volatility, an investor should keep in mind that the composition
of the investments in the reported indices and averages in not
identical to the Fund's portfolio, that the averages are
generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula
used by the Fund to calculate its figures. In addition there can
be no assurance that the Fund will continue this performance as
compared to such other averages.
FINANCIAL STATEMENTS
The Fund's books will be audited at least once each year by
Tait, Weller and Baker, of Philadelphia, PA, independent public
accountants. The Annual Report to Shareholders is incorporated
by reference to this Statement of Additional Information.
<PAGE>
Advisor: Vontobel USA Inc.
450 Park Ave.
New York, N.Y. 10022
Distributor: First Dominion Capital Corp.
1500 Forest Ave., Suite 223
Richmond, VA 23229
Independent Auditors: Tait, Weller & Baker
2 Penn Center Plaza
Suite 700
Philadelphia, PA 19102
Marketing Services: For general information on the Fund and
Marketing Services, call the Distributor
at (800) 527-9500 Toll Free.
Transfer Agent: For account information, wire purchase
or redemptions, call or write to TWF's
Transfer Agent:
Fund Services, Inc.
P.O. Box 26305
Richmond, VA 23260
(800) 628-4077 Toll Free
More Information: For 24 hour, 7 days a week price
information call 1-800-527-9500.
For information on any series of TWF,
investment plans, or other shareholder
services, call TWF at 1-800-527-9500 during
normal business hours, or write TWF at 1500
Forest Avenue, Suite 223, Richmond, VA 23229.
NASDAQ SYMBOL:
<PAGE>
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. (Incorporated by Reference
from PEA No. 28 as filed on April 27, 1995 for the
Vontobel EuroPacific Fund series, the Vontobel
U.S. Value Fund series, and the Vontobel
International Bond Fund series for the fiscal year
ended December 31, 1994). (Incorporated by
Reference from PEA No. 29 as filed on June 28,
1995 for the Sand Hill Portfolio Manager Fund
series for the four months ending April 30, 1995).
No Additional Financial Statements are provided
with respect to the Vontobel Eastern European
Equity Fund series.
(b) Exhibits
1. Articles of Incorporation of Registrant
(Incorporated by reference from PEA No. 1,
filed November 1, 1983.)
Articles Supplementary (Incorporated by
reference from PEA No. 4, filed October 29,
1984; PEA No. 11, filed February 28, 1989;
PEA No. 15, filed January 29, 1990; PEA No.
23, filed December 13, 1993, PEA No. 25 filed
April 29, 1994; and from PEA #27 filed
October 19, 1994.)
Articles of Amendment (Incorporated by
reference from PEA No. 19, filed March 1,
1991; and from PEA #27, filed October 19,
1994.)
Filed herewith as Exhibit 24(b)(1) are
Articles Supplementary as filed in Maryland
on May 10, 1995.
Filed herewith as Exhibit 24(b)(1)(a) are
Articles
Supplementary as filed in Maryland on
November 6, 1995.
2. By-Laws (Incorporated by reference from PEA
No. 1, filed November 1, 1983. Amendment to
By-Laws is incorporated by reference from PEA
No. 4, filed October 29, 1984.)
3. Not Applicable
4. Specimen of security issued by Registrant
(Incorporated by reference from PEA No. 19,
filed March 1, 1991, for the Vontobel
EuroPacific Fund series, and the Vontobel
U.S. Value Fund series; from PEA No. 23,
filed December 13, 1993, for the Vontobel
International Bond Fund series; and from PEA
#27, filed October 19, 1994, for the Sand
Hill Portfolio Manager Fund series.)
Filed herewith as Exhibit 24(b)(4) is the
text of the specimen of security for Vontobel
Eastern European Equity Fund series.
5. (a) Investment Advisory Agreement for the
Vontobel EuroPacific Fund series, dated
July 14, 1992, (Incorporated by
reference from PEA No. 22, filed April
30, 1993.)
