Registration No. 33-19369
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Pre-Effective Amendment No. 11 [X]
Post-Effective Amendment No. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 11 [X]
CHARTER MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1853 William Penn Way, P.O. Box 10695, Lancaster, PA 17605-0695
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number: 717-295-2120
David S. Butterworth
President and Managing Director
Charter Capital Management, Inc.
1853 William Penn Way, P.O. Box 10695
Lancaster, PA 17605-0695
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: January 2, 1997 or
as soon as practicable after such date.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
an indefinite number of shares of beneficial interest are being
registered by the Registrant pursuant to this Registration
Statement.
Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereby become
effective in accordance with Section 8(a) of the Securities Act
of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
Page of
CHARTER MUTUAL FUNDS, INC.
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
Part A Location in Prospectus
Item 1. Cover Page.................... Charter Mutual Funds
Item 2. Synopsis...................... Fund Expenses
Item 3. Condensed Financial
Information................... Not Applicable
Item 4. General Description of Description of the
Registrant.................... Funds
Item 5. Management of the Fund........ Management of the
Funds
Item 6. Capital Stock and Other Description of the
Securities.................... Funds and General
Information
Item 7. Purchase of Securities
Being Offered................. Purchase of Shares
Item 8. Redemption or
Repurchase.................... Redemption of Shares
Item 9. Pending Legal Proceedings..... Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Table of Contents
Item 12. General Information
and History................... Not Applicable
Item 13. Investment Objectives Investment
and Policies.................. Policies
Page of
Location in Statement of
Part B (Continued) Additional Information
Item 14. Management of the Fund....... Management of the
Funds
Item 15. Control Persons and
Principal Holders of Management of the
Securities.................... Funds
Item 16. Investment Advisory and Management of the
Other Services................ Funds
Investment
Item 17. Brokerage Allocation.......... Transactions
Item 18. Capital Stock and Other Shareholder
Securities.................... Matters
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered....................... Not Applicable
Item 20. Tax Status.................... Dividends and Taxes
Item 21. Underwriters.................. Distributor
Item 22. Calculations of Yield
Quotations of Money Market
Fund.......................... Not Applicable
Item 23. Financial Statements.......... [To be supplied
by amendment]
Part C
Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement.
Page of
For information contact:
Charter Mutual Funds, Inc.
Shareholder Services
1853 William Penn Way
P.O. Box 10695 CHARTER
Lancaster, PA 17605-0695 MUTUAL FUNDS, INC.
717-295-2120
Charter Growth Fund
TABLE OF CONTENTS PROSPECTUS
Fund Expenses 2 January 2, 1997
Investment Objectives
and Policies 3
Risk Considerations 5
Description of the Funds 5
Purchase of Shares 6
Redemption of Shares 9
Management of the Funds 11
General Information 13
CHARTER MUTUAL FUNDS
The CHARTER GROWTH FUND seeks to provide long-term capital
appreciation, and as a secondary objective seeks moderate
dividend income. The Fund invests primarily in "large to medium
capitalization growth" common stocks in pursuing its objective.
ADDITIONAL INFORMATION: This Prospectus contains information
about the Company that an investor should know before investing.
Please retain it for future reference. A Statement of Additional
Information dated January 2, 1997 has been filed with the
Securities and Exchange Commission and is incorporated in its
entirety by reference in and made a part of this Prospectus.
This statement is available from the Company without charge.
Shares in the Charter Mutual Funds are not deposits or
obligations of, or guaranteed or endorsed by, any bank, trust
company or credit union, and shares are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve
Board, the National Credit Union Administration or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITITES 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.
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FUND EXPENSES
The following table is provided to assist an investor in
understanding the various costs and expenses that a shareholder
in the Charter Growth Fund will bear directly or indirectly.
Shareholder Transaction Expenses:
Maximum sales load imposed on purchases
as a percentage of the offering price 3.50%
Sales load imposed on reinvested dividends None
Redemption fees None
Estimated Annual Fund Operating Expenses:
Investment Management Fees (1) 0.70%
12b-1 Fees (1, 2) 0.25%
Other Expenses (3) 0.65%
Total Operating Expenses 1.60%
(1) Investment Management Fees and 12b-1 Fees are based on
average daily net assets and are calculated daily and paid
monthly.
(2) 12b-1 Fees are paid by the Company to the Distributor
to finance the distribution of the Fund's shares. This 12b-1 fee
and the sales load (if any) may result, over the long-term, in
shareholders paying more than the economic equivalent of the
maximum front-end sales charge permitted by the NASD.
(3) Other Expenses include fees for administrative
services, accounting services, shareholder services, custodian,
legal and accounting, printing, registration fees, and costs of
regulatory compliance expenses as determined by the use of
generally accepted accounting principals. Figures shown are
based on estimated expenses for the current fiscal year. For
further information regarding expenses, please se "Purchase of
Shares", page 6 and "Management of the Funds", page 11.
The following example illustrates the expenses that a shareholder
would pay on a $1,000 investment over various time periods
assuming: (1) payment of the maximum sales load; (2) a 5% rate of
return; and (3) redemption at the end of each time period.
1 Year 3 Years
Charter Growth Fund $51 $84
This example should not be considered a representation of future
expenses or performance. Actual expenses may be greater or less
than those shown.
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INVESTMENT OBJECTIVES AND POLICIES
The Charter Mutual Funds have adopted certain fundamental and
non-fundamental policies which are presented in the Statement of
Additional Information. The fundamental policies of the Fund
cannot be changed without approval by holders of a majority of
its dollar value of outstanding voting shares; other
non-fundamental policies may be changed by the Directors without
shareholder approval. Subscriptions for the purchase of shares
will be invested in accordance with the Fund's investment
objective and policies as outlined below.
The CHARTER GROWTH FUND seeks to provide long-term capital
appreciation, and as a secondary objective seeks moderate
dividend income (less than the current yield of the S&P 500).
The Fund invests primarily in "large to medium capitalization
growth" common stocks in pursuing its objective. While it is
anticipated that most investments will be in common stocks, the
Fund may also invest to a limited degree in convertible
securities (including rights or warrants to purchase common
stocks) and preferred stocks.
It is a fundamental policy of the Fund to invest in a "socially
responsible" manner. In adhering to this philosophy, the Fund
does not invest in companies on the Department of Defense's list
of the top 100 weapons contractors; nor does the Fund invest in
companies in the alcohol, gambling or tobacco industries. The
Fund will endeavor to (but is not required to) invest in
companies which have adopted and administer fair employment and
pollution control policies to the extent information reflecting
such policies is available.
The Fund invests in companies with demonstrated growth in
earnings and dividends and consistency of operating performance.
Companies selected will generally have a market capitalization
greater than $400 million ("large to medium capitalization").
