=====================================================
SEC File Nos. 2-97999
811-4309
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 19
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16
THE GROWTH FUND OF WASHINGTON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(202) 842-5665
HARRY J. LISTER
WASHINGTON MANAGEMENT CORPORATION
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
ALLAN S. MOSTOFF
DECHERT PRICE & RHOADS
1500 K STREET, N.W.
WASHINGTON, D.C. 20005
(COUNSEL FOR THE REGISTRANT)
THE REGISTRANT HAS FILED A DECLARATION PURSUANT TO RULE 24F-2 REGISTERING AN
INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES ACT OF 1933.
ON FEBRUARY 22, 1996 IT FILED ITS 24F-2 NOTICE FOR FISCAL 1996.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
+ IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON SEPTEMBER 1, 1996,
PURSUANT TO PARAGRAPH (B) OF RULE 485.
===============================================
THE GROWTH FUND OF WASHINGTON, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER CAPTIONS IN PROSPECTUS (PART "A")
OF PART "A"
OF FORM N-1A
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Fees and Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective, Policies and
Techniques
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Securities Investment Objective, Policies and Techniques; Dividends, Distributions and
Taxes; General Information
7. Purchase of Securities Being Offered How to Purchase Shares; Reduced Sales Charges
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings N/A
</TABLE>
__________
<TABLE>
<CAPTION>
ITEM NUMBER CAPTIONS IN STATEMENT OF
OF PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
<S> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Policies Investment Objective and Policies
14. Management of the Registrant Fund Directors and Officers; Directors
Compensation
15. Control Persons and Principal Fund Directors and Officers
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other Services
Services
17. Brokerage Allocation Execution of Portfolio Transactions and Brokerage Allocation
18. Capital Stock and Other Securities Part "A"
19. Purchase, Redemption and Pricing Purchase, Redemption and Pricing of Securities Being Offered; Determination of
of Securities Being Offered Net Asset Value
20. Tax Status Tax Status
21. Underwriters Management of the Fund, the Distributor
(Part "A")
22. Calculations of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
_____________
ITEM IN PART "C"
OF FORM N-1A
24. Financial Statements and Exhibits
25. Persons Controlled by or under Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
[VISTA LOGO] PROSPECTUS
THE GROWTH FUND OF WASHINGTON, INC.
1101 Vermont Avenue, NW
Washington, DC
20005 (202) 842-5665
INVESTMENT STRATEGY: CAPITAL GROWTH
May 1, 1996 As revised September 1, 1996
The Growth Fund of Washington, Inc. (the "Fund") is a diversified, open-end
investment company incorporated in Maryland on May 24, 1985 which seeks to
provide an opportunity for long-term growth of capital by investing primarily in
securities of companies headquartered or having a major place of business in
Washington, D.C., Maryland or Virginia. There can be no guarantee the Fund will
achieve its objective.
This Prospectus sets forth concisely the information about the Fund that an
investor ought to know before investing. It should be read and retained for
future reference. A Statement of Additional Information about the Fund dated May
1, 1996 has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. It may be obtained without charge by writing
or calling the Secretary of the Fund at the above address and requesting "The
Statement of Additional Information."
Shares of the Fund are not deposits or obligations of, or insured, guaranteed,
or endorsed by the U.S. government, any bank, The Federal Deposit Insurance
Corporation, The Federal Reserve Board, or any other agency, entity or person.
The purchase of Fund shares involves investment risks, including the possible
loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
Summary of Fees and Expenses ................................................ 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ........................................................ 4
How the Fund has performed
Investment Objective, Policies and Techniques ............................... 6
The Fund's investment objective, the kinds of securities in which
the Fund invests, investment policies and techniques, and risks
Management of the Fund ...................................................... 9
The business manager, the investment adviser and the individual
who manages the Fund; the custodian, the distribution plan, and
the shareholder servicing agent
How to Purchase Shares ...................................................... 12
Sales Charges ............................................................... 14
Sales charges and reduced sales charges
How to Redeem Shares
16
Dividends, Distributions and Taxes .......................................... 19
How the Fund distributes its earnings, and tax treatment related
to those earnings
Shareholder Account Services and Privileges ................................. 20
How to make the most of your Vista privileges
General Information ......................................................... 22
2
<PAGE>
SUMMARY OF FEES AND EXPENSES
----------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) ...................................... 4.75%
Maximum Sales Charge Imposed on Reinvested Dividends ................. None
Deferred Sales Charge ................................................ None
Redemption Fees ...................................................... None
Exchange Fee ......................................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets):
Management Fees ...................................................... 0.75%
12b-1 Fees ........................................................... 0.22%(1)
Other Expenses ....................................................... 0.49%
----
TOTAL FUND OPERATING EXPENSES ........................................ 1.46%
====
3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE
1 Year 3 Years 5 years 10 years
------ ------- ------- --------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period ........ $ 62 $ 91 $ 123 $ 214
</TABLE>
The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of the preceding Summary of Fees and Expenses is to assist the
investor in understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. It does not purport to reflect the Fund's
investment performance, past or future. Past performance which, of course, is
not necessarily indicative of future results, is shown in the Financial
Highlights which follow. For more complete descriptions of the management fees,
see "Management of the Fund" and for uses of the 12b-1 fees, see "Distribution
Plan" below.
1. These expenses may not exceed 0.25% of the Fund's average net assets
annually. (See "Management of the Fund--Distribution Plan".) After a
substantial period, these expenses, together with the initial sales charge,
may total more than the maximum sales expense that would have been
permissible if imposed entirely as an initial sales charge.
3
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The following financial information has been audited by Johnson Lambert & Co.
The report of Johnson Lambert & Co. on the financial statements for the year
ended December 31, 1995 appears in the Annual Report which is incorporated by
reference in the Statement of Additional Information. This information should be
read in conjunction with the financial statements and notes thereto which also
appear in the Annual Report.
Year Ended December 31
------------------------------
1995 1994 1993
------ ------- -------
Net Asset Value, Beginning of Year ........... $ 13.32 $ 15.37 $ 14.16
------- ------- -------
Income From Investment Operations:
Net Investment Income ...................... .14 .18 .14
Net Realized and Unrealized Gains
(Losses) on Investments .................. 5.72 (1.61) 1.63
------- ------- -------
Total from Investment Operations ........... 5.86 (1.43) 1.77
------- ------- -------
Less Distributions:
Dividends (from net investment income) ..... (.14) (.18) (.14)
Distributions (from capital gains) ......... (.85) (.44) (.42)
------- ------- -------
Total Distributions ........................ (.99) (.62) (.56)
------- ------- -------
Net Asset Value, End of Year ................. $ 18.19 $ 13.32 $ 15.37
======= ======= =======
Total Return* ................................ 44.25% (9.32%) 12.52%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) .... $45,397 $33,715 $39,990
Ratio of Expenses to Average Net Assets ..... 1.46% 1.50% 1.55%
Ratio of Net Income to Average Net Assets .. .87% 1.20% 0.87%
Portfolio Turnover Rate ...................... 25.65% 13.34% 13.52%
*Excludes maximum sales charge of 4.75%.
4
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986
------ ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ........... $ 12.34 $ 10.62 $ 13.34 $ 12.22 $ 10.72 $
11.12 $ 10.20
------- ------- ------- ------- ------- ------- -------
Income From Investment Operations:
Net Investment Income ...................... .14 .18 .23 .23 .20 .15 .14
Net Realized and Unrealized Gains
(Losses) on Investments .................. 2.03 2.54 (2.68) 1.65 1.64 .29
1.31
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ........... 2.17 2.72 (2.45) 1.88 1.84 .44
1.45
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends (from net investment income) ..... (.13) (.18) (.26) (.28) (.20) (.24)
(.07)
Distributions (from capital gains) ......... (.22) (.82) (.01) (.48) (.14) (.60)
(.46)
------- ------- ------- ------- ------- ------- -------
Total Distributions ........................ (.35) (1.00) (.27) (.76) (.34) (.84) (.53)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ................. $ 14.16 $ 12.34 $ 10.62 $ 13.34 $ 12.22 $
10.72 $ 11.12
======= ======= ======= ======= =======
======= =======
Total Return* ................................ 17.72% 26.37% (18.49%) 15.50% 17.23%
4.24% 14.15%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) .... $37,162 $35,266 $38,260 $58,425 $51,770
$48,158 $50,142
Ratio of Expenses to Average Net Assets ..... 1.55% 1.67% 1.72% 1.66% 1.76%
1.74% 1.80%
Ratio of Net Income to Average Net Assets .. 1.04% 1.43% 1.95% 1.69% 1.65%
1.17% 1.05%
Portfolio Turnover Rate ...................... 12.89% 11.33% 10.07% 12.23% 10.88%
18.62% 31.99%
</TABLE>
5
<PAGE>
PERFORMANCE INFORMATION
From time to time, quotations of the Fund's "total return" may be included in
advertisements or reports to current or prospective shareholders. Total return
figures reflect only the performance of a hypothetical investment in the Fund
during the particular historical time period on which the calculations are
based. Any quotation of the Fund's total return will be expressed in terms of
the average annual compounded rate of return on a hypothetical investment in the
Fund over a period of 1, 5 and 10 years. Unless otherwise stated, such quotation
reflects the maximum initial sales charge and assumes that all dividends and
distributions are reinvested when paid. Excluding sales charges would increase
total return. Historical performance information should be considered in light
of the Fund's investment objectives and policies, the level of Fund expenses,
the characteristics and quality of the Fund's portfolio and market conditions
during the period indicated, and should not be considered representative of what
may be achieved in the future. For a description of the method used to determine
total return for the Fund, see the Statement of Additional Information.
Management's discussion of Fund performance and other information regarding the
Fund's investment results are contained in the Fund's annual report which may be
obtained without charge by writing to the Secretary of the Fund at the address
indicated on the cover of this Prospectus.
INVESTMENT
OBJECTIVE, POLICIES
AND TECHNIQUES
- --------------
In seeking to meet its objective of long-term growth of capital, the Fund will
invest at least 65% of its total assets in common stocks or securities
convertible into common stock of companies headquartered or having a major place
of business, i.e., deriving at least 40% of their gross revenues from
activities, in Washington, D.C., Maryland or Virginia. The Fund may invest up to
35% of its total assets in common stocks or securities convertible into common
stock of other U.S. companies that are headquartered elsewhere in the United
States or that do not meet the 40% of gross revenues test. For temporary
defensive purposes, the Fund may exceed the 35% limit and may also invest in
certain money market instruments. Within the 35% limit, money market instruments
may also be utilized to provide funds to meet redemptions. The Fund may engage
in certain investment techniques designed to protect against fluctuations in the
value of its portfolio securities.
It is anticipated that the assets of the Fund ordinarily will be substantially
invested in common stocks or securities convertible into common stocks which
offer an opportunity, in the Investment Adviser's opinion, to achieve long-term
growth of capital. The Fund may invest in the entire range of Washington area
companies, and there is no limitation as to the size of such companies or where
their securities are traded. The Fund may, for temporary defensive purposes or
to provide funds to meet redemptions, invest a portion of its assets in U.S.
Government securities,
6
<PAGE>
commercial paper issued by domestic corporations rated at the time of purchase
Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Corporation, or certificates of deposit issued by U.S. banks having assets in
excess of $1 billion and may enter into repurchase agreements with banks or
broker- dealers with respect to such securities. In addition, as a means of
minimizing the impact of market price fluctuations on the value of securities in
the Fund's portfolio, the Fund may, to a limited extent, purchase put and call
options, write covered call options and engage in related closing transactions.
The Fund's investment restrictions (which are described in the Statement of
Additional Information) and objective cannot be changed without shareholder
approval. All other investment practices may be changed by the Board of
Directors (the "Directors"). Except as otherwise provided in this Prospectus,
the following investment techniques are not fundamental policies of the Fund
and, therefore, may be changed by the Directors.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements with commercial banks or
broker-dealers meeting creditworthiness standards set and monitored by the
Fund's Directors. A repurchase agreement involves the purchase by the Fund of
U.S. Government securities or other debt obligations with the condition that,
after a stated period of time, the seller will buy back the same securities (the
"collateral") at a predetermined price or yield. The collateral will be
maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder). In the event the original seller
defaults on its obligation to repurchase, the Fund will seek to sell the
collateral, which action could involve costs or delays. The Fund's rights to the
collateral are unclear where the seller is a bank which becomes insolvent.