(b) Investment Advisory Agreement for the
Vontobel U.S. Value Fund series, dated
July 14, 1992, (Incorporated by
reference from PEA No. 22, filed April
30, 1993.)
(c) Investment Advisory Agreement for the
Vontobel International Bond Fund, dated
February 10, 1994, (Incorporated by
reference from PEA No. 25, filed April
29, 1994.)
(d) Investment Advisory Agreement for Sand
Hill Portfolio Manager Fund series,
dated December 29, 1994. (Incorporated
by reference from PEA #27 filed October
18, 1994).
(e) Filed herewith as Exhibit 24(b)(5)(e) is
the form of Investment Advisory
Agreement for the Vontobel Eastern
European Equity Fund series.
6. (a) Distribution Agreement dated January 1,
1994 (Incorporated by reference from PEA
No. 25 filed April 29, 1994.)
(b) Selling Dealer Agreement (Incorporated
by reference from PEA No. 19, filed
March 1, 1991.)
(c) Foreign Broker Dealer Selling Agreement
(Incorporated by reference from PEA No.
20 filed April 24, 1992.)
7. Not Applicable.
8. (a) Custodian Agreement for The World Funds,
Inc. dated November 19, 1992
(Incorporated by reference from PEA No.
22, filed April 20, 1993.)
(b) Transfer Agent Agreement (Incorporated
by reference from PEA No. 16, filed
April 27, 1990.)
9. (a) Administrative Services Agreement for
the Vontobel EuroPacific Fund and the
Vontobel U.S. Value Fund series, dated
July 14, 1992 (Incorporated by reference
from PEA No. 22, filed April 30, 1993.)
(b) Administrative Services Agreement, dated
February 10, 1994 for the Vontobel
International Bond Fund series,
(Incorporated by Reference from PEA No.
25, filed April 29, 1994.)
(c) Administrative Services Agreement, dated
December 29, 1994, for the Sand Hill
Portfolio Manager Fund series,
(Incorporated by Reference from PEA No.
27, filed October 18, 1994.)
(d) Filed herewith as Exhibit 24(b)(9)(d) is
the form of Administrative Services
Agreement for Vontobel Eastern European
Equity Fund series.
10. Opinion of Counsel (The Opinion and Consent
of Counsel with respect to shares previously
sold was attached to the Fund's 24f-2 Notice,
which was filed February 24, 1995.)
11. (a) Filed herewith as Exhibit 24(b)(11)(a)
is the Auditor's Consent to the
continued use of its reports (dated
January 25, 1995) appearing in the
Annual Reports to shareholders (for the
fiscal year ended December 31, 1994) for
the Vontobel EuroPacific Fund series,
the Vontobel U.S. Value Fund series and
the Vontobel International Bond Fund
series.
(b) Power of Attorney (Incorporated by
reference from PEA No. 2, filed December
17, 1983 (for Samuel Boyd, Jr. and
William E. Poist); and Incorporated by
reference from PEA No. 10, filed
February 25, 1987 (for Paul M.
Dickinson.)
12. Not Applicable.
13. Not Applicable.
14. (a) Custodial Account Agreement for
Individual Retirement Accounts
(Incorporated by reference from PEA No.
22, filed April 30, 1993.)
(b) Disclosure Statement for Individual
Retirement Accounts (Incorporated by
reference from PEA No. 22, filed April
30, 1993.)
15. Not Applicable.
16. Computation of Performance for the Vontobel
EuroPacific Fund series, the Vontobel U.S.
Value Fund series and the Vontobel
International Bond Fund Series (Incorporated
by Reference from PEA No. 22, filed April 27,
1995). Computation of Performance for the
Sand Hill Portfolio Manager Fund series
(Incorporated by Reference from PEA No. 29,
filed June 28, 1995).