The Fund will be invested in three types of growth companies:
established growth; emerging growth; and cyclical growth.
Emphasis is placed on companies in the established growth
category, generally comprising 60-70% of the Fund's portfolio.
The remaining 30-40% makes up the more active portion of the
Fund's portfolio which is generally invested in emerging growth
and cyclical growth companies.
Established growth companies are defined as those with consistent
long-term (3-5 yrs.) growth of both earnings and dividends.
Emerging growth companies are medium capitalization companies
with solid positions in rapidly growing niche industries and/or
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companies with proprietary innovative technologies, such as
companies in the healthcare and high-technology fields. Cyclical
growth companies are generally established companies whose
earnings fluctuate very noticeably in response to changes in
business conditions and the economy; investments are considered
in those companies that are likely to demonstrate improving
trends in earnings growth in the near-term future.
The percentage of assets invested in common and preferred stocks
will vary from time to time, however, the Fund will invest at
least 90% of total assets in these securities under normal
circumstances; the balance, not held in such investments, will be
invested in cash and cash equivalent securities and repurchase
agreements.
Cash Equivalent Securities. Cash equivalent securities include
(i) short-term U.S. Government securities; (ii) demand and time
deposits of domestic banks; (iii) commercial paper which is rated
A-1 or A-2 by Standard & Poor's Corporation ("S&P") and/or Prime-1
or Prime-2 by Moody's Investors Services, Inc. ("Moody's") or
if not rated, is issued or guaranteed by companies which have an
outstanding debt issue rated A or higher by either S&P or
Moody's; (iv) short-term notes rated SP-1 or SP-2 by S&P and/or
MIG-1 or MIG-2 by Moody's; and (v) other investment companies
(money market funds) that invest in comparable quality
securities. All ratings are determined as of the date of
investment. For a description of these ratings, please refer to
the appendix "Description of Ratings" in the Statement of
Additional Information.
Repurchase Agreements. Repurchase agreements are instruments
under which the purchaser acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a
mutually agreed upon time and price (which is higher than the
purchase price), thereby determining the yield during the
purchasers holding period. Repurchase agreements entered into by
the Fund will be fully collateralized. Maturity of the
securities subject to repurchase may exceed one year. In the
event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund might have expenses in enforcing
its rights, and could experience losses, including a decline in
the value of the underlying securities and loss of income. The
Fund will not purchase repurchase agreements maturing in more
than seven days if, as a result thereof, more than 5% of the
Fund's total assets at the time of the transaction would be
invested in such securities.
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Defensive Strategies and Portfolio Turnover. The policy of the
Fund is to be fully invested according to its investment
objectives and policies; however, the Manager may employ
temporary defensive strategies in view of prevailing or
anticipated market and economic conditions and its overall level
of commitment to opportunities then present for investment. In
such instances, the Manager may reduce Fund investments in equity
securities and hold varying degrees of cash or cash equivalent
securities. It is anticipated that the Fund's portfolio turnover
rate will typically be less than 50% per year, although market
conditions could result in higher turnover rates.
RISK CONSIDERATIONS
General: All investments involve a degree of risk; however, the
Fund involves varying degrees of risk and should be assessed by
the types of securities in its underlying portfolio, investment
objective, and policies of the Fund in which an investment is to
be made. There can be no guarantee against loss resulting from
an investment in the Company or its Fund, and there can be no
assurance that the Company's investment policies will be
successful or that its investment objectives will be attained.
The Charter Mutual Funds are a newly formed entity with no
history of operations.
Manager Risk: The Manager invests the Fund's portfolio
securities according to the traditional methods of "active"
investment management, which involves the buying and selling of
securities based upon economic, financial, and market analysis
and investment judgement. If the Manager should fail to execute
the Fund's investment strategies effectively, the Fund may fail
to achieve its stated objective.
DESCRIPTION OF THE FUNDS
The Charter Mutual Funds, Inc. ("Company") is a Maryland
corporation and is registered under the Investment Company Act of
1940 as an open-end, management investment company. The
Company's Articles of Incorporation provide that the Board of
Directors ("Directors") may issue 1,200,000,000 shares of common
stock, with a $0.0001 par value. The Charter Mutual Funds are a
"series fund" in that the Directors have the power to designate
one or more funds or series of shares in the Company and to
classify or reclassify any unissued shares with respect to such
series.
The shares of each series when issued have no conversion rights
and are fully paid and non-assessable; they have no preference
within a particular series with respect to distributions or
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otherwise and are redeemable in accordance with the provisions
set forth under the heading "Redemption of Shares". Each
shareholder will be entitled to the pro-rata share of all
distributions from the investment assets of the Fund or Funds in
which he or she is invested.
Shares of the Company are entitled to vote based on the dollar
amount of their holdings in the respective Fund(s) in which they
are invested and do not have cumulative voting rights. As a
Maryland corporation, the Company is not required to, and does
not intend to, hold annual shareholder meetings. Holders of 10%
of the total outstanding dollar amount of the Company have the
right to call a special meeting for the purposes of removing
Directors or for other proper purposes. The Company will assist
shareholders in calling a meeting and communicate this to other
shareholders.
Each series ("Fund") of the Charter Mutual Funds, in effect,
represents a separate mutual fund with its own distinct
investment objective and policies. The Company has retained the
investment management services of Charter Capital Management,
Inc. ("Manager") to invest the assets of each Fund in accordance
with these parameters. The Manager is further described under
"Management of the Funds", page 11. The Directors may establish
additional Funds without shareholder approval, which Funds may
have distinctly different investment objectives and policies.
The series currently offered through this Prospectus is
diversified, meaning that the series is restricted to owning an
amount not greater than 5 percent of its total assets in one
issuer. U.S. Government securities are excluded from such
restrictions.
Additional Funds may be offered to investors through an amendment
to this Prospectus or by separate prospectus relating to one or
more such Funds. You may invest in any of the Funds, provided
that the Fund(s) are eligible for sale in your state of
residence.
PURCHASE OF SHARES
General: Shares of the Fund may be purchased at the offering
price directly from the Charter Mutual Funds or from any
broker-dealer, registered investment advisor or trust company that
has a
dealer sales agreement or participation agreement with the
Distributor.
All share purchases must be in U.S. dollars and checks in payment
of your order must be drawn on a U.S. bank forwarded to the
Charter Mutual Funds, Inc., 1853 William Penn Way, P.O. Box
10695, Lancaster, PA 17605-0695. Initial purchases should be
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accompanied by a completed and signed Subscription Agreement,
including your social security number or tax identification
number. Shares may be purchased on any day, Monday through
Friday, that the New York Stock Exchnage ("NYSE") is open for
business ("Business Day"). The NYSE is currently open every day
except weekends and New Year's Day, Presidents' Day (observed),
Good Friday, Memorial Day, Labor Day, Thanksgiving Day, and
Christmas Day (observed).