Moreover, the Fund could suffer a loss to the extent proceeds from the sale of
the collateral may be less than the repurchase price. Either the Fund or its
custodian will have physical custody of the collateral or the Fund will have
constructive possession by entry to the Fund's account in the federal book-entry
system. No more than 10% of the Fund's assets, at the time of investment, may be
invested in repurchase agreements which are not terminable within seven days.
COVERED CALL OPTIONS
The Fund may write (i.e., sell) covered call options on portfolio securities
worth up to 25% of the value of its net assets. Options give the option
purchaser the right to buy the security from the Fund at the stated exercise
price at any time during the option period, generally ranging up to nine months.
The Fund would expect to set the exercise price at a favorable level but, in
return for the net premium for the option, forgoes the opportunity during the
option period to realize increases above the exercise price. The Fund may close
out its obligation under an option by purchasing a call option for the same
security with the same
7
<PAGE>
expiration date and exercise price, if such option is available.
When the Fund writes a covered call option, it gives the purchaser of the option
the right to buy the underlying security at the price specified in the option
(the "exercise price") at any time during the option period, generally ranging
up to nine months. If the option expires unexercised, the Fund will realize gain
to the extent of the amount received for the option (the "premium") less any
commission paid. If the option is exercised, a decision over which the Fund has
no control, the Fund must sell the underlying security to the option holder at
the exercise price. By writing a covered option, the Fund forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price. The price at which the Fund would agree to
dispose of portfolio securities pursuant to covered call options written by the
Fund or put options purchased by the Fund would be a price determined by the
Investment Adviser to be attractive for sale of that security by the Fund in any
event. Thus, it is not anticipated that these options activities would conflict
with the Fund's capital growth objective.
PURCHASES OF OPTIONS
The Fund may purchase put options ("puts") which relate to securities held by
the Fund only in order to protect against a decline in value of such securities.
The Fund may purchase call options ("calls") but only (a) if the investments to
which the calls relate are equity securities which may be held by the Fund or
(b) the calls are purchased to effect "closing purchase transactions" to
terminate the Fund's obligations with respect to calls which it has previously
written. In addition, puts and calls may be purchased only if, after any such
purchase, the value of all put and call options held by the Fund would not
exceed 5% of the Fund's total assets.
PRINCIPAL RISKS
RELATING TO OPTIONS
The principal risks relating to the use of options by the Fund are: (a) there
may not be a perfect correlation between the prices of the options and the cash
(market value) prices of the securities held by the Fund, and between the
movements in their prices; (b) there is no assurance of a liquid secondary
market for closing out an options position; (c) the use of options requires
skills and techniques in addition to those required to manage the Fund's
securities portfolio; and (d) the use of these instruments involves additional
transaction costs to the Fund. Additionally, the Fund may lose the anticipated
benefit of an options transaction if the market moves in an unanticipated
manner.
Options transactions may be engaged in by the Fund to hedge against market price
fluctuations. A put option may be purchased to attempt to protect against a
decline in the market value of a security held by the Fund, while a call option
may be purchased as an anticipatory hedge against a rise in a security's market
value. A covered call option may be written when the premium for writing the
call plus the appreciation in market value of the underlying security up to the
8
<PAGE>
exercise price of the call are expected to be greater than the appreciation in
the price of the security alone. Should the market price of the security
underlying a covered call option decline, the amount of such decline will be
offset wholly or in part by the premium received for the sale of the call and
the Fund may or may not realize a loss. There is no assurance these techniques
will achieve their intended purpose. These activities may generate incidental
income for the Fund. The Fund will engage in options transactions only to the
extent permitted by the policies of state securities authorities in states where
shares of the Fund are qualified for offer and sale.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend up to one third of the value of its portfolio securities to
qualified broker-dealers or other institutional investors, provided it receives
collateral consisting of U.S. Government obligations, cash or cash equivalents
which at all times is maintained in an amount equal to at least 100% of the
current market value of the securities loaned. The Fund would be at risk to the
extent the borrower failed to continue to provide adequate collateral and failed
to return the borrowed security. By lending its portfolio securities, the Fund
may be able to increase its income through the investment of any cash collateral
or may receive a premium from the loan.
RISK FACTORS
Investments in securities involve inherent risks of market fluctuation. The Fund
attempts to reduce these risks by spreading its investments over many companies
in a variety of industries and by engaging in the options activities described
above which are designed to minimize the impact of market price fluctuations.
These actions, however, will not eliminate all of the risks inherent in an
investment of this type. Thus, the value of the Fund's portfolio securities and
the value of its shares is expected to fluctuate. The Fund is not intended to
provide a balanced investment program to meet all requirements of every
investor.
In addition, concentration of the Fund's investments in companies in the
Washington region involves risk. The economic, geographic and demographic
factors which, to the Investment Adviser, make this area a favorable one for
long-term investment may become less favorable or reverse themselves at some
time in the future.
MANAGEMENT
OF THE FUND
- -----------
The Fund's Board of Directors, which is responsible for the overall supervision
of the operations of the Fund and which performs various duties imposed on
directors of investment companies by the Investment Company Act of 1940 (the
"Act") and by applicable state and federal law, has retained the companies
listed below to provide certain services to the Fund.
THE BUSINESS MANAGER
Pursuant to an agreement with the Fund (the "Business Management Agreement"),
Washington Management Corporation (the "Business Manager") provides the
facilities and services required to carry on the Fund's general administrative
9
<PAGE>
and corporate affairs. The Business Manager, a wholly-owned subsidiary of The
Johnston-Lemon Group, Incorporated ("JLG"), maintains its principal business
address at 1101 Vermont Avenue, NW, Washington, D.C. 20005. The Business Manager
provides business management and administrative services to three other mutual
funds with assets of more than $20 billion. The Business Manager may in the
future provide similar services to parties not affiliated with the Fund.
The Business Management Agreement provides that the Fund will pay the Business
Manager a fee of 0.375% per annum on the Fund's first $40 million of net assets,
0.30% on net assets in excess of $40 million but not exceeding $100 million and
0.25% on net assets in excess of $100 million. The fee is computed daily and
paid monthly. During fiscal year ended December 31, 1995, the Business Manager's
fees amounted to $147,686 (0.373% of average net assets).
THE INVESTMENT ADVISER
Pursuant to an agreement with the Fund (the "Investment Advisory Agreement") and
subject to the policies of the Fund's Directors, Washington Investment Advisers
Inc. (the "Investment Adviser") provides general portfolio management services
for the Fund. The Investment Adviser, located at 1101 Vermont Avenue, NW,
Washington, D.C. 20005, is a wholly-owned subsidiary of JLG.
Pursuant to the Investment Advisory Agreement, the Fund will pay the Investment
Adviser a fee of 0.375% per annum on the Fund's net assets up to $100 million
decreasing to 0.35% on the net assets in excess of $100 million. The fee is
computed daily and paid monthly. During the fiscal year ended December 31, 1995,
the Investment Adviser's fees amounted to $148,597 (0.375% of average net
assets). The combined fees to the Business Manager and to the Investment Adviser
are higher than similar fees paid by most investment companies. However, such
fees are similar to those charged by equity mutual funds of comparable size.
In its discretion and at no additional cost to the Fund, the Investment
Adviser may contract for certain services such as research and
administration. It currently has such a contract with Chase Manhattan Bank,
N.A. to provide it with research assistance. The primary portfolio counselor
is shown below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Years of Experience as
Investment Professional
(approximate)
----------------------------
Years of
Experience as
Portfolio Portfolio With Washington
Counselor Counselor for The Investment
for the Growth Growth Fund of Advisers, Inc.
Fund Washington or its
of Washington Primary Title(s) (approximate) predecessors Total
Years
- --------------------- ------------------------------- ------------------ --------------- -----------
Prabha S. Carpenter Vice President, The Growth Fund 9 years 9 years 17
years
of Washington; Vice President,
Washington Investment Advisers,
Inc.
</TABLE>
10
<PAGE>
FUND EXPENSES
The Fund pays all expenses not assumed by the Investment Adviser or Business
Manager, but will be reimbursed in equal parts out of fees paid to those parties
to the extent certain of its expenses exceed applicable state limits. No such
reimbursement was required for fiscal year 1995. Expenses paid by the Fund
include custodian, stock transfer and dividend disbursing fees and accounting
and recordkeeping expenses; distribution expenses pursuant to a plan under Rule
12b-1 of the Act; costs of designing, printing and mailing reports,
prospectuses, proxy statements and notices to its shareholders; taxes and
insurance; expenses of the issuance, sale, or repurchase of shares of the Fund
(including federal and state registration and qualification expenses); legal and
auditing fees and expenses; compensation, fees and expenses paid to Directors
who are not interested persons of the Fund; association dues; and costs of
stationery and forms prepared exclusively for the Fund.
PORTFOLIO TRANSACTIONS
The Directors of the Fund have authorized the Investment Adviser, subject to the
objective of obtaining the best price and execution, to consider sales of Fund
shares, and the provision of research, statistical and other related services to
the Fund or other funds served by the Investment Adviser as factors in selecting
broker-dealers to execute portfolio transactions for the Fund. The Investment
Adviser is also authorized, subject to applicable regulatory limitations, to pay
brokerage commissions for agency transactions to Johnston, Lemon & Co.
Incorporated ("Johnston, Lemon") a wholly-owned subsidiary of JLG. Johnston,
Lemon will not participate in commissions from brokerage given by the Fund to
other broker-dealers, and the Fund will in no event effect principal
transactions with Johnston, Lemon, even with respect to securities in which
Johnston, Lemon is a market maker.
THE CUSTODIAN
Pursuant to a Custodian Agreement, The Chase Manhattan Bank, N.A. ("Chase") acts
as the custodian of the assets of the Fund for which Chase receives compensation
as is agreed upon by the Fund and Chase. The Custodian's responsibilities
include safeguarding and monitoring the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund.
THE DISTRIBUTOR
Vista Fund Distributors, Inc. formerly Vista Broker-Dealer Services, Inc.
(the "Distributor"), a wholly-owned subsidiary of The BISYS Group, Inc., acts
as the principal underwriter of the Fund's shares. The Distributor, as agent
of the Fund in the offering of its shares, will receive the commissions
consisting of that portion of the sales charge remaining after the dealer
concession which it pays to
11
<PAGE>
selling Dealers. The amount of the sales charge and dealer concession is set
forth under "How to Purchase Shares."
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") providing that the Fund
will pay to the Distributor monthly a fee at a maximum annual rate of 0.25% of
the Fund's net assets. Payments under this Plan will be made to the Distributor
to finance activity which is primarily intended to result in the sale and
retention of Fund shares including, but not limited to, advertising, salaries
and other expenses of the Distributor relating to selling or servicing efforts,
expenses of organizing and conducting sales seminars, printing of prospectuses
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature and payments to Dealers whose
customers purchase Fund shares. The Directors have authorized payment, as a
service fee, of up to 20 of the total 25 basis points available under the Plan
to be used to pay Dealers who advise shareholders regarding the purchase, sale,
or retention of Fund shares. The total amount spent under the Plan for the
fiscal year ended December 31, 1995 was $86,317 (0.22% of the Fund's average net
assets). Any unreimbursed expenses incurred in one plan year are not carried
over to future plan years. At least quarterly, the Directors review a written
report of the amounts expended under the Plan and the purpose for which
expenditures were made.
TRANSFER AGENT
DST Systems, Inc., 210 W. 10th Street, Kansas City, MO 64105 is the Fund's
transfer agent (the "Transfer Agent") and performs shareholder service
functions. Telephone conversations with the Transfer Agent or Vista Service
Center may be recorded or monitored for verification, recordkeeping and quality
assurance purposes. Their telephone number is 1-800 34-VISTA.
HOW TO
PURCHASE SHARES
- ---------------
The Fund's shares may be purchased in states where they are qualified for offer
and sale at their net asset value next computed after receipt of an order, plus
a sales charge (the "Offering Price"), through selected financial service firms
such as broker-dealer firms and banks ("Dealer(s)") who have entered into a
Selected Dealers Agreement with Vista Fund Distributors, Inc. In the
alternative, once an account has been established and the selling dealer has
been recorded, additional Fund shares may be purchased by sending a check
payable to The Growth Fund of Washington, Inc. with the shareholder's Fund
account number indicated on the check, to:
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
The "Invest by Mail" stub which accompanies each Fund confirmation statement
should be included with any purchase order. The shareholder will receive a
statement confirming the number of shares purchased.
12
<PAGE>
A minimum initial investment of $2,500 ($1,000 for a regular or SEP IRA account
or $250 for a spousal IRA) is required to open a shareholder account and each
subsequent investment must be $100 or more.