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
None
ITEM 26 NUMBER OF HOLDERS OF SECURITIES: As of October 31,
1995:
Number of
Title of Class Record Holders
Vontobel EuroPacific Fund 1,463
Vontobel U.S. Value Fund 1,553
Vontobel International Bond Fund 44
Sand Hill Portfolio Manager Fund 54
ITEM 27 INDEMNIFICATION
Incorporated by reference from PEA No. 1, filed
November 1, 1983, and as modified from PEA No. 3, filed
March 1984.
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
(a) With respect to Vontobel USA, Inc. (the Investment
Advisor to the Vontobel U.S. Value Fund series,
the Vontobel EuroPacific Fund series, and the
Vontobel International Bond Fund series), the
information required is Incorporated by Reference
from PEA No. 15, filed January 29, 1990.
(b) Sand Hill Advisors, Inc, (formerly Conway,
Williams & Foster, Inc.) (the Investment Advisor
to the Sand Hill Portfolio Manager Fund series),
3000 Sand Hill Road, Building 3, Suite 150, Menlo
Park, CA 94025, is a registered Investment
Advisor.
(b) With respect to Vontobel USA, Inc. (the Investment
Advisor to the Vontobel U.S. Value Fund series,
the Vontobel EuroPacific Fund series, the Vontobel
International Bond Fund series and the Vontobel
Eastern European Equity Fund series), the
directors and officers are listed below:
Position
with Investment
Name Advisor Other Positions
Dr. Wolfhard Graetz
Chairman of Board
Chief Investment Officer,Vontobel
Group, Chairman Tardy, de
Watteville President, Vontobel
Asset Management Ltd.
Dr. Hans-Dieter Vontobel
Director Chairman, Vontobel Holding Ltd.
Chairman, Bank J. Vontobel Co. Ltd.
Henrich Schlegel Director, Senior
Vice President
Treasurer
Edwin David Walczak First Vice President
Chief Investment Officer
Thomas Peter Wittwer First Vice President
and Secretary
Peter Howard Newell First Vice President
Sven Rump Vice President
Fabrizio Pierallini Vice President
Arpad Pongracz Vice President
(effective 1/1/96)
Alex von Erlach Vice President
Joseph A. Mastoloni Assistant Vice President/
Compliance Officer
Conrad A. Reyes Assistant Treasurer/
Assistant Secretary
Joerg Dobler Assistant Treasurer
ITEM 29 PRINCIPAL UNDERWRITER
(a) None
(b) Name and Principal Position with Position With
Business Address Underwriter Registrant
John Pasco, III President, Chief Chairman &
1500 Forest Avenue Financial Officer, Treasurer
Suite 223 Treasurer, Director
Richmond, VA 23229
Mary T. Pasco Director Assistant
1500 Forest Avenue Secretary
Suite 223
Richmond, VA 23229
Lori J. Martin Vice President None
1500 Forest Ave. & Assistant Sec.
Suite 223
Richmond, VA 23229
F. Byron Parker, Jr. Secretary Secretary
Mustian & Parker
Two Paragon Place
Suite 100
6802 Paragon Place
Richmond, Va. 23230
(c) None
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
The books and records of the Registrant are kept in
several locations:
1. All shareholder account records including share
ledgers, duplicate confirmations, duplicate
account statements, and applications forms are
maintained by the Registrant's Transfer Agent,
Fund Services Inc., at 1500 Forest Avenue, Suite
111, Richmond, Virginia 23229.
Records relating to the investments of the
Vontobel EuroPacific Fund series, the Vontobel
U.S. Value Fund series, and the Vontobel
International Bond Fund series, including research
information, records relating to the placement of
brokerage transactions, memorandums regarding
investment recommendations for supporting and/or
authorizing the purchase or sale of assets,
information relating to the placement of
securities transactions, and certain records
concerning the recommendations of Vontobel USA,
Inc. (the Investment Advisor) are maintained at
Vontobel USA, Inc., 450 Park Avenue, New York,
N.Y. 10022.