The price to the public on purchases of shares is the offering
price per share for the Fund. Purchase is made at the offering
price based on the net asset value of the shares next computed
after the purchase order has been received by the Company.
For purchases by check, the trade date will be the day upon which
a purchase order is received in "proper order" prior to 4:00 PM
Eastern Standard Time. For purchases by wire or exchange, the
trade date will be the same Business Day as the wire or notice of
exchange is received, if received prior to 4:00 PM Eastern
Standard Time. If the wire or notice is received after 4:00 PM,
the trade date will be the next Business Day following receipt.
Any subscription may be rejected by the Company. Shareholders
should promptly check the confirmation advice that is mailed
after each transaction to insure that it has been accurately
recorded in the shareholder's account. The minimum initial
purchase order is $5,000. Each subsequent purchase requires a
$500 minimum.
The minimum initial purchase, Fund minimum balances, and
subsequent purchase restrictions may be waived by approval of the
Directors for certain related accounts or persons within the same
immediate family, participant accounts for retirement plans, and
organizations representing a group of investors which
collectively meet the minimum initial purchase requirements.
Wire Transfers: After the shareholder has established an
account, subsequent investments may be made by having your bank
wire payment to The First National Bank of Boston, the Company's
custodian bank. In order to ensure prompt receipt by the Company
of your wire, please follow the instructions set forth below:
Bank of Boston
ABA #011000390 Charter Mutual Funds
A/C: Charter #0000
Worldwide Custody/ Trust Services Canton
Further Credit: (shareholder name)
(shareholder account number)
(Fund or Funds and amount each)
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Distribution Plan: The Company has adopted a Distribution Plan
(12b-1 Plan) whereby the Fund will pay 0.25% of its net asset
value to finance the distribution and promotion of the Fund's
shares which is based on the Fund's average daily net assets,
regardless of the amount of expenses incurred. Under the
Distribution Plan, the Company has entered into a Distribution
Agreement with Charter Securities Corp. ("Distributor"), 1853
William Penn Way, P.O. Box 10695, Lancaster, PA 17605-0695 to
serve as its principal underwriter for shares of the Funds. The
Distributor is further described under "Distributor" in the
Statement of Additional Information.
Net Asset Value: The net asset value of the shares for the
Fund are computing as of the close of trading on each day the New
York Stock Exchange is open for trading, by dividing the value of
the Fund's securities plus any cash and other assets (including
dividends declared and interest due) less all liabilities
(including accrued expenses) by the number of shares outstanding,
the result being adjusted to the nearest whole cent. Securities
listed or traded on a recognized stock exchange, including NASDAQ
National Market issues, are valued at their last sale price on
the principal exchange on which the security is traded or closing
quotation on the NASDAQ market prior to the time when assets are
valued. If no sale is reported at that time, the mean between
the current bid and asked price is used. All other securities
for which over-the-counter market quotations are readily
available are valued at the mean between the current bid and
asked price. Short-term securities having a maturity of 60 days
or less are valued at cost, plus accrued interest or discount
earned. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined
in good faith by the Directors.
Offering Price: The offering price on purchases is the net
asset value per share plus a sales load equal to a maximum of
3.50% of the offering price (equivalent to 3.63% of the net asset
value). The sales load is reduced according to the following
schedule for purchases over certain transaction amounts, but such
reductions do not apply cumulatively to transactions effected on
any prior or subsequent dates.
Sales Loads
and Dealer As a percent As a percent
Concessions: of Offering of Net Asset Dealer
Price Value Concession
Up to $49,999 3.50% 3.63% 3.00%
$50,000 to $99,999 3.00% 3.09% 2.50%
$100,000 to $249,999 2.50% 2.56% 2.00%
$250,000 to $499,999 1.50% 1.52% 1.25%
$500,000 to $999,999 1.00% 1.01% 0.75%
$1,000,000 or more None None None
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A sales load will not apply to shares purchased: (1) by employees
of a dealer having a sales agreement with the Distributor; (2)
with redemption proceeds from other mutual fund companies on
which a sales load was previously paid; and (3) for accounts
invested on a discretionary basis by a registered investment
advisor or trust company having a participation agreement with
the Distributor specifying certain minimums, qualifications, and
restrictions.
Yield and Total Return: From time-to-time a Fund of the Company
may advertise its yield and total return. Both yield and total
return figures are based on historical earnings and are not
intended to indicate future performance. The "total return" of a
Fund refers to the average annual compounded rates of return over
one-, five-, and ten-year periods or over the life of the Fund
(as stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the ending
redeemable value of the investment, assuming the reinvestment of
all income and capital gain dividends.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRA"): The Charter Mutual Funds
may be suitable investments for part or all of the assets held in
an IRA. Individuals may make tax-deductible IRA contributions of
up to a maximum of $2,000 annually. However, the deduction will
be reduced if the individual or, in the case of a married
individual filing jointly, either the individual or the
individual's spouse is an active participant in an
employer-sponsored retirement plan and has adjusted gross income
above
certain levels. In all cases, taxation of the earnings paid to
the IRA from your investment is deferred until a distribution is
made. The Charter Mutual Funds may also be a suitable investment
for a transfer from an existing IRA or a "rollover" of a lump sum
distribution from an employer's qualified retirement plan.
REDEMPTION OF SHARES
Shares will be redeemed, without charge, upon the receipt of a
request in "proper order" by the Company at the next determined
net asset value. Proper order means that the request to redeem
must meet all the following requirements:
1. It must be in writing sent to the Charter Mutual Funds,
Inc., 1853 William Penn Way, P.O. Box 10695, Lancaster, PA
17605-0695;
2. It must be signed by the shareholder(s) exactly in the
manner as the shares are registered, and must specify either the
number of shares or the dollar amount of shares to be redeemed;
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3. The signature(s) for the redeeming shareholder(s) must be
guaranteed by a commercial bank or trust company located in the
United States (or having a correspondent relationship with a
commercial bank or trust company in the United States), or by a
member firm of a national stock exchange. The Directors may
waive this requirement for amounts of less than $25,000, if the
request is (i) for the exchange of shares from one identically
registered account to one or more other accounts within the
Company, (ii) to elect any dividend option available to a Fund
shareholder, or (iii) to redeem shares where the proceeds of such
redemption are to be payable to the shareholder of record at the
registered address.