Fund shares may be purchased in full and fractional shares calculated to three
decimal places and acquired through a Dealer or Vista Service Center. No stock
certificate will be issued unless a shareholder makes a written request therefor
to Vista Service Center at the above address, in which case a certificate will
be provided at no cost to the shareholder. No certificates will be issued for
fractional shares.
DETERMINING NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of trading
(currently 4:00 P.M. Eastern time for stocks and 4:15 P.M. for options) on the
New York Stock Exchange ("NYSE") on each day Monday thru Friday, on which the
NYSE is open for trading. The Fund is not required to determine its net asset
value per share on days when changes in the value of its portfolio securities
will not materially affect such value or on days during which no orders to
purchase or sell Fund shares are received. Net asset value per share is computed
by dividing the value of the Fund's total assets less liabilities by the total
number of shares outstanding. The Fund's expenses and fees are accrued daily and
taken into account in determining the net asset value.
For purposes of computing the Fund's net asset value per share, portfolio
securities and liabilities with respect to covered call options written will be
valued at the last sales price on the valuation day on the exchange or national
securities market on which such securities primarily are traded. Securities not
listed on an exchange or national securities market, or securities in which
there were no reported transactions (except for short-term obligations), will be
valued at the latest reliable quoted bid price. Premiums paid for options are
recorded as assets and are subsequently adjusted to market value. Short-term
obligations with maturities of 60 days or less will be valued at amortized cost,
so long as such valuation continues to constitute fair value as determined by
the Fund's Board of Directors. Any securities or other assets for which reliable
recent market quotations are not readily available will be valued at fair value
as determined in good faith by the Directors.
PRICE OF SHARES
The offering price per share is equal to the net asset value per share plus a
sales charge which decreases as the amount of investment increases ("Offering
Price"), as described below. Approximately 90% of the sales charge is reallowed
to Dealers. During special promotions, the entire sales charge may be reallowed
to Dealers and at such times such Dealers may be deemed to be underwriters for
purposes of the Securities Act of 1933. Orders received by Dealers or by the
Transfer Agent prior to the close of trading on the NYSE will be filled at that
day's price, while orders received after the close of trading on the NYSE will
be filled at the Offering Price next
13
<PAGE>
computed after receipt of the order. The Fund assumes no responsibility for
the failure of a Dealer to transmit an order promptly.
SALES CHARGES
-------------
The following table shows (a) the sales charge as a percentage of the
amount invested, (b) the sales charge as a percentage of the Offering Price,
and (c) the Dealer concession as a percentage of the Offering Price.
Dealer
Sales Charge Concession
----------------------- ------------
(a) (b) (c)
Percentage Percentage Percentage
Dollar Amount of Amount of Offering of Offering
of Purchase Invested Price Price
- ----------------------------------------- ---------- ---------- ------------
Less than $100,000 ...................... 4.99% 4.75% 4.00%
$100,000 but less than $250,000 ......... 3.90% 3.75% 3.25%
$250,000 but less than $500,000 ......... 2.56% 2.50% 2.25%
$500,000 but less than $1,000,000 ....... 2.04% 2.00% 1.75%
$1,000,000 but less than $2,500,000 ..... 0.00% 0.00% 1.00%
$2,500,000 but less than $10,000,000 .... 0.00% 0.00% 0.75%
$10,000,000 but less than $50,000,000 ... 0.00% 0.00% 0.50%
$50,000,000 or more ..................... 0.00% 0.00% 0.20%
The sales charge varies with the size of the purchase as shown above. The
reduced charges apply to the aggregate of purchases of the Fund made at one time
by "any person", which term includes an individual, spouse and children under
the age of 21, or a trustee or other fiduciary of a trust estate or fiduciary
account. The Distributor may compensate Dealers for sales of $1,000,000 or more
from its own resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has a Sales Agreement, the Distributor will
reallow up to the full applicable sales charge and such Dealers may therefore be
deemed an "underwriter" under the Securities Act of 1933, as amended, during
such periods. The Distributor will, from time to time, provide promotional
incentives to Dealers whose representatives have sold or are expected to sell
significant amounts of the Fund or other Vista Funds. These incentives may
include cash payments or attendance at sales seminars or business conferences
sponsored by the Distributor. The Distributor will provide marketing services to
Dealers with whom it has Sales Agreements, consisting of written informational
material relating to sales incentive campaigns sponsored by such Dealers.
There is no sales charge for "Qualified Persons", which are the following (a)
active or retired Trustees, Directors, officers, partners or employees (their
spouses and children under age 21) of (i) the Business Manager, Investment
Adviser, Custodian, Distributor, Transfer Agent or any affiliates or
subsidiaries thereof (the Directors, officers or employees of which shall also
include parents and siblings), (ii) Dealers having an Agreement with the
Distributor, or (iii) trade organizations to which the Business
14
<PAGE>
Manager, Investment Adviser, and Custodian or any affiliates or subsidiaries
thereof belong, and (b) trustees or custodians of any qualified retirement plan
or IRA established for the benefit of a person in (a) above and (c) the Business
Manager, and Investment Adviser or any affiliates or subsidiaries thereof. In
addition, no sales charge will apply to any purchase of Fund shares by an
investor through certain 401(k) Plans sponsored by an institution which has a
custodial relationship with the Fund's Custodian or through a Dealer which
imposes a transaction charge with respect to such purchase.
The Fund reserves the right to cease offering shares for sale at any time or to
reject any order for the purchase of shares and to cease offering any services
it has previously provided.
CUMULATIVE QUANTITY DISCOUNT
Shares of the Fund may be purchased by any person at a reduced sales charge
which is determined by (a) aggregating the dollar amount of the new purchase and
the net asset value of all shares of the Fund and Class A shares of other Vista
Funds, including shares of Vista money market funds, acquired by exchange from
such other Vista Fund, provided such other Vista Fund charged a sales commission
on the shares exchanged and (b) applying the sales charge applicable to such
aggregate. The privilege of the cumulative quantity discount is subject to
modification or discontinuance at any time with respect to all shares purchased
thereafter.
GROUP PURCHASES
An individual who is a member of a qualified group (as hereinafter defined) may
also purchase shares of the Fund at the reduced sales charge applicable to the
group taken as a whole. The reduced sales charge is based upon the aggregate
dollar value of shares previously purchased and still owned by the group plus
the securities currently being purchased and is determined as stated in
"Cumulative Quantity Discount". For example, if members of the group had
previously invested and still held $90,000 of Fund shares and an individual
member of the group is now investing $10,000, the individual's sales charge
would be 3.75%. In order to obtain such discount, the purchaser or Dealer must
provide the Vista Service Center with sufficient information, including the
purchaser's total cost, at the time of purchase to permit verification that the
purchaser qualifies for a cumulative quantity discount, and confirmation of the
order is subject to such verification. Information concerning the current sales
charge applicable to a group may be obtained by contacting the Vista Service
Center.
A "qualified group" is one which (a) has been in existence for more than six
months, (b) has a purpose other than acquiring Fund shares at a discount and (c)
satisfies uniform criteria which enables the Distributor to realize economies of
scale in its costs of distributing shares. A qualified group must have more than
10 members, must be available to arrange for group meetings between
representatives of the Fund and the members, must agree to include sales and
other materials related to the Fund in its publications and mailings
15
<PAGE>
to members at reduced or no cost to the Distributor, and must seek to arrange
for payroll deduction or other bulk transmission of investments of the Fund.
This privilege is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.
STATEMENT OF INTENTION
Investors may also qualify for reduced sales charges by signing a Statement of
Intention (the "Statement"). This enables the investor to aggregate purchases of
the Fund with purchases of Class A shares of any other Vista Fund, including
shares of any Vista money market fund acquired by exchange from such other Vista
Fund, provided such other Vista Fund charged a sales load on the shares
exchanged, during a 13-month period. All shares of the Fund and Class A shares
of other Vista Funds currently owned by the investor will be credited as
purchases (at their current offering prices on the date the Statement is signed)
toward completion of the Statement. The sales charge is based on the total
amount of such purchases during the 13-month period. A 90-day back-dating period
can be used to include earlier purchases at the investor's cost. The 13-month
period would then begin on the date of the first purchase during the 90-day
period. No retroactive adjustment will be made if purchases exceed the amount
indicated in the Statement. A shareholder must notify the Vista Service Center
or Distributor whenever a purchase is being made pursuant to a Statement.
The Statement is not a binding obligation on the investor to purchase the full
amount indicated; however, on the initial purchase, if required (or subsequent
purchases if necessary), up to 4.75% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in shares registered in
the shareholder's name in order to assure payment of the proper sales charge. If
total purchases pursuant to the Statement (less any dispositions and exclusive
of any distributions on such shares automatically reinvested) are less than the
amount specified, the investor will be requested to remit to the Transfer Agent
an amount equal to the difference between the sales charge paid and the sales
charge applicable to the aggregate purchases actually made. If not remitted
within 20 days after written request, an appropriate number of escrowed shares
will be redeemed in order to realize the difference. This privilege is subject
to modification or discontinuance at any time with respect to all shares
purchased thereafter.
HOW TO
REDEEM SHARES
- -------------
Redemption requests may be made in writing directly to Vista Service Center,
P.O. Box 419392, Kansas City, MO 64141-6392. The redemption price of shares of
the Fund will be the net asset value next determined after receipt of all
required documents in good order. "Good order" means that the request must
include the following:
(1) the stock certificate, if issued;
16
<PAGE>
(2) a letter of instruction or stock assignment specifying the number or dollar
value of shares to be redeemed, signed by all owners of the shares in the exact
names in which they appear on the account, or by an authorized officer of a
corporate shareholder including the capacity in which such officer is signing;
(3) a signature guarantee executed by an eligible guarantor institution
including banks, savings associations, credit unions, and member firms of a
domestic stock exchange or the National Association of Securities Dealers, Inc.
You should verify with the institution that it is an eligible guarantor prior to
signing. Notarization by a Notary Public is not an acceptable signature
guarantee; and
(4) other supporting legal documents if required by applicable law in the case
of estates, trusts, guardianships, corporations and pension and profit-sharing
plans.
Although payment of the redemption price (calculated as of the time all required
redemption request documents are received in good order) will ordinarily be made
within seven days after a redemption request is received, payment to investors
redeeming shares which were purchased by check will not be made until the Fund
can verify that the payment for the purchase has been, or will be, collected,
which may take up to fifteen days. The Fund may suspend redemption privileges or
postpone the date of payment:
(1) during any period that trading on the NYSE is restricted as determined by
the Securities and Exchange Commission (the "Commission");
(2) during any period when an emergency exists, as defined by the rules of the
Commission, as a result of which it is not reasonably practicable for the Fund
to dispose of securities owned by it or to determine fairly the value of its
assets; and
(3) for such other periods as the Commission may permit.
If the Directors of the Fund determine that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay the redemption price in whole or part by a
distribution in kind of securities from the portfolio of the Fund in lieu of
cash in conformity with applicable rules of the Commission. Investors would
incur brokerage charges on the sale of portfolio securities so received.
No charge will be made for the redemption of Fund shares tendered directly to
the Vista Service Center but shares tendered for redemption through Dealers, who
are responsible for the prompt transmission of such request, may be subject to a
service charge by such Dealers. The redemption price may be more or less than
the shareholder's cost for the redeemed shares depending on the market value of
the Fund's portfolio securities at the time of redemption.
The payment of redemption requests may be wired or mailed directly to a
previously designated domestic commercial bank account. For the protection of
shareholders, all telephone redemption requests in
17
<PAGE>
excess of $25,000 will be wired directly to such previously designated bank
account. Normally, redemption payments will be transmitted on the next business
day following receipt of the request (provided it is made prior to 4:00 P.M.
Eastern time on any day redemptions may be made). Redemption payments requested
by telephone may not be available in a previously designated bank account for up
to four days. There is a $10 charge for each wire transaction. If no share
certificates have been issued, a wire redemption may be requested by telephone
or wire to the Vista Service Center. Preauthorizations or indemnifications must
be accepted and on file for the acceptance of instructions by telephone to
redeem shares for deposit to designated banks. For telephone redemptions, call
1-800 34-VISTA.
The Fund reserves the right to terminate and distribute to a shareholder, upon
60 days' written notice, the proceeds of any account where the shareholder has
made no additions to the account during the prior twelve months and its value is
less than $500 for reasons other than market action.
SYSTEMATIC REDEMPTION PLAN
A shareholder whose shares are worth at least $10,000 may elect to have regular
monthly or quarterly withdrawals of $100 or more made from his account to be
sent directly to him, to a designated bank account or to another recipient.