Records relating to the investment of the Sand
Hill Portfolio Manager Fund series, including
research information, records relating to the
placement of brokerage transactions, memorandums
regarding investment recommendations for
supporting and/or authorizing the purchase or sale
of assets are maintained in the custody of Sand
Hill Advisors, Inc., 3000 Sand Hill Road, Building
3, Suite 150, Menlo Park, California 94025.
3. Actual portfolio securities and other investment
assets (including cash) of the Vontobel
EuroPacific Fund series, the Vontobel U.S. Value
Fund series, the Vontobel International Bond Fund
series and the Sand Hill Portfolio Manager Fund
series are maintained in the custody of the
Registrant's Custodian Bank, Brown Brothers
Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109.
4. Certain accounting records of the Vontobel
EuroPacific Fund series, the Vontobel U.S. Value
Fund series, the Vontobel International Bond Fund
series and the Sand Hill Portfolio Manager Fund
series are maintained by Brown Brothers Harriman &
Co., at 40 Water Street, Boston, Massachusetts
02109 in its capacity as Accounting Services
Agent. These include: general ledger, supporting
ledgers, pricing computations, etc.
5. All other records of the Registrant required to be
maintained pursuant to Section 31(a) of the 1940
act, and Rule 31a-1 thereunder (such records
include copies of the Charter, By-Laws, minute
books, original copies of agreements, compliance
records and reports, shareholder communications,
etc.) are maintained in the principal office of
the Registrant, at 1500 Forest Avenue, Suite 223,
Richmond, Virginia 23229.
ITEM 31 MANAGEMENT SERVICES
Not Applicable.
ITEM 32 UNDERTAKINGS
Registrant hereby undertakes to file a post effective
amendment, using unaudited financial statements for the
Vontobel Eastern European Equity Fund series of the
Registrant, to be filed within four to six months from
the effective date of the Vontobel Eastern European
Equity Fund series pursuant to this Post-Effective
Amendment to the Registrant's 1933 Act Registration
Statement.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of
Richmond, and the Commonwealth of Virginia on the 7th day of
November, 1995.
THE WORLD FUNDS, INC. - Registrant
By: /s/ John Pasco III
John Pasco, III, Chairman
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated
below.
John Pasco III Director, Chairman Nov. 7, 1995
John Pasco, III & Treasurer
Samuel Boyd, Jr.* Director Nov. 7, 1995
Samuel Boyd, Jr.
Paul M. Dickinson* Director Nov. 7, 1995
Paul M. Dickinson
William E. Poist* Director Nov. 7, 1995
William E. Poist
* Each signature is made by the undersigned pursuant to a
power of attorney on file.
/s/ John Pasco III
John Pasco, III
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
24(b)(1) Articles Supplementary
24(b)(1)(a) Articles Supplementary
24(b)(4) Specimen Stock Certificate for the
Vontobel Eastern European Equity Fund
24(b)(5)(e) Form of Investment Advisory Agreement
for the Vontobel Eastern European Equity
Fund series.
24(b)(9)(d) Administrative Services Agreement for
the Vontobel Eastern European equity Fund
series.
24(b)(11)(a) Auditor's Consent
THE WORLD FUNDS, INC.
Articles Supplementary
The World Funds, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation") and an
open-end investment company registered under the Investment Company
Act of 1940, hereby certifies, in accordance with Section 2-105 of
the Maryland General Corporation law, to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at
a meeting held on November 2, 1995, adopted resolutions classifying
and allocating unallocated and unissued common stock of the
corporation as follows: Fifty Million (50,000,000) shares of
common stock with a par value of One Cent ($.01) per share to a new
series of shares designated as Vontobel Eastern European Equity
Fund series.
SECOND: The shares of the Vontobel Eastern European
Equity Fund series shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other
characteristics as are stated in Article SIXTH of the Articles of
Incorporation of the Corporation.
THIRD: The aforesaid shares have been duly classified
and allocated by the Board of Directors pursuant to the authority
and power contained in the charter of the Corporation.