4. If the shares being redeemed are registered in the name of
an estate, trust, custodian, guardian, retirement plan or the
like, or in the name of a corporation or partnership, documents
also must be included which, in the judgement of the Company, are
sufficient to establish the authority of the person(s) signing
the request, and/or as may be required by applicable laws or
regulations, with signature(s) guaranteed in the same manner as
described in Item 3 above; and
A signature guarantee also is required in connection with a
request for proceeds to be mailed other than to the registered
owner of the shares or to an address different from the address
of record or a request for transfer of shares to another person.
Payment of the redemption price will be made by check (or by wire
at the sole discretion of the Company) within seven days after
receipt of the redemption request in proper order. The check
will be mailed by first class mail to the shareholder's
registered address (or as otherwise directed).
When the Company is requested to redeem shares for which it may
not have yet yet received good payment (eg. cash or certified
check on a U.S. bank), it may delay the mailing of a redemption
check until such time as it has assured itself that good payment
has been collected for the purchase of such shares, which may
take up to 15 days.
The Company shall not suspend or postpone the right of
redemption, or postpone the date of payment for more than seven
days after the receipt of a redemption request, except (1) for
any period (A) during which the New York Stock Exchange is closed
in addition to customary weekend and holiday closings or (B)
during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists
as a result of which (A) disposal by the Fund of securities owned
by it is not reasonably practicable or (B) it is not reasonably
practicable for the Fund to determine the value of its net
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assets; or (3) for such other periods as the Securities and
Exchange Commission may by order permit for the protection of
shareholders of the Company.
Upon any redemption of a portion of a shareholder's account
leaving a balance of unredeemed shares of less than $5,000 in the
Fund per investor (or within the same immediate family and
registered address), the Company will involuntarily also redeem
such balance of shares in the Fund and add the proceeds thereof
to the proceeds of the redemption which the shareholder
requested. Fluctuations in market value will not automatically
cause involuntary share redemptions. A check for the proceeds of
redemption will be mailed to the shareholder at the registered
address. The value of the shares on redemption may be more or
less than the shareholder's cost, depending on the market value
of the securities in the Fund's underlying portfolio at the time
of redemption.
In order to avoid backup withholding of 20% of the proceeds or
redemption, under regulations of the Internal Revenue Service, it
is necessary for shareholders to certify under penalty of perjury
their correct social security (taxpayer identification) number
and that they are not subject to backup withholding for under
reporting of interest or dividends. Forms for this purpose are
included with the Subscription Agreement.
Shareholders requesting a redemption as a transfer or rollover
from a retirement plan should be certain to make such transfer or
rollover effective between plan trustees and not to themselves
personally to avoid being subject to a 20% withholding deduction.
MANAGEMENT OF THE FUNDS
The Company is managed by its Directors who have overall
responsibilities for the Company and may exercise all powers as
are not required by statute or the Company's Articles of
Incorporation and Bylaws to be exercised by the shareholders.
Information relating to the Directors and Manager and to expenses
of the Fund are set forth below.
Manager: Charter Capital Management, Inc., 1853 William Penn
Way, P.O. Box 10695, Lancaster, PA 17605-0695 is the "Manager" to
the Company. The Manager is responsible for the overall
supervision of the Company's operations and provides it with
various services and facilities, including office space,
equipment, personnel, and other services as it requires in the
management of the Funds. The Manager maintains the Company's
records, reconciles daily transactions with the Custodian and
brokerage firms, and is responsible for placing all orders for
the purchase and sale of the Fund's portfolio securities.
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Subject to the supervision of the Directors, the Manager will
provide a continuous program of investment management to the
Fund. David S. Butterworth is the sole portfolio manager and
will be primarily responsible for the day-to-day management of
the Fund's investments and has a two person operational and
administrative staff. Mr. Butterworth has been involved in the
investment management business for private clients since 1992 as
the President of Charter Capital Management, Inc. and is
registered as an investment adviser under the Investment Advisers
Act of 1940.
The Company pays the Manager a monthly investment management fee,
at the annual rate of 0.70% of net assets for management of the
Charter Growth Fund. The Manager is further described under
"Management of the Funds" in the Statement of Additional
Information.
Shareholder Service/ Transfer Agent: The Company serves as its
own transfer agent. Charter Capital Management, Inc. manages the
Company's shareholder service operations and provides all
shareholder communication, administrative, and fund accounting
services for the Funds. The Company does not issue certificates
for Fund shares purchased.
Custodian: The First National Bank of Boston ("Custodian"),
100 Federal Street, Boston, MA 02105-1865 or its agent holds all
securities and cash assets of the Fund, and it attends to the
collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Fund.
The Custodian has no responsibility for the supervision and
management of the Company or its Fund.
Other Expenses: The Fund will bear all expenses incurred in
connection with its operations, including the fees as set forth
above and listed under "Fund Expenses", page 2. Some of the
other possible expenses are taxes, interest, compensation and
expenses of the Directors and the Company's officers and
employees, insurance premiums, and brokerage commissions.
The Manager may waive its fees or reimburse a fund for certain
expenses in order to reduce the Fund's expense ratio. If the
Manager does so waive its fees or reimburse a Fund, the Fund will
reimburse the Manager for such amounts if expenses fall below a
pre-determined limit prior to the end of the fiscal year, but
will not reimburse the Manager for any such fees in future fiscal
years. No fees are now being waived or under reimbursement.
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GENERAL INFORMATION
Dividends and Distributions: The Company intends normally to pay
a quarterly dividend on the Fund. These dividends represent
substantially all of the Fund's net investment income. A capital
gain dividend representing substantially all of the Fund's net
investment gain is distributed as a net long-term realized
capital gain prior to the Company's fiscal year-end. Income and
capital gain dividends paid by the Company will automatically be
reinvested in whole or fractional shares of the Fund at net asset
value as of the payable date, unless a shareholder makes a
written request for payments in cash. Cash payments will be
distributed within five Business Days following the record date.
Checks issued pursuant to a shareholder's request for payment of
dividends in cash are forwarded by first class mail to the
registered address. The proceeds of any such checks which are
not accepted by the addressee and returned to the Company will be
reinvested for the shareholder's account in whole or fractional
shares at net asset value next computed after the check has been
returned to the Company, and subsequent dividends will
automatically be reinvested at net asset value as of the payable
date in additional whole or fractional shares.
Tax Information: The Company intends to meet the requirements of
Subchapter M of the Internal Revenue Code ("Code"). Because the
Company is regulated as an investment company under the Code, the
Company is not subject to federal corporation income tax and is
not subject to corporate income or franchise taxes on income and
capital gains distributed to its shareholders. The Company will
distribute substantially all of its net income and net realized
capital gains to shareholders which will be taxable income or
capital gains in their hands. Reinvested income and capital gain
dividends will receive the same tax treatment as dividends paid
in cash.