Sufficient full and fractional shares will be redeemed to make each payment and
payments will be sent on or about the first of each applicable month.
To establish a systematic withdrawal plan the shareholder's signature must be
guaranteed by an eligible guarantor institution as described above under "How to
Redeem Shares". Shares under such a plan must be on deposit with the Transfer
Agent and not in certificate form.
Withdrawal payments should not be considered as dividends, yield or income. In
addition to fluctuations due to market action, if periodic withdrawals
continuously exceed any reinvested dividends, the shareholder's investment will
be correspondingly reduced. The purchase of additional shares concurrent with
withdrawals is ordinarily disadvantageous to the shareholder because of sales
charges and tax liabilities. The Fund will accept additions to a shareholder
account in which an election has been made to receive systematic withdrawals
only if each such addition is equal to at least one year's scheduled withdrawals
or $1,200, whichever is greater. A shareholder may change the amount of or
terminate the systematic withdrawal at any time without charge or penalty by
written instructions to the Vista Service Center received five business days
prior to the effective date of the change.
REINSTATEMENT PRIVILEGE
Shareholders who redeem their shares have a one-time privilege of reinstating
their investment by investing any portion or all of the proceeds of the
redemption at net asset value without a sales charge in shares of the Fund. To
exercise this
18
<PAGE>
reinstatement privilege, a shareholder must notify the Vista Service Center in
writing within 30 days after such redemption. The reinstatement request must be
accompanied by a check for the amount to be reinstated, which cannot exceed the
redemption proceeds. The reinstatement purchase will be made at the net asset
value per share next determined after receipt of the request for reinstatement.
Any gain realized on the redemption would be subject to federal income tax but
any loss would be disallowed for tax purposes. This privilege is subject to
modification or discontinuance at any time.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
- ---------
Dividends from the Fund's net income and capital gain distributions will be
automatically reinvested in additional shares of the Fund at their net asset
value next determined on the reinvestment date, unless a shareholder elects in
writing to receive either such dividends or distributions, or both, in cash. Any
election with respect to such dividends and distributions may be changed at any
time by written notice from the shareholder to the Vista Service Center and will
be effective for any payment made no sooner than 5 days after receipt of the
notice. Generally, any income dividends will be paid semi- annually and any
capital gain distributions will be paid annually.
The Fund intends to qualify and elect to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code. In any year in which
the Fund so qualifies and distributes at least 90% of its net investment income,
the Fund will not be subject to Federal income tax on that portion of its net
investment income and net realized capital gains distributed to shareholders. A
distribution will be treated as paid during the calendar year if it is declared
by the Fund in December, with a record date in that month, and paid by the Fund
by January 31 of the following year. Such distributions will be taxable to
shareholders in the year the distributions are declared, rather than the year in
which the distributions are received.
Dividends from net investment income and distributions of net realized
short-term capital gains (except to the extent reduced by capital losses of the
shareholder) are taxable at ordinary income rates to shareholders (except
tax-exempt shareholder accounts) whether or not they are reinvested in shares of
the Fund. Shareholders will be notified annually as to the federal tax status of
such payments.
Upon redemption, sale or exchange of shares, a shareholder will realize a
taxable gain or loss depending upon the shareholder's basis in the shares. A
loss realized by a shareholder on the sale of shares of the Fund with respect to
which long-term capital gain distributions have been paid will, to the extent of
such long-term capital gain distributions, be treated as long-term capital loss
if such shares have been held by the shareholder for less than six months.
Certain of the options transactions which may be undertaken by the Fund would
result in "straddles" for federal income tax purposes. The
19
<PAGE>
straddle rules may affect the character of gains (or losses) realized from the
options or underlying securities and results in losses being deferred. In order
to ensure qualification as a regulated investment company, the Fund may have to
limit the amount of its options transactions. Because only a few of the
regulations implementing the straddle rules have been promulgated, the
consequences of straddle transactions to the Fund are not entirely clear.
Federal law requires the Fund to withhold 31% from dividends and/or redemptions
(including exchanges) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply.
Amounts withheld are applied to the shareholder's tax liability and a refund may
be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes.
The foregoing discussion relates only to federal income tax law. Distributions
and dividends from the Fund also may be subject to state and local taxes.
Shareholders should consult their tax advisers with respect to particular
questions of federal, state and local taxation.
SHAREHOLDER
ACCOUNT SERVICES
AND PRIVILEGES
- --------------
Tax-Sheltered Retirement Plans
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Information
about establishing any such plan, including fees, charges and minimum
investments may be obtained from the Vista Service Center.
SYSTEMATIC INVESTMENT PLAN
A shareholder may establish a monthly investment plan to make automatic
investments through drafts automatically drawn on their checking account. With
shareholder authorization and bank approval, the Transfer Agent will forward
systematic investment plan drafts to the bank for the amount specified ($100
minimum). This amount will be automatically invested in shares at the offering
price on the date selected on the Application (or the preceding business day if
such date falls on a weekend or a holiday). The shareholder may change the
amount of the investment or discontinue the plan at any time by writing to the
Vista Service Center.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, shares of the Fund for
Class A shares of the other Vista Funds in accordance with the terms of the then
current prospectus of the Vista Fund being acquired. Under the Exchange
Privilege, shares of the Fund may be exchanged for shares of other Vista funds
only if those Funds are registered in the states where the exchange may legally
be made and if
20
<PAGE>
the account registrations are identical. The prospectus of the Vista Fund into
which shares are being exchanged should be read carefully prior to any exchange
and retained for future reference. Additionally, with respect to exchanges from
the Vista money market funds, shareholders must have acquired their shares in
such money market fund by exchange from the Fund or one of the other Vista Funds
or any exchange directly from one of such money market funds will be done at
relative net asset value plus the appropriate sales charge. Class B shareholders
of other Vista funds who have redeemed Class B shares and paid a contingent
deferred sales charge in connection with such redemption may purchase shares
with no initial sales charge (in an amount not exceeding the redemption
proceeds) if the purchase occurs within 30 days of the redemption of the Class B
shares. Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of any Vista Fund to be acquired are
purchased on the redemption date, but such purchase may be delayed up to five
business days if the Fund determines that it would be disadvantaged by an
immediate transfer of the proceeds. Certain preauthorizations or
indemnifications must be accepted and on file for the acceptance of instructions
by telephone to exchange shares. Further information and telephone exchange
forms are available from the Vista Service Center.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. The Fund reserves the right, without notice,
to revise or terminate the exchange privilege, limit the amount or number of
exchanges or reject any exchange in order to limit excessive exchange activity
or in other circumstances where the Directors or Investment Adviser believes
doing so would be in the best interest of the Fund.
REPORTS
When a shareholder makes an initial investment in the Fund, a shareholder
account is opened in accordance with registration instructions. A shareholder
will receive a confirmation statement showing any current transaction, such as
an additional investment or reinvestment of a dividend or distribution, along
with a summary of the status of the account as of the transaction date, except
that transactions through a Systematic Investment Plan or a Systematic
Redemption Plan will be confirmed by a regular quarterly statement. Shareholders
(except IRA accounts) will receive each January a Form 1099 showing dividends
and capital gain distributions received during the preceding calendar year.
Additionally, shareholders will receive reports at least semi-annually
containing information about the Fund, its operations and a list of the Fund's
investments, and will receive the Fund's annual financial statements audited by
independent public accountants.
21
<PAGE>
GENERAL INFORMATION
- -------------------
All shareholders have one vote per share owned and each Fund share participates
equally in dividends and distributions or, upon liquidation or dissolution, in
the net assets remaining after satisfaction of outstanding liabilities. At the
request of the holders of at least 10% of the shares, the Fund will hold a
meeting at which the board could be removed by a majority vote. There will not
usually be a shareholder meeting in any year except, for example, when the
election of the board is required to be acted upon by shareholders under the
Act.
The Fund has filed with the Commission a Registration Statement under the
Investment Company Act of 1940 and the Securities Act of 1933 with respect to
the shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Fund and such shares, reference is
hereby made to such Registration Statement and exhibits, which may be inspected
at the Commission's office in Washington, D.C. without charge, and copies of
which may be obtained therefrom upon payment of prescribed fees. Statements
contained in this Prospectus as to the contents of any agreements or other
documents are not necessarily complete and in each instance reference is made to
the copy of such agreement or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
22
<PAGE>
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
1-800-34-VISTA
OFFICE OF THE FUND AND
BUSINESS MANAGER
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, D.C. 20005
(202) 842-5665
INVESTMENT ADVISER
Washington Investment Advisers, Inc.
DISTRIBUTOR
Vista Fund Distributors, Inc.
CUSTODIAN
The Chase Manhattan Bank
TRANSFER AGENT
DST Systems, Inc.
INDEPENDENT ACCOUNTANTS
Johnson Lambert & Co.
COUNSEL
Dechert Price & Rhoads
[Vista logo]
THE GROWTH FUND OF WASHINGTON, INC.
Part B
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
As revised September 1, 1996
1101 Vermont Avenue, NW
Washington, D.C. 20005
(202) 842-5665
The Growth Fund of Washington, Inc. (the "Fund") is a diversified, open-end
investment company that seeks long-term capital growth by investing primarily
in securities of companies headquartered or having a major place of business in
Washington, D.C., Maryland or Virginia. This Statement of Additional
Information relating to the Fund is not a prospectus and should be read in
conjunction with the Fund's Prospectus. A copy of the Fund's Prospectus can be
obtained by writing or calling the Secretary of the Fund at the above address.
The date of the Prospectus to which this statement relates is May 1, 1996 as
revised September 1, 1996.
__________________________
Vista Fund Distributors, Inc.
Distributor
Washington Management Corporation
Business Manager
Washington Investment Advisers, Inc.
Investment Adviser
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
CAPTION PAGE
General Information and History 3
Investment Objective and Policies 3
Management of the Fund 8
Directors and Director Compensation 8
Investment Advisory and Other Services 9
Execution of Portfolio Transactions and Brokerage Allocation 12
Purchase, Redemption and Pricing of Securities Being Offered 13
Determination of Net Asset Value 15
Tax Status 15
Investment Results 17
Financial Statements 18
</TABLE>
GENERAL INFORMATION AND HISTORY
The Growth Fund of Washington, Inc. (the "Fund") is a diversified, open-end
investment company that seeks long-term capital growth by investing primarily
in securities of companies headquartered or having a major place of business in
Washington, D.C., Maryland or Virginia. The Fund was incorporated under the
laws of the State of Maryland on May 24, 1985.
Washington Management Corporation, a wholly-owned subsidiary of The
Johnston-Lemon Group, Incorporated ("JLG"), is the Fund's Business Manager.
Washington Investment Advisers, Inc., a wholly-owned subsidiary of JLG, is the
Fund's Investment Adviser. Vista Fund Distributors, Inc., a wholly-owned
subsidiary of The BISYS Group, Inc., is the Distributor of the Fund's shares.
The Investment Adviser believes economic and demographic strengths of the
Washington-Maryland-Virginia area benefit both area businesses and their
shareholders. In the opinion of the Investment Adviser, one measure of such
strengths is the performance of area securities as reflected in the Johnston,
Lemon Index (the "Index"), an unmanaged index of the common stocks of 30
Washington area companies, which is published weekly in THE WASHINGTON POST.
The Fund is not required to invest in stocks in the Index, and may invest a
large portion or all of its assets in stocks not in the Index, so the
performance of the Fund could be better or worse than the performance of the
Index. Past performance of the Index does not predict future performance of
the Index or the Fund. Johnston, Lemon & Co. Incorporated ("Johnston, Lemon"),
a Washington, D.C. based regional brokerage firm and a member of the New York
Stock Exchange, developed the Index. Johnston, Lemon is a wholly-owned
subsidiary of JLG.
Washington Investment Advisers, Inc. has adopted a personal investing policy
based upon Investment Company Institute guidelines. This policy includes: a
ban on acquisitions of securities pursuant to an initial public offering;
restrictions on acquisitions of private placement securities; pre-clearance and
reporting requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the Fund; blackout periods for certain investment personnel; limitations on
service as a director of publicly traded companies; and disclosure of personal
securities transactions.
INVESTMENT OBJECTIVE AND POLICIES
Options
The Fund may, to a limited extent, engage in transactions involving options,
as described in the Prospectus.
Covered Call Options
The Fund may write covered call options on its portfolio securities. The
writing of covered call options by the Fund is subject to limitations imposed
by certain state securities authorities. The Fund has been advised that under
the most restrictive of such limitations currently in effect, no more than 25%
of the Fund's net assets may be subject to covered options. Further, such
options and the securities underlying the call must both be listed on a
national securities exchange.