IN WITNESS WHEREOF, I have hereunto signed and acknowledged
that these Articles Supplementary are the act of the Corporation
and under the penalties of perjury, that, to the best of my
knowledge, information and belief these matters and facts are true
in all material respects.
John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
________________________
Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of The
World Funds, Inc., who executed on behalf of said Corporation the
foregoing Articles Supplementary of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said
Corporation, the foregoing Articles to be the corporate act of said
Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth
herein with respect to the approval thereof are true in all
material respects, under the penalties for perjury.
John Pasco, III
Chairman and Chief Executive Officer
Attest:
__________________________
Assistant Secretary
THE WORLD FUNDS, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
(to eliminate a series and reallocate shares)
The World Funds, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), in
accordance with Section 2-105 (a)(9) of the Maryland General
Corporation Law (the "GCL"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at
a meeting on December 4, 1994, adopted resolutions approving an
Agreement and Plan of Reorganization (the "Plan") providing for a
reorganization (the "Reorganization") of the Newport Tiger Fund
series of the Corporation (the "Tiger Fund") with and into a series
of Liberty Financial Trust, a Massachusetts business trust (the
"Trust"), and recommended the approval of such Reorganization to
the shareholders of the Tiger Fund,.
SECOND: The shareholders of the Tiger Fund, at a
special meeting of such shareholders called for March 24, 1995,
adopted, pursuant to Section 2-104(b)(5) of the GCL and the
Corporation's Articles of Incorporation, resolutions approving the
proposed Reorganization of the Tiger Fund as set forth in the Plan.
THIRD: The Reorganization having been approved by a
majority of the Board of Directors of the Corporation and a
majority of the shareholders of the Tiger Fund entitled to vote on
approval of the Plan, the Reorganization of the Tiger Fund as of
the close of business on March 31, 1995 was effected on April 3,
1995; all assets of the Tiger Fund were then transferred to the
Trust, and the shareholders of Tiger Fund became shareholders of
the Trust.
FOURTH: Article SIXTH of the Corporation's Articles of
Incorporation authorizes the Board of Directors to classify and
reclassify shares of the Corporation's stock pursuant to Section 2-
208 of the GCL.
FIFTH: Following completion of the Reorganization
there are no shares of the Tiger Fund outstanding and there are no
current shareholders of the Tiger Fund; pursuant to the Plan and
the authority of the Board of Directors, the Board has directed the
Corporation to execute and file these Articles Supplementary to
reclassify One Hundred Million (100,000,000) shares of common stock
of the Corporation ($.01 per value per share) previously allocated
to the Tiger Fund, and by these Articles Supplementary elects to
treat such shares as unallocated shares at this time.
IN WITNESS WHEREOF, The World Funds, Inc. has caused
these Articles Supplementary to be signed in its name and on its
behalf this 4th day of April, 1995.
THE WORLD FUNDS, INC.
By: John Pasco, III
John Pasco, III
Chairman and Chief
Executive Officer
ATTEST:
_______________________________
Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of
THE WORLD FUNDS, INC., who executed on behalf of the said
Corporation the foregoing Articles Supplementary, of which this
Instrument is made a part, hereby acknowledges, in the name of and
on behalf of said Corporation, said Articles Supplementary to be
the corporate act of said Corporation and further certifies that,
to the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of perjury.
John Pasco, III
John Pasco, III
Below is the text of a sample of the Stock Certificate for Vontobel
Eastern European Equity Fund Series of The World Funds, Inc.
CAPITAL STOCK OF CUSIP
THE WORLD FUNDS, INC.
VONTOBEL EASTERN EUROPEAN EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01
EACH OF THE CAPITAL STOCK OF
THE WORLD FUNDS, INC. VONTOBEL EASTERN EUROPEAN EQUITY FUND
(hereinafter called the "Corporation") transferable on the books of
the Corporation in person or by duly authorized attorney upon
surrender of this certificate property endorsed. This Certificate
and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Certificate of
Incorporation and the bylaws of the Corporation and all amendments
thereto, to all of which the holder by acceptance hereof assents.