Capital gain dividends, if any, are taxed to shareholders as
long-term capital gains in the year in which they are received,
regardless of the length of time a shareholder has owned the
shares and whether or not such gain was reflected in the price
paid for the shares. The Company will inform shareholders each
year of the amount and nature of such income or capital gains.
The tax information presented here should not be relied upon
without further consultation with a CPA or other tax adviser
relative to potential changes in the federal and state tax laws
and a shareholder's personal circumstances. Tax consequences to
shareholders are further referred to under "Dividends and Taxes"
in the Statement of Additional Information.
-13-
STATEMENT OF ADDITIONAL INFORMATION
January 2, 1997
CHARTER MUTUAL FUNDS, INC.
1853 William Penn Way, P.O. Box 10695, Lancaster, PA 17605-0695
This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Charter Mutual Funds, Inc.
("Company's) Prospectus dated January 2, 1997. The Prospectus
may be obtained without charge from the Company.
---------------------
TABLE OF CONTENTS
Investment Policies....................................... 2
Dividends and Taxes....................................... 4
Management of the Funds................................... 5
Distributor............................................... 8
Investment Transactions................................... 8
Shareholder Matters....................................... 9
Performance............................................... 10
Report of Independent Accountants.......................... 12
Appendix..................................................
-1-
INVESTMENT POLICIES
The Company has adopted certain investment objectives, as
presented in the Prospectus, for the Fund presently offered; and
may establish additional Funds with different investment
objectives and policies as the Directors designate. Current
policies guiding the management of the Funds are described below.
These policies are either fundamental or non-fundamental
policies; fundamental policies cannot be changed without approval
by vote based on the outstanding dollar amount of holdings (NAV
times shares owned) in the respective Fund or Funds in which such
change is sought. As defined in the Investment Company Act of
1940, this means the lesser of the vote of (a) 67% of the dollar
amount of the Fund's NAV at a meeting where more than 50% of the
outstanding dollar amount of holdings are present in person or by
proxy; or (b) more than 50% of the outstanding dollar amount of
holdings of the Fund.
The fundamental policies of the Company require that the
individual Funds may not:
(1) In regard to 75% of the Fund's total assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrumentalities) if more than 5% of the Fund's total
assets would be invested in securities of that issuer.
(2) Issue senior securities as defined in the Investment
Company Act of 1940.
(3) Make short sales of securities, or purchase any
securities on margin except to obtain such short-term
credits as may be necessary for the clearance of
transactions.
(4) Borrow money except for temporary or emergency
purposes,and then only in an amount not to exceed 5% of the
Fund's total assets; or pledge the Fund's securities or
receivables or transfer or assign or otherwise encumber
them in an amount exceeding the amount of the borrowings
secured thereby.
(5) Underwrite securities issued by others except to the
extent the Company may be deemed to be an Underwriter,
under the federal securities laws, in connection with the
disposition of Fund shares.
(6) Concentrate more than 25% of the value of its assets in
any one industry (other than obligations of, or guaranteed
-2-
by, the U.S. Government, its agencies or instrumentalities).
Water, communications, electric, and gas utilities shall
each be considered a separate industry.
(7) Invest in commodities or commodity futures contracts;
or in real estate, although the Funds may invest in
securities which are secured by real estate and securities
of issuers which invest or deal in real estate.
(8) Invest in interests in oil, gas or other mineral
exploration or development programs, although the Funds may
invest in the securities of issuers which invest in or
sponsor such programs.
(9) Lend money or securities, excepting repurchase
agreements, provided that investing in
demand deposits with
banks and the purchase of publicly traded debt securities
such as bonds, debentures, commercial paper, and short-term
obligations in accordance with the Fund's objective and
policies are not prohibited.
In addition to the fundamental policies listed above, the Company
has also adopted the following non-fundamental policies. These
policies may be changed by the Directors without shareholder
approval.
Accordingly, the individual Funds of the Company may not
currently:
(1) Purchase securities of any issuer (other than
obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities) if more than 5% of the Fund's
total assets would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of the securities
of any issuer.
(3) Invest for the purpose of exercising control or
management of another issuer.
(4) Purchase or retain the securities of any issuer if any
of the Directors or officers of the Company or its Manager
together own more than 5% of the securities of such issuer.
(5) Invest more than 10% of the Fund's total assets in the
securities of other investment companies, or more than 3% of
the total outstanding shares of any one investment company,
(except in connection with a merger, consolidation,
reorganization or acquisition of assets) recognizing that
when investing in the securities of other investment
companies, the Fund will incur duplicate fees and expenses.
-3-
(6) Invest more than 5% of the Fund's total assets in
securities of issuers which with their predecessors have a
record of less than three years continuous operation.
(7) Enter into repurchase agreements if, as a result
thereof, more than 10% of the Fund's net assets valued at
the time of the transaction would be invested in repurchase
agreements maturing in more than seven days and all other
illiquid securities.; and of the 10% no more than 5% (or
half) of these net assets, valued at the time of the
transaction, would be invested in restricted securities.
(8) Purchase options on securities or write covered option
contracts on securities held by the Fund.
(9) Invest in foreign securities.
If a percentage restriction is adheared to at the time of
investment, a later increase or decrease in percentage beyond the
specified limits resulting from a change in values or net assets
will not be considered a violation.
DIVIDENDS AND TAXES
Dividends. The Company intends normally to pay a quarterly
dividend on the Fund. These dividends represent substantially
all of the Fund's net investment income. A capital gains
dividend representing substantially all of the Fund's net
investment gain is distributed as net long-term realized capital
gains prior to the Company's fiscal year-end. The Company may at
any time vary the foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or
retain for reinvestment such of its net investment income and its
capital gains as the Directors determine appropriate under the
then current circumstances.
On the day after record date when an income or capital gains
dividend has been declared (ex-dividend date), the Fund's share
price will drop by the amount of the dividend. Reinvested shares
will be purchased at the price in effect at the close of business
on the payable date. If a shareholder has chosen to have income
and capital gains reinvested in additional shares of the Fund,
the total value of their account may change to some degree after
the dividend is paid, depending on what, if any, fluctuation in
net asset value takes place between the record and payable dates.
For the most part, while the value of each share will be lower,
each reinvesting shareholder will own more shares and so the
total value of their investment in the Fund should be
approximately the same.
-4-
Taxes. The Company intends to meet the requirements of
Subchapter M of the Internal Revenue Code ("Code") and qualify as
a regulated investment company to prevent double taxation of the
Fund and its shareholders.