When the Fund sells an option, an amount equal to the net premium received by
the Fund is included in the liability section of the Fund's Statement of Assets
and Liabilities as a deferred credit. The amount of the deferred credit will be
subsequently marked-to-market to reflect the current market value of the option
written. The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the closing bid and asked price. If
an option expires on its stipulated expiration date or if the Fund enters into
a closing purchase transaction (i.e., the Fund terminates its obligation as
the writer of the option by purchasing a call option on the same security with
the same exercise price and expiration date as the option previously written),
the Fund will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option was sold) and the
deferred credit related to such option will be eliminated. If an option is
exercised, the Fund will realize a long-term or short-term gain or loss from
the sale of the underlying security and the proceeds of the sale will be
increased by the net premium originally received. The writing of covered
options may be deemed to involve the pledge of the securities against which the
option is being written. Securities against which options are written will be
segregated on the books of the Fund's custodian.
Purchasing Put Options
The Fund may purchase exchange traded put options to protect its portfolio
holdings in an underlying security against a substantial decline in market
value. Such hedge protection is provided during the life of the put options
since the Fund, as holder of the put option, is able to sell the underlying
security at the put exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put
options in this manner, the Fund will reduce any profit it might otherwise have
realized on its underlying security by the premium paid for the put option and
by transaction costs.
State Regulations on Options
The Fund will purchase put options and write call options only to the extent
permitted by the policies of state securities authorities in states where
shares of the Fund are qualified for offer and sale. Since certain of these
states do not permit investment in options not listed on national securities
exchanges, the Fund will not purchase such put options unless and until such
restrictions are removed and appropriate changes are made to the prospectus.
Loans of Portfolio Securities
The Fund may lend its portfolio securities provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities,
cash or cash equivalents adjusted daily to have a market value at least equal
to the current market value of the securities loaned; (2) the Fund may at any
time call the loan and regain the securities loaned; (3) the Fund will receive
any interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed one-third of the
total assets of the Fund. In addition, it is anticipated that the Fund may
share with the borrower some of the income received on the collateral for the
loan or that it will be paid a premium for the loan. Before the Fund enters
into a loan, the Fund's Investment Adviser considers all relevant facts and
circumstances including the creditworthiness of the borrower.
Investment Restrictions
The Fund has adopted the following restrictions which, together with its
investment objective, are its fundamental policies. These fundamental policies
cannot be changed without approval of the holders of a majority (as defined in
the Investment Company Act of 1940, the "Act") of the Fund's outstanding
shares. The Act defines "majority" as the lesser of (1) 67% of the Fund's
outstanding shares present at a meeting at which the holders of more than 50%
of the outstanding shares are present in person or by proxy, or (2) more than
50% of the Fund's outstanding shares.
The Fund may not:
(1) borrow money, except for temporary or emergency purposes and not for
investment purposes and then only from banks in an amount not exceeding at the
time of borrowing the lesser of 10% of the Fund's total assets taken at cost or
5% of the market value of the Fund's total assets;
(2) underwrite any securities issued by other persons, except to the extent
that the purchase of portfolio securities and the later disposition thereof may
be deemed to be underwriting;
(3) purchase or sell real estate, but this shall not prevent the Fund from
investing in securities secured by real estate or interests therein;
(4) purchase or sell commodities, commodities contracts or oil, gas or other
mineral exploration or development programs (although it may invest in
companies which own or invest in such interests);
(5) make loans to other persons, except to the extent that the purchase of
debt obligations in accordance with the Fund's investment objectives is
considered the making of loans, and except that the Fund may (i) lend its
portfolio securities and (ii) enter into repurchase agreements;
(6) purchase any securities which would cause 25% or more of the value of its
total assets at the time of such purchase to be invested in the securities of
one or more issuers having their principal business activities in the same
industry, provided that there is no limitation in respect to investments in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities;
(7) issue senior securities except as appropriate to evidence indebtedness
which it is permitted to incur;
(8) with respect to 75% of its assets, invest more than 5% of its total assets
(taken at market value) in the securities of any one issuer;
(9) with respect to 75% of its assets, purchase more than 10% of the voting
securities of any one issuer (except for investments in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities). In
order to comply with current state rules this restriction shall be applicable
to 100% of the Fund's assets, but may be lowered to no less than 75% without
shareholder approval if state rules are changed.
The following restrictions are not fundamental and may be changed by the
Fund without shareholder approval, in compliance with applicable law,
regulation, or regulatory policy. The Fund may not:
(a) make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions;
(b) purchase or sell any put or call options or any combination thereof,
except to the extent described above and in the Prospectus under "Investment
Objective, Policies and Techniques";
(c) purchase any securities subject to legal or contractual restrictions on
the resale thereof, or purchase securities which are not readily marketable, or
enter into repurchase agreements not terminable within seven business days, if
such purchase or entering into a repurchase agreement would cause more than 10%
of the value of its total assets to be invested in such securities and such
repurchase agreements;
(d) purchase securities of any issuer with a record of less than three years
continuous operation, including predecessors, except obligations issued or
guaranteed by the U.S. Government or its agencies, if such purchase would cause
the investments of the Fund in all such issuers to exceed 5% of the value of
its total assets;
(e) invest its assets in securities of other open-end investment companies,
but may invest up to 5% of its assets in closed-end investment companies, and
may (together with other investment companies having the same investment
adviser or controlled by the Fund or such other investment companies) purchase
or acquire up to 10% of the outstanding voting stock of a closed-end fund, and
may acquire securities of other investment companies as part of a merger,
consolidation or acquisition of assets; or
(f) purchase warrants of any issuer if, as a result more than 2% of the value
of its total assets would be invested in warrants which are not listed on the
New York Stock Exchange or the American Stock Exchange, or more than 5% of the
value of its total assets would be invested in warrants whether or not so
listed, such warrants in each case to be valued at market or fair value, but
assigning no value to warrants acquired by the Fund in units with or attached
to debt securities.
(g) pledge, mortgage or hypothecate its assets, (i) except to the extent that
the writing of covered call options may be deemed to involve the pledge of
securities against which the option is being written and (ii) except to secure
borrowings permitted by subparagraph (1) above, it may pledge securities having
a value at the time of pledge not exceeding 15% of the cost of its total
assets.
For the purposes of subparagraphs (1), (6), (c), (d) and (f) "value" shall
mean the value used in determining the Fund's net asset value.
All percentage limitations shall be computed as of the time of making the
investment or taking the action to which the limitation refers. Moreover, any
investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, the restricted activity.
MANAGEMENT OF THE FUND
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Address Position with Principal Occupation(s) during Aggregate Compensation from Registrant during
Fiscal Year ended Total Compensation from
Registrant Past 5 Years# 12/31/95 Registrant and Fund
Complex/3/
Cyrus A. Ansary Director President, Investment Services $2,400 $2,400
1725 K Street, NW Suite 410 International Co.
Washington, DC 20006
*James H. Lemon, Jr./1,2/ Chairman of the Chairman and Chief Executive 0 0
Board Officer, The Johnston-Lemon
Group, Incorporated
*Harry J. Lister/1,2/ Preside President and Director, Washington Management Corporation 0
0
nt and Director
T. Eugene Smith Director President, T. Eugene Smith, Inc. $2,000 $2,000
2830 Graham Road
Suite 200
Falls Church, VA 22042
Leonard P. Steuart II Director Vice President, Steuart Investment Co. $2,600 $2,600
4646 40th Street, NW
Washington, DC 20016
Margita E. White Director President, Association for Maximum Service Television, $2,400
$2,400
1776 Massachusetts Ave., NW Inc.
Suite 310
Washington, DC 20036
</TABLE>
#Positions within the organizations listed may have changed during the period.
* Address is 1101 Vermont Avenue, NW, Washington, DC 20005
/1/ James H. Lemon, Jr. and Harry J. Lister are affiliated with the Business
Manager and, accordingly, receive no remuneration from the Fund.
/2/ Directors who are considered "interested persons" as defined in the Act.
The Fund pays all Directors who are not "interested persons" an attendance fee
of $400 per meeting and $200 for each committee meeting attended. The total
compensation paid by the Fund to such Directors for the fiscal year ended
December 31, 1995 was $9,400. All directors who are not "interested persons"
of the Fund serve on the Contracts, Audit and Nominating Committees. No
officers, directors or employees of the Business Manager or Investment Adviser
receive remuneration directly from the Fund.
/3/ No director serves on any other fund boards in the complex and none have
any pension or retirement benefits from the Fund.
Officers
(with their principal occupations during the past five years)#
* Stephen Hartwell, EXECUTIVE VICE PRESIDENT. Washington Management
Corporation, Chairman
* Howard L. Kitzmiller, SENIOR VICE PRESIDENT, SECRETARY/TREASURER AND CHIEF
FINANCIAL OFFICER. Washington Management Corporation, Senior Vice President,
Secretary, Assistant Treasurer and Director
* Prabha S. Carpenter, VICE PRESIDENT. Washington Investment Advisers, Inc.,
Vice President
* Lois A. Erhard, VICE PRESIDENT. Washington Management Corporation, Vice
President
* J. Lanier Frank, ASSISTANT SECRETARY. Washington Management Corporation,
Assistant Vice President
* Michael W. Stockton, ASSISTANT VICE PRESIDENT AND ASSISTANT TREASURER.
Washington Management Corporation, Assistant Vice President and Assistant
Treasurer
#Positions within the organizations listed may have changed during the period.
* Address is 1101 Vermont Avenue, NW, Washington, DC 20005
Directors of the Fund, acting on behalf of shareholders, direct and coordinate
the Fund's overall policy and have retained the services of the Business
Manager and Investment Adviser to operate the Fund.
As of August 15, 1996 ,all officers and directors as a group owned
beneficially or of record approximately 152,000 shares of the Fund (6.3%).
INVESTMENT ADVISORY AND OTHER SERVICES
As compensation for services rendered to the Fund, the Fund pays the
Investment Adviser a fee, computed daily and paid monthly, of .375% per annum
on the Fund's net assets up to $100,000,000, decreasing to .35% per annum on
the net assets in excess of $100,000,000. The Fund also pays the Business
Manager, as compensation for services rendered to the Fund, a fee computed
daily and paid monthly, of .375% per annum on the Fund's net assets up to
$40,000,000, decreasing to .30% on the next $60,000,000 of net assets and .25%
per annum on net assets in excess of $100,000,000. During the fiscal year ended
December 31, 1995 the Business Manager received a fee of $147,686 and the
Investment Adviser $148,597. During fiscal year ended December 31, 1994, the
Business Manager received $142,311 and the Investment Adviser received
$142,348. Comparable fees for the fiscal year ended December 31, 1993 were
$147,814 and $147,890 respectively.
Subject to the supervision and direction of the Fund's Board of Directors, the
Investment Adviser determines the securities to be bought, sold or held in the
Fund's portfolio, determines the timing and amount of transactions, and places
orders with broker-dealers of its choice. The Business Manager provides the
facilities and services required to carry on the Fund's general administrative
and corporate affairs. Such services include providing executive personnel,
clerical staff, office space and equipment, arranging for and supervising all
shareholder services and federal and state regulatory compliance.
The Business Manager and the Investment Adviser will reimburse the Fund in
equal parts to the extent that the Fund's annual operating expenses, exclusive
of taxes, interest, brokerage commissions or transaction costs, distribution
fees and extraordinary expenses, exceed the applicable expense limitations
imposed by the securities regulations in any state in which its shares are
registered or qualified for sale to the public. Reimbursement will be limited
to the amount of fees otherwise payable to the Investment Adviser and Business
Manager.
The Investment Advisory and Business Management Agreements are subject to
annual approval by (i)the Board of Directors of the Fund or (ii)vote of a
majority (as defined in the Act) of the outstanding voting securities of the
Fund, provided that in either event the continuance is also approved by a
majority of the Directors who are not "interested persons" of the Fund by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory and the Business Management Agreements were last
approved by shareholders at the annual meeting on April 29, 1991. The Board of
Directors, including a majority of the Directors who are not "interested
persons" of the Fund, at a meeting held on February 22, 1996, voted to extend
the Investment Advisory and Business Management Agreements for one year
beginning May 1, 1996 until April 30, 1997. The Investment Advisory and
Business Management Agreements are each terminable without penalty on not less
than 60 days' notice by the Board of Directors of the Fund or by vote of the
holders of a majority of the Fund's shares. Each will terminate automatically
in the event of their assignment.