This certificate is not valid until countersigned by the
Transfer Agent.
Witness the facsimile signatures off the duly authorized
officers of the Corporation
Dated Attest By
Secretary Chairman
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated December
__, 1995 by and between THE WORLD FUNDS, INC., a Maryland
corporation (herein called the "Fund"), and VONTOBEL USA, INC., a
New York corporation (the "Advisor"), a registered investment
adviser under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as a diversified, open-end,
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), consisting of several series of
shares, each having its own investment policies; and
WHEREAS, the Fund desires to retain the Advisor to furnish
investment advisory and management services to certain portfolios
of the Fund, subject to the control of the Fund's Board of
Directors, and the Advisor is willing to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be bound, it is agreed
between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Advisor to act
as the advisor to the VONTOBEL EASTERN EUROPEAN EQUITY FUND series
of the Fund (the "Portfolio") for the period and on the terms set
forth in this Agreement. The Advisor accepts such appointment and
agrees to furnish the services herein set forth, for the
compensation herein provided.
2. Duties of the Advisor. The Fund employs the Advisor to
manage the investments and reinvestment of the assets of the
Portfolio, and to continuously review, supervise, and administer
the investment program of the Portfolio, to determine in its
discretion the securities to be purchased or sold, to provide the
Fund and Commonwealth Shareholder Services, Inc. (the
"Administrative Services Agent") with records concerning the
Advisor's activities which the Fund is required to maintain, and to
render regular reports to the Fund's Officers and Board of
Directors and to the Administrator concerning the Advisor's
discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing
responsibilities subject to the control of the Fund's Board of
Directors and in compliance with such policies as the Board may
from time to time establish, and in compliance with the objectives,
policies, and limitations for the Portfolio as set forth in the
Fund's Prospectuses and Statement of Additional Information, as
amended from time to time, and applicable laws and regulations.
The Fund will instruct each of its agents and contractors to co-
operate in the conduct of the business of the Portfolio.
-2-
The Advisor accepts such employment and agrees, at its
own expense, to render the services and to provide the office
space, furnishings, and equipment and the personnel required by it
to perform the services on the terms and for the compensation
provided herein.
3. Portfolio Transactions. The Advisor is authorized to
select the brokers and dealers that will execute the purchases and
sales of portfolio securities for the Portfolio and is directed to
use its best efforts to obtain the best price and execution for the
Portfolio's transactions in accordance with the policies of the
Fund as set forth from time to time in the Prospectus and Statement
of Additional Information. The Advisor will promptly communicate
to the Fund and to the Administrative Services Agent such
information relating to portfolio transactions as they may
reasonably request.
It is understood that the Advisor will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the
Fund or be in breach of any obligation owing to the Fund under this
Agreement, or otherwise, by reason of its having directed a
securities transaction on behalf of the Fund to an unaffiliated
broker-dealer in compliance with the provisions of Section 28(e) of
the Securities Exchange Act of 1934 or as described from time to
time by the Prospectuses and Statement of Additional Information.
Subject to the foregoing, the Advisor may direct any transaction of
the Portfolio to a broker which is affiliated with the Advisor in
accordance with, and subject to, the policies and procedures
approved by the Board of Directors of the Fund pursuant to Rule
17e-1 under the 1940 Act. Such brokerage services are not deemed
to be provided under this Agreement.
4. Compensation of the Advisor. For the services to be
rendered by the Advisor under this Agreement, the Fund shall pay to
the Advisor compensation at the rate specified in the Schedule
attached hereto and made a part of this Agreement. Such
compensation shall be paid to the Advisor within five (5) business
days after the last business day of each month, and calculated by
applying a daily rate, based on the annual percentage rates as
specified in the attached Schedule, to the assets. The fee shall
be based on the average daily net assets for the month involved.