Qualification under the Code requires that (i) at least 90% of
the Fund's gross income must be derived from dividends, interest,
payments with respect to securities loans, and gains (without
reduction for capital losses) from the sale or other disposition
of securities; (ii) less than 30% of gross income (without
reduction for capital losses) can be derived from the sale or
other disposition of securities held for less than three months;
(iii) at least 50% of the value of the Fund's total assets must
be represented by cash and cash equivalents, obligations of, or
guaranteed by, the U.S. Government, its agencies or
instrument-alities, securities of other investment companies, and
other
securities which meet the two following limitations: (1) the
entire amount of the securities of any issuer owned does not
exceed 5% of the Fund's total assets, and (2) the entire amount
of the securities of any issuer owned by the Fund does not
represent more than 10% of the outstanding voting securities of
such issuer; and (iv) not more than 25% of the Fund's total
assets are invested in the securities of any one issuer (other
than obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities or securities of other investment
companies).
The Company intends to declare and pay income and capital gains
dividends so as to avoid the imposition of a 4% federal excise
tax on undistributed earnings. If, for any taxable year, the
Fund does not qualify for tax treatment afforded regulated
investment companies, all of its taxable income would be subject
to federal and state taxation at regular corporate rates (without
any deduction for distributions made to shareholders).
The Code provides a 70% deduction for dividends received by
corporate shareholders, with certain exceptions. It is expected
that only part, if any, of the Fund's investment income will be
derived from dividends qualifying as such and, therefore, not all
dividends received will be subject to the deduction.
Shareholders should be aware that if a long-term capital gains
dividend is paid with respect to shares of a Fund which are sold
at a loss after a holding period of less than six months, then
this loss realized upon sale of such shares will be treated as a
long-term capital loss to the extent of the long-term capital
gains dividend paid by the Fund. For example, if a shareholder
buys shares at $10.00 each in October, receives a long-term
capital gains dividend of $1.00 in December and sells his or her
shares at a loss in February, only losses in excess of $1.00 per
share can be considered short-term losses.
-5-
MANAGEMENT OF THE FUNDS
Directors and Officers. Set forth below are the names and
principal occupations of each Director and officer of the
Company:
David S. Butterworth, Director; President and Managing
Director, Charter Capital Management, Inc.; President,
Charter Securities Corp.; 1853 William Penn Way, P.O. Box
10695, Lancaster, PA 17605-0695
[name] Director;
[employment]
[address]
[name] Director;
[employment]
[address]
[name] Director;
[employment]
[address]
[name] Director;
[employment]
[address]
Retirement Estimated
Benefits Annual
Aggregate Accrued as Benefits Total
Compensation Company Upon Compensation
Director from Company Expense Retirement from Company
=================================================================
David S.
Butterworth 0 0 0 0
[name] $10,000/year 0 0 $10,000/year
[name] $10,000/year 0 0 $10,000/year
[name] $10,000/year 0 0 $10,000/year
[name] $10,000/year 0 0 $10,000/year
-6-
There are no controlling persons of the Company. No director
other than Mr. Butterworth is an "interested person" (as that
term is defined in the Investment Company Act of 1940). The
Company pays directors who are not interested persons of the
Company $9,000 annually and $250 per meeting of the Board or any
committee thereof that is not held in conjunction with a Board
meeting. Directors who are not affiliated persons of the Company
are reimbursed for any expenses incurred in attending meetings of
the Board of Directors or any committee thereof.
Manager: Charter Capital Management, Inc. ("Manager") is the
manager of the Registrant's fund complex. Pursuant to the
Investment Management Agreement, the Manager administers the
Company's business affairs, and furnishes office facilities and
equipment. The Manager will permit any of its officers or
employees to serve without compensation as Directors or officers
of the Company if elected to such positions.
The Investment Management Agreement provides that the Company
pays the charges and expenses of its operations including the
fees and expenses of the Directors (except those affiliated with
the Manager), independent auditors, counsel, custodian and
transfer agent, reports and notices to shareholders, brokerage
commissions or transaction costs, costs of calculating net asset
value, taxes and membership dues. The Company bears the expenses
of registration of its shares with the Securities and Exchange
Commission, and pays the cost of qualifying and maintaining the
qualification of the Company's shares for sale under the
securities laws of the various states.
The Investment Management Agreement provides that the Manager
shall not be liable for any error of judgment or of law, or for
any loss suffered by the Company in connection with the matters
to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of
the Manager in the performance of their obligations and duties,
or by reason of its reckless disregard of its obligation and
duties under the Agreement.
The Investment Management Agreement continues in effect from year
to year so long as its continuation is approved at least annually
by 1.) a majority of the Directors who are not parties to such
Agreement and 2.) a majority vote of the full Board of Directors
or the majority of the outstanding dollar amount of holdings in
the Company. It may be terminated at any time upon 60 days
notice by either party, or by a majority vote of the outstanding
dollar amount of holdings, and will terminate automatically upon
assignment. Upon termination of the Agreement and when so
requested by Manager, the Company will refrain from using the
term "Charter" in its name or in its business in any form or
combination.
-7-
Shareholder Service Agent: Charter Capital Management, Inc.
("Agent") provides all shareholder communication and
administrative services and handles the receipt and payment of
funds between the Company and its shareholders which are
deposited with the custodian; the Agent may perform other
services such as recordkeeping, valuation, and matters pertaining
to the Company, as the Directors and the Agent agree from time to
time. The Agent may delegate all or a portion of these services
to other outside agents, as the Agent in its discretion deems
appropriate.
DISTRIBUTOR
Charter Securities Corp. is the "Distributor" for shares of the
Company and acts as agent of the Company in the continuous
offering of its shares. The Company pays the cost for the
Prospectus and shareholder reports to be printed and mailed to
existing shareholders; and the Distributor pays for the printing
and distribution of copies thereof used in connection with the
offering of shares to prospective investors. The Distributor
pays for supplementary sales literature and all other advertising
costs. Terms of continuation, termination and assignment under
the Distribution Agreement are identical to those described above
with regard to the Investment Management Agreement, except that
termination, other than upon assignment, requires six months
notice.
INVESTMENT TRANSACTIONS
It is understood that the Manager also furnishes investment
management services to other investment company and non-investment
company clients. At times investment decisions may be
made to purchase or sell the same securities for the Company and
for one or more of the other clients advised by the Manager.
When two or more of such clients are simultaneously engaged in
the purchase or sale of investment securities, the transactions
are allocated as to amount and price in a manner considered
equitable to each and so that each receives to the extent
practicable the average price of such transactions.
The above mentioned factors may have a detrimental effect on the
quantities or prices of securities available to the Company. On
the other hand, the ability of the Company to participate in
volume transactions may produce better executions for the Company
in some cases. The Directors believe that the benefits of such
participation outweigh any limitations that may arise from
simultaneous transactions.
-8-
The Manager's trading desk in effecting purchases and sales of
securities for the account of the Company, will implement the
Company's policy of seeking best execution of orders. Consistent
with this policy, orders for securities transactions are placed
with broker-dealer firms giving consideration to the quality,
quantity and nature of each firm's professional services which
include execution, clearance procedures, wire service quotations
and statistical and other research information provided to the
Company, the Manager, and the Advisers. Any research benefits
derived are available for all clients.