The Chase Manhattan Bank, N.A. (the "Custodian"), 1211 Avenue of the Americas,
New York, NY 10036, serves as the Fund's custodian. As Custodian, it maintains
custody of Fund assets, settles portfolio purchases and sales, collects
portfolio income, maintains general ledger and capital stock accounts and
investment ledgers, prepares daily trial balances and calculates net asset
values. DST Systems, Inc. (the "Transfer Agent"), located at 210 W. 10th
Street, Kansas City, MO 64105 serves as the Fund's transfer agent. The
Transfer Agent maintains the Fund's official record of shareholders and, as
dividend agent, it is responsible for crediting dividends to shareholders
accounts.
Johnson Lambert & Co., independent certified public accountants, located at
7500 Old Georgetown Road, Bethesda, Maryland 20814, have been selected as
auditors for the Fund. In such capacity, Johnson Lambert & Co. conducts an
annual audit of the Fund, meets with the Fund's Audit Committee and management
at least annually, reviews filings, such as Form N-SAR and registration
statement amendments, prepares tax returns, and reviews the Fund's annual and
semi-annual reports.
Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") under which the Fund
will pay to the Distributor a monthly fee at a maximum annual rate of .25 of 1%
of the Fund's net assets. Payments under the Plan will be made to the
Distributor to finance activity which is primarily intended to result in the
sale and retention of Fund shares including, but not limited to, advertising,
salaries and other expenses of the Distributor relating to selling or servicing
efforts, expenses of organizing and conducting sales seminars, printing of
Prospectuses and reports for other than existing shareholders, preparation and
distribution of advertising material and sales literature and payments to
dealers whose customers purchase Fund shares.
The Plan, together with a distribution agreement with the Distributor, was
approved by the Directors including a majority of the Directors who are not
"interested persons", as defined in the Act, who have no direct or indirect
financial interest in the operation of the Plan or the Distribution Agreement
("Plan Directors"). While the Plan is in effect, the selection and nomination
of Directors who are not "interested persons" shall be committed to the
discretion of Plan Directors. The Plan was approved by shareholders at the
annual meeting on August 28, 1986. Renewal of the Plan must be considered by
the Board of Directors annually after their review of information and
consideration of all pertinent factors with respect to the Plan at a meeting
called for that purpose. In considering whether to continue the Plan and any
agreement related to it, the Directors have a duty to request and evaluate, and
the Distributor has a duty to furnish, such information as the Directors deem
reasonably necessary for them to reach an informed determination. Each year
that the Plan remains in effect the Distributor will prepare and furnish to the
Directors at least quarterly, and the Directors will review, a written report
of the amounts expended under the Plan and the purpose for which expenditures
were made.
All material amendments to the Plan must be approved by a vote of the
Directors, including a majority of the Plan Directors, at a meeting called for
that purpose. The Plan may not be amended to increase materially the amount to
be spent for distribution without shareholder approval. The Plan may be
terminated without penalty at any time by a vote of a majority of the Plan
Directors or a majority of the outstanding shares of the Fund. Any agreement
under the Plan may be terminated upon 60 days' written notice and will
terminate automatically in the event of its assignment.
The total amount paid to the Distributor under the Plan for the fiscal year
ended December 31, 1995 was $86,317. Those amounts were expended as follows
and such expenditures were reviewed quarterly by the Fund's Board of Directors:
Service Fees to Dealers $52,785
Distributor's Selling and
Servicing Expenses $33,532
All officers of the Fund and two of its Directors, who are "interested
persons" of the Fund, are officers or directors of Washington Management
Corporation or Washington Investment Advisers, Inc., wholly-owned subsidiaries
of JLG. Johnston, Lemon, also a subsidiary of JLG, participates in receiving
dealer service fee payments from the Plan. Some of the Fund's officers and two
Directors who are "interested persons" of the Fund are also registered
representatives with Johnston, Lemon and, as such, to the extent they have sold
shares of the Fund, receive a portion of the service fee payments in the same
manner as all other Johnston, Lemon registered representatives.
During the fiscal year ended December 31, 1995, the Fund's Distributor, Vista
Fund Distributors, Inc. ("VFD") (formerly called Vista Broker-Dealer Services,
Inc.), received $13,631 (after allowance to dealers), as its portion of sales
charges paid by purchasers of the Fund's shares. Additionally, VFD received
$86,317 from the Fund's Distribution Plan. Johnston, Lemon received $33,828 in
commissions from sales and $33,015 in dealer service fees from VFD in
accordance with the terms of VFD's Selling Group Agreement. All of the
officers of the Fund and two of its directors are officers of or associated
with JLG.
Brokerage commissions paid on portfolio transactions for the fiscal years
ended December 31, 1995, 1994, and 1993 amounted to $31,032, $22,026 and
$10,940, respectively. Differences in commission amounts reflect essentially
differences in aggregate dollar amount of the portfolio transactions. During
fiscal years ended December 31, 1995, 1994, and 1993 Johnston, Lemon received
$1,096, $3,755 and $1,510, respectively, in commissions for executing portfolio
transactions for the Fund.
EXECUTION OF PORTFOLIO TRANSACTIONS
AND BROKERAGE ALLOCATION
Orders for the Fund's portfolio securities transactions are placed by the
Investment Adviser. The objective of the Fund is to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. There is no agreement or commitment to place orders
with any broker-dealer. In transactions executed in the over-the-counter
market, purchases and sales are transacted directly with principal
market-makers except in those circumstances where, in the opinion of the
Investment Adviser, better prices and executions are available elsewhere.
Subject to the requirement of seeking the best available prices and
executions, the Investment Adviser may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and execution, give
preference to broker-dealers which have provided research, statistical, and
other related services to the Investment Adviser for the benefit of the Fund
if, in its judgment, the Fund will obtain prices and executions comparable with
those available from other qualified firms. The Investment Adviser is of the
opinion that while such research and related services are useful in varying
degrees, they are of indeterminable value and do not reduce the expenses of the
Investment Adviser.
The Directors of the Fund have adopted a policy which permits the Investment
Adviser, subject to the objective of obtaining the best price and execution, to
consider a broker-dealer's sale of Fund shares as a factor in selecting from
among broker-dealers qualified to offer comparable prices and execution of
portfolio transactions. This policy does not imply a commitment by the Fund to
execute portfolio transactions through all broker-dealers which sell shares of
the Fund. The Investment Adviser will periodically report to the Directors to
enable them to assure themselves that the best execution objective continues to
be paramount in selection of executing broker-dealers.
The Fund's Board of Directors has determined that the Fund may effect
portfolio transactions through Johnston, Lemon (i) if, in the Investment
Adviser's judgment, the use of Johnston, Lemon is likely to result in prices
and executions at least as favorable as those of other qualified
broker-dealers, (ii) if, in the transaction, the commission, fee or other
remuneration to be received by Johnston, Lemon is consistent with those charged
by Johnston, Lemon to comparable unaffiliated customers in similar transactions
and (iii) if such commission, fee or other remuneration is reasonable and fair
compared to the commission, fee or other remuneration received by other
broker-dealers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. The Fund's Board of Directors, including a majority of those Directors
who are not "interested persons" of the Fund, have adopted procedures which are
reasonably designed to provide that any commission, fee or other remuneration
received by Johnston, Lemon is consistent with these standards. Johnston,
Lemon will not participate in commissions from brokerage given by the Fund to
other brokers or dealers. Over-the-counter purchases and sales are transacted
directly with principal market makers except in those cases in which better
prices and executions may be obtained elsewhere. The Fund will in no event
effect principal transactions with Johnston, Lemon, even in securities in which
Johnston, Lemon makes a market.
The Fund does not consider that it has an obligation to obtain the lowest
available commission rate to the exclusion of price, service and qualitative
considerations. Nevertheless, the personnel of the Investment Adviser are
authorized to negotiate payment only for brokerage services rendered and not
for research, statistical or other services. The Fund does not authorize the
payment of commissions to broker-dealers in excess of commissions other
qualified broker-dealers would have charged for handling comparable
transactions in recognition of their having provided research, statistical, or
other related services, or of their having sold Fund shares.
PURCHASE, REDEMPTION AND
PRICING OF SECURITIES BEING OFFERED
How to Purchase Shares
Vista Fund Distributors, Inc., is the Distributor of the Fund shares. The
information pertaining to the purchase and redemption of the Fund's shares
appearing in the Prospectus under the caption "HOW TO PURCHASE SHARES" is
hereby incorporated by reference.
The Fund's shares may be purchased at their net asset value next computed
after receipt of an order, plus a sales charge (the "Offering Price"), through
broker-dealers who have current sales agreements with the Distributor. In the
alternative, once an account has been established and the selling broker-dealer
has been recorded, additional Fund shares may be purchased by wire or by
sending a check payable to The Growth Fund of Washington, Inc. with the
shareholder's Fund account number indicated on the check, to:
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
The "Invest by Mail" stub which accompanies each Fund confirmation statement
should be included with any purchase order. The Fund will send each
shareholder a statement confirming the number of shares purchased.
Purchases may also be made by automatic investment plan whereby your bank
account is debited at specified amounts and intervals or by telephone if
certain preauthorization and indemnification is made (see items 5, 6, 8 and 10
of the Account Application in the Fund's Prospectus).
A minimum initial investment of $2,500 ($1,000 for a regular or SEP IRA
account and $250 for a spousal IRA) is required to open a shareholder account
and each subsequent investment must be $100 or more.
Fund shares may be purchased in full and fractional shares calculated to three
decimal places and acquired through a broker-dealer or the transfer agent. No
stock certificate will be issued unless a shareholder makes a written request
therefor to the Transfer Agent at the above address, in which case a
certificate will be provided at no cost to the shareholder. No certificates
will be issued for fractional shares.
How to Redeem Shares
The information pertaining to redemption of the Fund's shares appearing in the
Prospectus under the caption "HOW TO REDEEM SHARES" is hereby incorporated by
reference.
Shares tendered for redemption to Vista Service Center at the address given
above under "How to Purchase Shares" are redeemed without charge but shares
tendered for redemption through Dealers may be subject to a service charge by
such Dealers. The redemption price may be more or less than the shareholder's
cost for the redeemed shares depending on the market value of the Fund's
portfolio securities at the time of redemption.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of trading
on the New York Stock Exchange (the "NYSE") (currently 4:00 p.m. New York time
for stocks and 4:15 p.m. for options) on each day, Monday through Friday, on
which the NYSE is open for trading. The Fund is not required to determine its
net asset value per share on days when changes in the value of its portfolio
securities will not affect such value or on days during which no orders to
purchase or sell Fund shares are received. Net asset value per share is
computed by dividing the value of the Fund's total assets less liabilities by
the total number of shares outstanding. The Fund's expenses and fees are
accrued daily and taken into account in determining the net asset value.
TAX STATUS
The Fund intends to qualify and elect to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code ("Code").
Qualification and election to be taxed as a regulated investment company
involves no supervision or management by any government agency. To qualify as
a regulated investment company the Fund must distribute to shareholders at
least 90% of its net investment income, and meet certain diversification of
assets, source of income, and other requirements of the Code. By so doing, the
Fund will not be subject to income tax on that portion of its net investment
income and net realized capital gains distributed to shareholders. If the Fund
does not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its dividends and distributions will be taxable to shareholders
as ordinary income dividends regardless of whether such distributions were
derived from the Fund's net long-term capital gains.
The Fund will be subject to a non-deductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax the Fund must distribute during each calendar
year (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) at least 98% of its capital
gains in excess of its capital losses for the twelve-month period ending on
October 31 of the calendar year, and (3) all ordinary income and capital gains
for previous years that were not distributed during such years. To avoid
application of the excise tax, the Fund intends, to the extent practicable, to
make its distributions in accordance with the calendar year distribution
requirement. A distribution will be treated as paid during the calendar year
if it is declared by the Fund in December, with a record date in that month,
and paid by the Fund by January 31 of the following year. Such distributions
will be taxable to shareholders in the year the distributions are declared,
rather than the year in which the distributions are received.
Dividends from net investment income and net short-term capital gain
distributions are taxable to shareholders as ordinary income. To the extent
determined each year, such dividends are eligible for the dividends received
deduction available to corporations.
Distributions of net long-term capital gains are taxable to shareholders as
long-term capital gains, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss by a shareholder on the sale of shares of the Fund with
respect to which long-term capital gain distributions have been paid will, to
the extent of such long-term capital gain distributions, be treated as
long-term capital loss if such shares have been held by the shareholder for
less than one year.