All rights of compensation under this Agreement for
services performed as of the termination date shall survive the
termination of this Agreement.
-3-
5. Expenses. During the term of this Agreement, the Advisor
will pay all expenses incurred by it in connection with the
management of the Fund. Notwithstanding the foregoing, the
Portfolio shall pay the expenses and costs of the Portfolio for the
following:
( 1) Taxes;
( 2) Brokerage fees and commissions with regard to
portfolio transactions;
( 3) Interest charges, fees and expenses of the
custodian of the securities;
( 4) Fees and expenses of the Fund's transfer agent and
the Administrative Services Agent;
( 5) Its proportionate share of auditing and legal
expenses;
( 6) Its proportionate share of the cost of maintenance
of corporate existence;
( 7) Its proportionate share of compensation of
directors of the Fund who are not interested
persons of the Advisor as that term is defined by
law;
( 8) Its proportionate share of the costs of corporate
meetings;
( 9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to existing
shareholders;
(11) The Advisory fee payable to the Advisor, as
provided in paragraph 4 herein;
(12) Costs of recordkeeping (other than investment
records required to be maintained by the Advisor),
and daily pricing; and
-4-
(13) Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
(14) Expenses and taxes incident to the failure of the
Portfolio to qualify as a regulated investment
company under the provisions of the Internal
Revenue Code of 1986, as amended, unless such
expenses and/or taxes arise from the negligence of
another party.
If the expenses projected to be borne by the Portfolio
(exclusive of interest, brokerage commissions, taxes and
extraordinary items, but inclusive of Advisory fees) in any fiscal
year are expected to exceed any applicable state expense limitation
provision to which the Fund is subject, the Advisory fee payable by
the Portfolio to the Advisor shall be reduced on each day such fee
is accrued to the extent of that day's portion of such excess
expenses. The amount of such reduction shall not exceed the actual
amount of the Advisory fee otherwise payable in such year.
Accruals of expenses and adjustments to advisory fees otherwise
payable under this Agreement, and the amounts payable monthly in
accordance with this Agreement, shall be adjusted as required from
month to month.
It is understood that the Fund will register its shares
in states which impose expense limitations on mutual funds only
with the prior written consent of the Advisor and, if consent is
granted, the Advisor agrees to reimburse the Fund for any excess
expenses incurred over such states' limitation up to a maximum of
its Advisory fee.
6. Reports. The Fund and the Advisor agree to furnish to
each other, if applicable, current information required for the
preparation by such parties of prospectuses, statements of
additional information, proxy statements, reports to shareholders,
certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to
their affairs as each may reasonably request.
7. Status of the Advisor. The services of the Advisor to
the Fund are not to be deemed exclusive, and the Advisor shall be
free to render similar services to others so long as its services
to the Fund are not impaired thereby.
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Pursuant to comparable agreements, the Fund may also
retain the services of the Advisor to serve as the investment
advisor of other series of the Fund.
8. Books and Records. In compliance with the requirements
of the 1940 Act, the Advisor hereby agrees that all records which
it maintains for the Fund are the property of the Fund, and further
agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Advisor further agrees to preserve for the
periods prescribed by the 1940 Act, and the rules or orders
thereunder, the records required to be maintained by the 1940 Act.
9. Limitation of Liability of Advisor. The duties of the
Advisor shall be confined to those expressly set forth herein, and
no implied duties are assumed by or may be asserted against the
Advisor hereunder. The Advisor shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund
in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or negligence on the part of the
Advisor in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. (As used
in this Paragraph 9, the term "Advisor" shall include directors,
officers, employees and other corporate agents of the Advisor as
well as that corporation itself).