Since statistical and other research information is only
supplementary to research efforts of the Manager and still must
be analyzed and reviewed by their staff, the receipt of research
information is not expected to materially reduce its expenses.
In selecting among firms believed to meet the criteria for
handling a particular transaction, the Manager may give
consideration to those firms which provide market, statistical,
and other research information to the Company and the Manager.
So long as the provisions of Section 28(e) of the Securities
Exchange Act of 1934 are met, the Manager may cause a broker or
dealer to be paid commissions in excess of those another broker
or dealer would charge.
SHAREHOLDER MATTERS
Description of Shares. The Company is a Maryland corporation.
On any matter submitted to the
shareholders for a vote, all
shares of the Company then issued and
outstanding and entitled to
vote, irrespective of the Fund, shall be voted in the aggregate
and by dollar amount of holdings and not by Fund, except (i) when
required by the Investment Company Act of 1940, shares shall be
voted by the individual Fund; and (ii) when the matter does not
affect any interest of a particular Fund, then only shareholders
of the affected Fund(s) shall be entitled to vote thereon.
The Company and its Funds will continue without limitation of
time, provided however, that:
(1) Subject to the majority vote by dollar amount of
holdings in any Fund of the Company outstanding, the
Directors may sell or convert the assets of such Fund to
another investment company in exchange for shares of such
investment company and distribute such shares ratably among
the shareholders of such Fund;
(2) Subject to the majority vote by dollar amount of
holdings in any Fund of the Company outstanding, the
-9-
Directors may sell or convert into cash the assets of such
Fund and distribute such assets ratably among the
shareholders of such Fund; and
(3) Without the approval of the shareholders of any Fund,
unless otherwise required by law, the Directors may combine
the assets of any two or more Funds into a single Fund so
long as such combination will not have a materially adverse
effect upon the shareholders of such Funds.
Upon completion of the distribution of the remaining proceeds or
the remaining assets of any Fund as provided in paragraphs (1),
(2), and (3) above, the Company shall terminate as to that Fund
and the Directors shall be discharged of any and all further
liabilities and duties hereunder and the right, title, and
interest of all parties shall be canceled and discharged.
Special Meetings of Shareholders. The Company's Bylaws provide
that special meetings may be called by the Directors or the
holders of not less than 10% of the Company's total outstanding
dollar amount of holdings. Meetings may be held at the Company's
principal office or at such other location as the Directors may
designate.
Election and Removal of Directors. Each Director serves until
such Director sooner dies, resigns, retires or is removed by a
majority of the dollar amount of holdings entitled to vote or a
majority of the Directors. The Company will hold a special
meeting of shareholders for the election of Directors at such
time as less than a majority of the Directors have been elected
by shareholders. If, as a result of a vacancy in the Directors,
less than two-thirds of the Directors have been elected by the
shareholders, that vacancy will be filled only by a vote of the
shareholders. Directors may be removed from office by a vote of
the holders of a majority of the outstanding dollar amount of
holdings at a meeting called for that purpose.
Accountants and Reports to Shareholders. The Company's
independent public accountants are [
] who audit and report
on the Company's annual financial statements, review certain
regulatory reports and the Company's federal income tax return,
and perform other professional accounting, auditing, tax, and
advisory services when engaged to do so by the Company.
Shareholders will receive annual audited financial statements and
semi-annual unaudited financial statements.
-10-
PERFORMANCE
From time to time, the Company may advertise several types of
performance inform
ation with respect to any or all of the Funds.
A Fund's performance may be compared to that of the Consumer
Price Index, United States Treasury securities, or various
unmanaged equity or bond indices such as the Dow Jones Industrial
Average, the Standard & Poor's 500 Stock Index, and the Merrill
Lynch Intermediate Term Treasury Index, and may also be compared
to the performance of other mutual funds or mutual fund indices
as reported by Lipper Analytical Services, Inc. ("Lipper"),
Morningstar Investor Services, Inc. ("Morningstar") or Value Line
Investor Services, Inc. ("Value Line"). Lipper, Morningstar, and
Value Line are widely recognized independent mutual fund
reporting services. Lipper, Morningstar, and Value Line
performance calculations are based upon changes in net asset
value with all dividends reinvested and do not include the effect
of any sales charges that may be incurred.
-11-
Report of Independent Accountants
-12-
APPENDIX
DESCRIPTION OF RATINGS
Bond ratings apply to long-term debt obligations, generally those
with maturities longer than three years. The following
summarizes the highest four ratings used by Standard & Poor's
Corporation for bonds:
AAA - This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from AAA issues
only in small degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal, although it is somewhat more susceptible to
the adverse effects of change in circumstances and economic
conditions than bonds in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas such
issues normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category than in
higher rated categories.
To provide more detailed indications of credit quality, the "AA"
through "B" ratings may be modified by the addition of a plus or
minus sign to show relative standing within these major
categories.
Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms
of the obligations. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposure to adverse conditions. The rating C is
reserved for income bonds on which no interest is being paid.
Bonds rated D are in default, and payment of principal and/or
interest is in arrears.
-i-
The following summarizes the highest four ratings used by Moody's
Investors Service, Inc. for bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may
not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered as medium-
grade obligations: i.e., they are neither highly protected
nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2, and 3) with respect to
corporate bonds rated Aa and A. The modifier 1 indicates that
the bond being rated ranks in the higher end of its generic
rating category; the modifier 2 indicates a midrange ranking; and
the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds which are rated Ba are judged to have speculative elements.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
-ii-
and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B
generally lack characteristics of a desirable investment.
Assurance of interest and principal payments of or maintenance of
other terms of the contract over any long period of time may be
small.
Standard & Poor's uses the ratings SP-1, SP-2, and SP-3 for
short-term note issues (generally due in three years or less).
SP-1 means the issuer has a strong or very strong capacity to pay
principal and interest (SP-1+ indicates overwhelming safety);
SP-2 signifies satisfactory capacity. Both SP-1 and SP-2 are
considered high quality.
The following are the two highest ratings used by Moody's for
short-term notes (generally due in three years or less) and
variable rate demand obligations:
MIG-1/VMIG-1 - Obligations bearing these designations are of
the best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing, or both.
MIG-2 - Obligations bearing this designation are of high
quality, with ample margins of protection although not so
large as in the preceding group.
Commercial paper (obligations with an original maturity of one
year or less) rated A-1 by Standard & Poor's indicates that the
degree of safety regarding timely payment is either overwhelming
or very strong. Those issuers determined to possess overwhelming
safety characteristics are denoted A-1+. Issuers rated A-2 have
a slightly smaller degree of safety than those rated A-1, but
their commercial paper is still considered to be high quality.