All dividends and distributions are taxable to the shareholder whether
reinvested in additional shares or received in cash. Shareholders receiving
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share equal to the net asset value of a
share of the Fund on the reinvestment date. Shareholders will be notified
annually as to the federal tax status of such payments.
Distributions and dividends by the Fund reduce the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, it nevertheless would be taxable to the shareholder
as ordinary income or capital gains as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Therefore,
those purchasing Fund shares just prior to a distribution will receive a return
of capital upon the ensuing distribution which will nevertheless be taxable to
them.
Upon redemption, sale or exchange of his shares, a shareholder will realize a
taxable gain or loss depending upon his cost basis in his shares. Such gain or
loss will be treated as capital gain or loss if the shares are capital assets
in the shareholder's hands. Such gain or loss will be long-term or short-term
depending on the shareholder's holding period for the shares.
A gain realized on a redemption will not be affected by exercise of the
reinstatement privilege. A loss realized on a redemption, however, will be
disallowed to the extent the shares redeemed are replaced pursuant to exercise
of the reinstatement privilege. In such case, the basis of the shares acquired
pursuant to the exercise of the reinstatement privilege will be adjusted to
reflect the disallowed loss.
Certain of the options transactions that may be undertaken by the Fund would
result in "straddles" for federal income tax purposes. Without regard to
the straddle rules, any gains (or losses) on the options are generally
considered short-term capital gains (or losses) for federal income tax
purposes. The straddle rules, however, may affect the character of gains (or
losses) realized. The options transactions may also result in short sales
which could eliminate the holding period of the underlying securities for
purposes of the 30% limit on gains from securities held for less than three
months which applies to regulated investment companies. As a result, the Fund
may be restricted by the 30% limit in the amount of options transactions it may
undertake. In addition, losses realized by the Fund on either options or the
underlying securities may be deferred under the straddle rules, rather than
being taken into account in calculating the taxable income for the taxable year
in which the losses are realized. Because only a few of the regulations
implementing the straddle rules have been promulgated, the consequences of
straddle transactions to the Fund are not entirely clear.
The Fund is required to report to the Internal Revenue Service all dividends
and distributions as well as gross proceeds from the redemption of Fund shares,
except in the case of certain exempt shareholders. All dividends and proceeds
will be subject to withholding of federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if (1) the shareholder
fails to furnish the Fund with the shareholder's correct taxpayer
identification number or social security number, (2) the Internal Revenue
Service notifies the Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he is not subject to backup withholding. If the withholding provisions
are applicable, any such dividends or proceeds, whether reinvested in
additional shares or taken in cash, will be reduced by the amounts required to
be withheld.
The foregoing discussion relates only to federal income tax law as applicable
to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Distributions and dividends
by the Fund also may be subject to state and local taxes, and their treatment
under state and local income tax laws may differ from federal income tax
treatment. Shareholders should consult their tax advisers with respect to
particular questions of federal, state and local taxation. Shareholders who
are not U.S. persons should consult their tax advisers regarding U.S. and
foreign tax consequences of ownership of shares of the Fund, including the
likelihood that dividends to them would be subject to withholding of U.S. tax.
INVESTMENT RESULTS
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. From time to time, the performance and yield
of the Fund may be quoted and compared to those of other mutual funds with
similar investment objectives, unmanaged investment accounts, including savings
accounts, or other similar products and to stock or other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Fund may be compared to data prepared by CDA/Wiesenberger,
Ibbotson Associates, Lipper Analytical Services and Morningstar, Inc.
Performance and yield data as reported in national financial publications
including, but not limited to, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL
STREET JOURNAL and THE NEW YORK TIMES, or in local or regional publications,
may also be used in comparing the performance and yield of the Fund.
Additionally, the Fund may, with proper authorization, reprint articles written
about the Fund and provide them to prospective shareholders.
Quotations of total return for the Fund will be expressed in terms of the
annual compound rate of return of a hypothetical investment in the Fund over
periods of 1 year, five years and 10 years, calculated pursuant to the
following formula required by the Securities and Exchange Commission: P(1 +
T)/n/ = ERV (where P = a hypothetical initial payment of $1,000, T = the
average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period.
The Fund's average annual compound rates of return for the 1, 5 and 10 year
periods, ending December 31, 1995 were +37.44%, +15.84% and +10.60%
respectively. These figures assume deduction of the maximum sales charge of
4.75% from the investment at the beginning of each period and assume that all
dividends and distributions are reinvested at net asset value on the
reinvestment date. (Sales charges are reduced under certain circumstances as
described in the Prospectus under "How to Purchase Shares", but these
reductions are not reflected in the quoted return figures above.) The average
annual compound rates of return for the same periods without assuming deduction
of a sales charge would be 44.25%, +16.97% and +11.14%, respectively.
The Fund's investment results will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses, so that total return should not be considered representative of what
an investment in the Fund may earn in any future period. These factors and
possible differences in the methods used in calculating performance should be
considered when comparing the Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged
indices. The Fund's results also should be considered relative to the risks
associated with its investment objective and policies.
FINANCIAL STATEMENTS
The Investment Portfolio, Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Notes to Financial Statements,
and Report of Independent Accountants contained in the Attached Annual Report
dated December 31, 1995, are hereby incorporated by reference into this
statement of additional information.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Prospectus - Part A
Selected Per Share Data and Ratios
Incorporated by reference to the Registrant's Annual Report - Part B
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Report of Independent Accountants
(b) Exhibits:
1. On file (see SEC files nos. 811-4309 and 2-97999)
2. On file (see SEC files nos. 811-4309 and 2-97999)
3. None
4. On file (see SEC files nos. 811-4309 and 2-97999)
5. On file (see SEC files nos. 811-4309 and 2-97999)
6. On file (see SEC files nos. 811-4309 and 2-97999)
7. None
8. On file (see SEC files nos. 811-4309 and 2-97999)
9. On file (see SEC files nos. 811-4309 and 2-97999)
10. On file (see SEC files nos. 811-4309 and 2-97999)
11. On file (see SEC files nos. 811-4309 and 2-97999)
12. None
13. On file (see SEC files nos. 811-4309 and 2-97999)
14. On file (see SEC files nos. 811-4309 and 2-97999)
15. On file (see SEC files nos. 811-4309 and 2-97999)
16. Schedule for computation of each performance quotation provided
in the Registration Statement in response to item 22.
17. Financial Data Schedule
Item 25. Persons Controlled by or under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
As of August 1, 1996
Number of
Title of Class
Record-Holders
Capital Stock
3,080
($.01 par value)
Item 27. Indemnification.
Article VI, paragraph (3) of the Registrant's Articles of Incorporation
provides as follows:
(3) Each director and each officer of the Corporation shall be indemnified by
the Corporation to the full extent permitted by the general laws of the State
of Maryland, subject to the requirements of the 1940 Act.
Article XII of Registrant's By-Laws provides as follows:
ARTICLE XII
Indemnification of Directors, Officers, and Employees
The Corporation shall indemnify to the full extent authorized by law any
person made or threatened to be made a party to any action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, is or was a director, officer, or employee of the Corporation or
serves or served any other enterprise as a director, officer, or employee at
the request of the Corporation, except that such indemnity shall not protect
any such person against any liability to the Corporation or any stockholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
Section 2-418 of the Maryland General Corporation Law provides as follows:
<UNDEF> 2-418. Indemnification of directors, officers, employees and agents.
(a) Definitions. -- In this section the following words have the meanings
indicated.
(1) "Director" means any person who is or was a director of a corporation
and any person who, while a director of a corporation, is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the officer or a director in the
corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any other foreign or
domestic corporation or any partnership, joint venture, other enterprise, or
employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened pending or contemplated action, suit or
proceeding, whether civil, criminal, administrative, or investigative.
(b) Permitted indemnification of director.
(1) A Corporation may indemnify any director made a party to any proceeding
by reason of service in that capacity if the director:
(i) Acted in good faith;
(ii) Reasonably believed:
1. In the case of conduct in the director's official capacity with the
corporation, that the conduct was in the best interests of the corporation; and
2. In all other cases, that the conduct was at least not opposed to the
best interests of the corporation; and
(iii) In the case of any criminal proceeding, had no reasonable cause to
believe that the conduct was unlawful.
(2)(i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may be made only against reasonable expenses and
may not be made in respect of any proceeding in which the director shall have
been adjudged to be liable to the corporation.
(3) The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent creates a
rebuttable presumption that the director did not meet the requisite standard of
conduct set forth in this subsection.
(c) No indemnification of director liable for improper personal benefit. -- A
director may not be indemnified under subsection (b) of this section in respect
of any proceeding charging improper personal benefit to the director, whether
or not involving action in the director's official capacity, in which the
director was adjudged to be liable on the basis that personal benefit was
improperly received.
(d) Required indemnification against expenses incurred in successful defense.
- -- Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (b) of this section shall
be indemnified against reasonable expenses incurred by the director in
connection with the proceeding.
(2) A court of appropriate jurisdiction, upon application of a director and
such notice as the court shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled to reimbursement under paragraph
(1) of this subsection, the court shall order indemnification, in which case
the director shall be entitled to recover the expenses of securing such
reimbursement; or
(ii) If it determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
director has met the standards of conduct set forth in subsection (b) of this
section or has been adjudged liable under the circumstances described in
subsection (c) of this section, the court may order such indemnification as the
court shall deem proper. However, indemnification with respect to any
proceeding by or in the right of the corporation or in which liability shall
have been adjudged in the circumstances described in subsection (c) shall be
limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in which the
proceeding involving the director's liability took place.
(e) Determination that indemnification is proper.
(1) Indemnification under subsection (b) of this section may not be made by
the corporation unless authorized in the specific case after a determination
has been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set forth in
subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum consisting of
directors not, at the time, parties to the proceeding, or, if such a quorum
cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a majority vote
of the full board in which the designated directors who are parties may
participate;
(ii) By special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full board cannot be obtained
therefor and the committee cannot be established, by a majority vote of the
full board in which directors who are parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
(4) Shares held by directors who are parties to the proceeding may not be
voted on the subject matter under this subsection.
(f) Payment of expenses in advance of final disposition of action.
(1) Reasonable expenses incurred by a director who is a party to a proceeding
may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding, after a determination that the facts then known
to those making the determination would not preclude indemnification under this
section, upon receipt by the corporation of:
(i) A written affirmation by the director of the director's good faith belief
that the standard of conduct necessary for indemnification by the corporation
as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to repay the
amount if it shall ultimately be determined that the standard of conduct has
not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1) of this
subsection shall be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make the repayment.
(3) Determinations and authorizations of payments under this subsection shall
be in the manner specified in subsection (e) of this section.
(g) Validity of indemnification provision. -- A provision for the corporation
to indemnify a director who is made a party to a proceeding, whether contained
in the charter, the bylaws, a resolution of stockholders or directors, an
agreement or otherwise, except as
contemplated by subsection (k) of this section, is not valid unless consistent
with this section or, to the extent that indemnity under this section is
limited by the charter, consistent with the charter.
(h) Reimbursement of director's expenses incurred while appearing as witness.
- -- This section does not limit the corporation's power to pay or reimburse
expenses incurred by a director in connection with an appearance as a witness
in a proceeding at a time when the director has not been made a named defendant
or respondent in the proceeding.
(i) Director's service to employee benefit plan. -- For purposes of this
section:
(1) The corporation shall be deemed to have requested a director to serve an
employee benefit plan where the performance of the director's duties to the
corporation also imposes duties on, or otherwise involves services by, the
director to the plan or participants or beneficiaries of the plan;
(2) Excise taxes assessed on a director with respect to an employee benefit
plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an employee
benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
(j) Officer, employee or agent. -- Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to the extent
provided in subsection (d) of this section for a director and shall be
entitled, to the same extent as a director, to seek indemnification pursuant to
the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer, employee,
or agent of the corporation to the same extent that it may indemnify directors
under this section; and
(3) A corporation, in addition, may indemnify and advance expenses to an
officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors, or contract.
(k) Insurance. -- A corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position, whether or not
the corporation would have the power to indemnify against liability under the
provisions of this section.
(l) Report of indemnification to stockholders. -- Any indemnification of, or
advance of expenses to, a director in accordance with this section, if arising
out of a proceeding by or in the right of the corporation, shall be reported in
writing to the stockholders with the notice of the next stockholders' meeting
or prior to the meeting. (1981, ch. 737.)
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer of controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Reference is also made to the Distribution Agreement and Underwriting
Agreement previously filed with the Commission.