10. Permissible Interests. Directors, agents, and
shareholders of the Fund are or may be interested in the Advisor
(or any successor thereof) as directors, officers, or shareholders,
or otherwise; directors, officers, agents, and shareholders of the
Advisor are or may be interested in the Fund as directors,
officers, shareholders or otherwise; and the Advisor (or any
successor) is or may be interested in the Fund as a shareholder or
otherwise. In addition, brokerage transactions for the Fund may be
effected through affiliates of the Advisor if approved by the
Fund's Board of Directors, subject to the rules and regulations of
the Securities and Exchange Commission, and the policies and
procedures adopted by the Fund.
11. License of Advisor's Name. The Advisor hereby authorizes
the Fund to use the name "Vontobel" for the Portfolio. The Fund
agrees that if this Agreement is terminated it will promptly
redesignate the name of the Portfolio to eliminate any reference to
the name "Vontobel" or any derivation thereof unless the Advisor
waives this requirement in writing.
-6-
12. Duration and Termination. This Agreement shall become
effective on the date first above written subject to its approval
by the shareholders of the Portfolio and unless sooner terminated
as provided herein, shall continue in effect for two (2) years from
that date. Thereafter, this Agreement shall be renewable for
successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of
those members of the Fund's Board of Directors who are not parties
to this Agreement or interested persons of any such party (as that
term is defined in the 1940 Act), cast in person at a meeting
called for the purpose of voting on such approval, and (b) by vote
of either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940
Act) of the Portfolio. Notwithstanding the foregoing, this
Agreement may be terminated by the Portfolio or by the Fund at any
time on sixty (60) days written notice, without the payment of any
penalty, provided that termination must be authorized either by
vote of the Fund's Board of Directors or by vote of a majority of
the outstanding voting securities of the Portfolio or by the
Advisor on sixty (60) days written notice. This Agreement will
automatically terminate in the event of its assignment (as that
term is defined in the 1940 Act).
13. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination
is sought. No material amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of
the Portfolio's outstanding voting securities (as defined in the
1940 Act).
14. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by the
party giving notice to the other party at the address stated below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
(b) To the Advisor at: 450 Park Avenue
New York, N.Y. 10022
15. Miscellaneous. The captions in this Agreement are
-7-
included for convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of
Maryland, and the applicable provisions of the 1940 Act. To the
extend that the applicable laws of the State of Maryland, or any of
the provisions herein, conflict with the applicable provisions of
the 1940 Act, the latter shall control.
17. This Agreement may be executed in two or more
counterparts, each of which, when so executed, shall be deemed to
be an original, but such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of
the day and year first above written.
VONTOBEL USA, INC.
BY:
Heinrich Schlegel
Chief Executive Officer
VONTOBEL USA, INC.
BY:
Thomas P. Wittwer
Vice President
THE WORLD FUNDS, INC.
BY:
John Pasco, III
President<PAGE>
-8-
SCHEDULE A TO
INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
THE WORLD FUNDS, INC. AND VONTOBEL USA, INC.
FOR THE
VONTOBEL EASTERN EUROPEAN EQUITY FUND
Pursuant to Paragraph 4 of the Investment Advisory Agreement,
dated July 14, 1992, between The World Funds, Inc. (the "Fund") and
Vontobel USA, Inc. (the "Advisor") for the Vontobel Eastern
European Equity Fund series of the Fund, the Fund shall pay to the
Advisor compensation at an annual rate as follows:
Portfolio Fee
Vontobel Eastern European 1.25% per annum on the first $500
Equity Fund million of the aggregate net assets
of the Portfolio and 1% on the
Portfolio's net assets over $500
million payable monthly.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our reports each dated January 25,
1995 on the financial statements and financial highlights of
Vontobel EuroPacific Fund, Vontobel U.S. Value Fund, and Vontobel
International Bond Fund, each a series of shares of The World
Funds, Inc. Such financial statements and financial highlights
appear in the 1994 Annual Reports to Shareholders which are
incorporated by reference in the Prospectus and in the Statement of
Additional Information filed in Post-Effective Amendment Number 30
to the Registration Statement on Form N-1A of The World Funds, Inc.
We also consent to the references to our Firm in such Registration
Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 30, 1995