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1 (or related
supporting institutions) are considered to have superior capacity
for repayment of short-term promissory obligations. Issuers
rated Prime-2 have a strong capacity for repayment of short-term
obligations, such that their commercial paper is also considered
to be high quality.
- -iii-
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part A
Not Applicable
Part B
* Report of Independent Accountants
* Statement of Assets and Liabilities
* Notes to Statement of Assets and Liabilities
(b) Exhibits:
+(1) Articles of Incorporation
(2) Not Applicable
(3) Not Applicable
(4) Not Applicable
*(5) Investment Management Agreement
*(6)(a) Distribution Agreement
*(6)(b) Form of Subscription Agreement
(6)(c) Not Applicable
(7) Not Applicable
*(8) Custody Agreement
*(9) Shareholder Services Agreement
*(10) Opinion and Consent of Counsel to the
Registrant
*(11) Consent of Independent Accountants
(12) Not Applicable
*(13) Initial Capital Undertaking
(14) Not Applicable
*(15) Distribution Plan
(16) Not Applicable
+ Previously filed; incorporated herein by
reference to pre-effective amendment no. 10.
* To be supplied by amendment.
C-1
Page of
Item 25. Persons Controlled by or Under Common Control with
Registrant.
David S. Butterworth
|
|
CHARTER CAPITAL MANAGEMENT, INC. - CHARTER SECURITIES CORP.
(Investment Manager and Distributor)
|
|
CHARTER MUTUAL FUNDS, INC.
(Registrant)
David S. Butterworth presently owns 100% of the outstanding
shares of these two Pennsylvania corporations: 1.) Charter
Capital Management, Inc. and 2.) Charter Securities Corporation.
Charter Capital Management, Inc. is the owner of thirty shares of
beneficial interest of the Registrant, which represents the only
shares of the Registrant that is presently outstanding. It is
anticipated that once the Registrant satisfies its minimum
capital requirements pursuant to Section 14(a) of the Investment
Company Act of 1940, Charter Capital Management, Inc. will own
less than 5% of the outstanding shares of the Registrant. The
Registrant is a Maryland corporation.
Item 26. Number of Holders of Securities.
Number of
Title of Class Recordholders
Shares of Beneficial Interest 1
(as of January 2, 1997)
Item 27. Indemnification.
The Registrant's Articles of Incorporation provide that the
directors and officers of the Registrant are entitled to
indemnification and advance payment of litigation expenses to the
fullest extent permitted by Maryland law. Nevertheless,
indemnification may be paid only if it is determined that the
directors's or officer's conduct did not constitute "willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office", as those terms
are used in the Investment Company Act of 1940 ("Disabling
Conduct").
C-2
Page of
The Articles of Incorporation require a determination that the
director or officer did not engage in Disabling Conduct, be made
by (a) a final decision on the merits by a court or other body
before whom the proceeding is brought that the indemnitee was not
liable by reason of Disabling Conduct, (b) a majority of a quorum
of non-interested directors who are not parties to the
proceeding, or (c) independent legal counsel in a written
opinion. As a condition to any advance payment of litigation
expenses, the director or officer must undertake to repay such
amount unless it is ultimately determined that he is entitled to
indemnification and (i) the indemnitee has provided security for
his undertaking, (ii) the Registrant shall be insured against
losses arising by reason of advance, or (iii) a majority of a
quorum of the non-interested, non-party directors of the
Registrant, or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts,
that there is reason to believe that the indemnitee will
ultimately be found entitled to indemnification.
Registrant may obtain for itself and its directors and officers
one or more insurance policies relating, among other things to
directors' and officers' liability and liability for certain
negligent acts, errors, and accident omissions. The Registrant
hereby undertakes that it will not purchase insurance that is
inconsistent with Release IC-7221 promulgated by the Securities
and Exchange Commission.
Insofar as indemnification for liabilities 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 is such 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, or controlling
person, 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 whether such indemnification by
it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
Charter Capital Management, Inc. is currently the only investment
manager that has been retained for the Registrant. Charter
Capital Management, Inc. also counsels other investment
management clients.
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Set forth below is a list of each director and elected officer
(does not include appointive officers - Vice President and lower
level officers) of the investment manager, indicating each
business, profession, vocation, or employment of a substantial
nature in which such person has been engaged since January, 1994
for his own account or in the capacity of director or officer.
Other Substantial
Positions with Business,Profession,
Investment Vocation, or
Name Manager Employment
David S. Butterworth President, same as above, Item 25
Managing Director,
Secretary,
and Treasurer
Item 29. Distributor.
(a) None
(b) Positions and Positions and
Name and Offices with Offices with
Business Address Distributor Registrant
David S. Butterworth President, Director
1853 William Penn Way Secretary,
P.O. Box 10695 and Treasurer
Lancaster, PA 17605-0695
(c) Not Applicable
Item 30. Location of Accounts and Records.
All accounts, books, and other documents required to be
maintained for the Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained by the Registrant at its
principal office.
Item 31. Management Services.
Not Applicable
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Item 32. Undertakings.
(a) The Registrant undertakes to file an amendment to the
Registration Statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any persons in excess of twenty-five.
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective date
from the Registrant's 1933 Act Registration Statement.
(c) Since no annual meeting of the shareholders is provided for
by the Registrant, holders of 10% of the outstanding shares of
the Registrant are given the right to call a special meeting for
the purposes of removing Directors or for other proper purposes.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Lancaster, and Commonwealth of
Pennsylvania on the 2nd day of January, 1997.
CHARTER MUTUAL FUNDS, INC.
By:/s/ David S. Butterworth
David S. Butterworth, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title(s) Date
/s/ David S. Butterworth Director January 2, 1997
David S. Butterworth (Principal Exec.,
Financial and
Accounting Officer)
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CHARTER MUTUAL FUNDS, INC.
EXHIBIT INDEX
Exhibit No. Description
+(1) Articles of Incorporation
(2) Not Applicable
(3) Not Applicable
(4) Not Applicable
*(5)(a) Investment Management Agreement
*(6)(a) Distribution Agreement
*(6)(b) Form of Subscription Agreement
(6)(c) Not Applicable
(7) Not Applicable
*(8) Custody Agreement
*(9) Shareholder Services Agreement
*(10) Opinion and Consent of Counsel
to the Registrant
*(11) Consent of Independent Accountants
(12) Not Applicable
*(13) Initial Capital Undertaking
(14) Not Applicable
*(15) Distribution Plan
(16) Not Applicable
+ Previously filed; incorporated herein by
reference to pre-effective amendment no. 10.
* To be supplied by amendment.
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