Item 28. Business and Other Connections of Investment Adviser
For information concerning Washington Investment Advisers, Inc., see
"Management of the Fund" in Part B of the Prospectus. Set forth below is a list
of each officer and director of Washington Investment Advisers, Inc. indicating
each business, profession, vocation or employment of a substantial nature in
which each such person has been engaged since January, 1994 for his own account
or in the capacity of director, trustee, officer, partner or employee. All
addresses are Washington Investment Advisers, Inc., 1101 Vermont Avenue, N.W.,
Washington, D.C. 20005.
<TABLE>
<CAPTION>
Name Position with Washington Investment Advisers, Inc. Principal Occupation or Other Employment of a Substantial
Nature During Past Two Years
<S> <C> <C>
Prabha S. Carpenter Vice President and Portfolio Manager Vice President, The Growth Fund of Washington, Inc.
Stephen Hartwell President and Director Chairman of the Board, Washington Management Corporation
Howard L. Kitzmiller Secretary and Treasurer Senior Vice President, Secretary, Assistant Treasurer, and Director, Washington
Management Corporation
James H. Lemon, Jr. Director Chairman and Chief Executive Officer of The Johnston-Lemon Group, Incorporated
Harry J. Lister Chairman of the Board President and Director, Washington Management Corporation
Michael W. Stockton Asst. Vice President, Assistant Secretary and Assistant Treasurer Assistant Vice President and Assistant
Treasurer, Washington Management Corporation
</TABLE>
____________
* For information with respect to other substantial business, profession,
vocation or employment of the above directors and officers, see "Management of
the Fund" in Part B of the Prospectus which is incorporated herein by
reference.
ITEM 29. Principal Underwriters
(a) Vista Fund Distributors, Inc., formerly called Vista Broker-Dealer
Services, Inc., a wholly-owned subsidiary of The BISYS Group, Inc., is the
underwriter for the Registrant.
(b) The following are the Directors and officers of Vista Fund Distributors,
Inc., a wholly-owned subsidiary of The BISYS Group, Inc..
<TABLE>
<CAPTION>
Name Position and Offices with Position and Offices with
Distributor the Registrant
<S> <C> <C> <C>
* Lynn J. Mangum Chairman None
* Robert J. McMullan Director & Exec. Vice None
President
Lee W. Schultheis President None
101 Park Avenue, 16th Fl
New York, NY 10178
# George O. Martinez Senior Vice President None
Irimga McKay Vice President None
1230 Columbia Street
5th Floor, Suite 500
San Diego, CA 92101
# Michael Burns Vice President / Compliance None
William Blundin Vice President None
125 West 55th Avenue
11th Floor
New York, NY 10019
* Dennis Sheehan Vice President None
* Annamaria Porcaro Assistant Secretary None
# Robert Tuch Assistant Secretary None
# Stephen Mintos Executive Vice President/ None
COO
# Dale Smith Vice President / CFO None
# William J. Tomko Vice President None
</TABLE>
* Address is 150 Clove Street, Little Falls, NJ 07424
# Address is 3435 Stelzer Road, Columbus, OH 43219
(c) None
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in part,
at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
Name Address
<S> <C>
Vista Fund Distributors, Inc., a wholly-owned subsidiary of The BISYS Group, Inc. 3435 Stelzer Road
Columbus, OH 43219
DST Systems, Inc. (transfer agent) 210 W. 10th Street
Kansas City, MO 64105
The Chase Manhattan Bank, N.A. (custodian) 1211 Avenue of the Americas
New York, NY 10036
Washington Management Corporation (business manager) 1101 Vermont Ave., NW
Washington, DC 20005
Washington Investment Advisers, Inc. (investment adviser) 1101 Vermont Ave., NW
Washington, DC 20005
</TABLE>
ITEM 31. Management Services
Not applicable
ITEM 32. Undertakings
(c) As reflected in the Prospectus, the Fund undertakes to provide each person
to whom a prospectus is delivered with a copy of the Fund's latest annual
report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
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 Washington, District of Columbia, on the 26th day of August, 1996.
Counsel reports that the amendment does not contain disclosures that would make
the amendment ineligible for effectiveness under the provisions of Rule 485(b).
THE GROWTH FUND OF WASHINGTON, INC.
By Harry J. Lister, President
Pursuant to the requirement of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on August 26, 1996 by the
following persons in the capacities indicated.
SIGNATURE TITLE
(1) Principal Executive Officer:
Harry J. Lister President
(2) Principal Financial Officer and
Principal Accounting Officer:
Howard L. Kitzmiller Senior Vice President,
Secretary, Treasurer and Chief Financial Officer
(3) Directors
James H. Lemon* Chairman of the Board
Cyrus A. Ansary* Director
Harry J. Lister Director
T. Eugene Smith* Director
Leonard P. Steuart II* Director
Margita E. White* Director
* By Howard L. Kitzmiller, Attorney-in-fact
POWER OF ATTORNEY
The undersigned directors of The Growth Fund of Washington, Inc., a Maryland
Corporation, do hereby constitute and appoint Stephen Hartwell, Harry J. Lister
and Howard L. Kitzmiller, or any of them to act as attorneys-in-fact for and in
his or her name, place and stead (1) to sign his or her name as a director of
said Corporation to any and all amendments to the Registration Statement of The
Growth Fund of Washington, Inc., File No. 2-97999 under the Securities Act of
1933 as amended, said amendments to be filed with the Securities and Exchange
Commission, and to any and all reports, applications or renewal of applications
required by any State in the United States of America in which this Corporation
is registered to sell shares, and (2) to deliver any and all such amendments to
such Registration Statement, so signed, for filing with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933 as
amended, granting to said attorneys-in-fact, and each of them, full power and
authority to do and perform every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 22nd day of February, 1996.
The Growth Fund of Washington, Inc.
Cyrus A. Ansary T. Eugene Smith
James H. Lemon, Jr. Leonard P. Steuart II
Harry J. Lister Margita E. White
EXHIBIT 16 - SCHEDULE OF CALCULATIONS FOR PERFORMANCE CALCULATIONS
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the year ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 0 $ 0 $ 1,000 $ 953 0 $ 0 $ 953
1995 10 10 1,010 1,300 63 11 1,374
</TABLE>
*Includes maximum sales charge of 4.75%.
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the 5 years ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1990 $ 0 $ 0 $ 1,000 $ 952 0 $ 0 $ 952
1991 16 16 1,016 1,107 81 16 1,204
1992 13 28 1,028 1,270 114 33 1,417
1993 14 42 1,042 1,378 167 49 1,594
1994 19 61 1,061 1,194 191 61 1,446
1995 15 76 1,076 1,632 355 99 2,086
</TABLE>
*Includes maximum sales charge of 4.75%.
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the 10 years ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 0 $ 0 $ 1,000 $ 952 0 $ 0 $ 952
1986 7 7 1,007 1,038 43 6 1,087
1987 24 30 1,030 1,001 105 27 1,133
1988 21 51 1,051 1,141 135 53 1,329
1989 31 82 1,082 1,245 201 88 1,534
1990 30 112 1,112 991 161 99 1,251
1991 21 133 1,133 1,152 293 136 1,581
1992 17 149 1,149 1,323 364 174 1,861
1993 18 167 1,167 1,436 451 207 2,094
1994 25 192 1,192 1,244 452 203 1,899
1995 20 212 1,212 1,698 742 299 2,739
</TABLE>
*Includes maximum sales charge of 4.75%.
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the year ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 0 $ 0 $ 1,000 $ 1,000 0 $ 0 $ 1,000
1995 11 11 1,011 1,366 66 11 1,443
</TABLE>
*At Net Asset Value
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the 5 years ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1990 $ 0 $ 0 $ 1,000 $ 1,000 0 $ 0 $ 1,000
1991 17 17 1,017 1,162 85 17 1,264
1992 13 30 1,030 1,334 120 34 1,488
1993 14 44 1,044 1,448 175 51 1,674
1994 20 64 1,064 1,254 200 64 1,518
1995 16 80 1,080 1,713 373 104 2,190
</TABLE>
*At Net Asset Value.
ILLUSTRATION OF A $1,000 INVESTMENT IN THE GROWTH FUND OF WASHINGTON, INC.
WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the 10 years ended December 31, 1995)*
<TABLE>
<CAPTION>
COST OF SHARES VALUE
OF SHARES
Fiscal Annual Total From From From Total
Year End Dividends Dividends Investment Initial Capital Gains Dividends Value
12/31 (cumulative) Cost Investment Reinvested Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 0 $ 0 $ 1,000 $ 1,000 0 $ 0 $ 1,000
1986 7 7 1,007 1,090 45 7 1,142
1987 25 32 1,032 1,051 110 29 1,190
1988 22 54 1,054 1,198 141 56 1,395
1989 32 86 1,086 1,307 211 93 1,611
1990 32 118 1,118 1,041 169 103 1,313
1991 22 139 1,139 1,210 307 143 1,660
1992 18 157 1,157 1,388 383 183 1,954
1993 19 175 1,175 1,507 474 217 2,198
1994 26 201 1,201 1,307 474 213 1,994
1995 21 222 1,222 1,783 779 314 2,876
</TABLE>
*At Net Asset Value.
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEEMABLE VALUE
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) INITIAL INVESTMENTdivided by
PUBLIC OFFERING PRICE FOR ONE SHARE
AT BEGINNING OF PERIODequals
NUMBER OF SHARES INITIALLY PURCHASED
(B) NUMBER OF SHARES INITIALLY PURCHASEDplus
NUMBER OF SHARES ACQUIRED AT NET ASSET
VALUE THROUGH REINVESTMENT OF DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS DURING
PERIODequals
NUMBER OF SHARES PURCHASED DURING PERIOD
(C) NUMBER OF SHARES PURCHASED DURING PERIODmultiplied by
NET ASSET VALUE OF ONE SHARE AS OF THE
LAST DAY OF THE PERIODequals
ENDING REDEEMABLE VALUE
(D) ENDING REDEEMABLE VALUEdivided by
INITIAL INVESTMENT
MINUS ONE AND THEN MULTIPLIED BY 100equals
TOTAL RETURN FOR THE PERIOD EXPRESSED AS A
PERCENTAGE
(2) AVERAGE ANNUAL COMPOUND TOTAL RETURN
Average annual compound total return quotations for the 1 year, 5 year and 10
year periods ended on the date of the most recent balance sheet are computed
according to the formula set forth below.
P(1+T)/n/ = ERV
Where: P = a hypothetical initial investment of $1,000
T = average annual compound total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment as of the end of 1, 5, and 10 year periods
(computed in accordance with the formula shown in
(1), above)
Thus:
Avg. Annual Compound Total Return at Offering Price:
1 Year Total Return 1,000(1+T)/1/ = 1,374
T = +37.44%
5 Year Total Return1,000(1+T)/5/ = 2,086
T =
+15.84%
10 Year Total Return1,000 (1+T)/10/ = 2,739
T =
+10.60%
Avg. Annual Compound Total Return at Net Asset Value:
1 Year Total Return1,000 (1+T)/1/ = 1,443
T =
44.25%
5 Year Total Return 1,000 (1+T)/5/ = 2,190
T =
+16.97%
10 Year Total Return 1,000(1+T)/10/ = 2,876
T =
+11.14%
Hypothetical illustrations based on $1,000 initial investments used to obtain
ending values over various time periods follow:
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 19798
<INVESTMENTS-AT-VALUE> 44727
<RECEIVABLES> 1241
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45993
<PAYABLE-FOR-SECURITIES> 429
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20426
<SHARES-COMMON-STOCK> 2497
<SHARES-COMMON-PRIOR> 2531
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24930
<NET-ASSETS> 45397
<DIVIDEND-INCOME> 776
<INTEREST-INCOME> 147
<OTHER-INCOME> 0
<EXPENSES-NET> 577
<NET-INVESTMENT-INCOME> 346
<REALIZED-GAINS-CURRENT> 2028
<APPREC-INCREASE-CURRENT> 12000
<NET-CHANGE-FROM-OPS> 14373
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 337
<DISTRIBUTIONS-OF-GAINS> 2029
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 146
<NUMBER-OF-SHARES-REDEEMED> 303
<SHARES-REINVESTED> 123
<NET-CHANGE-IN-ASSETS> 11682
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 577
<AVERAGE-NET-ASSETS> 39173
<PER-SHARE-NAV-BEGIN> 13.32
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 5.72
<PER-SHARE-DIVIDEND> .14
<PER-SHARE-DISTRIBUTIONS> .85
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.19
<EXPENSE-RATIO> 1.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
