CHACONIA INCOME & GROWTH FUND INC, 485A24F, 1996-12-26

CHACONIA INCOME & GROWTH FUND INC
485A24F, 1996-12-26

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<PAGE> 1

As filed with the Securities and Exchange Commission on December 26, 1996

Registration Nos. 33-37426
and 811-6194

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 9 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Post-Effective Amendment No. 9 [X]

(Check appropriate box or boxes)
- --------------------------------------------------------------------------------

THE CHACONIA INCOME & GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o American Data Services, Inc.
24 West Carver Street, Huntington, New York 11743
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: 516-385-9580 or
1-800-368-3322

- --------------------------------------------------------------------------------

The Corporation Trust Company
32 South Street
Baltimore, MD 21202
(Name and Address of Agent for Service)
Copies to:
Ulice Payne, Jr., Esq.
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100, Milwaukee, WI 53202
414-298-8233
- --------------------------------------------------------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
- --------------------------------------------------------------------------------

It is proposed that this filing will become effective on January 26, 1997
pursuant to paragraph (a)(3) of Rule 485.

- --------------------------------------------------------------------------------

Pursuant to Rule 24f-2(a)(1) under the Investment Company Act
of 1940, registrant hereby elects to register an indefinite number of shares of
its securities under The Securities Act of 1933. Registrant will file a
Rule 24(f)-2 Notice within six months of the fiscal year ended December 31.

<PAGE> 2
THE CHACONIA INCOME & GROWTH FUND, INC.

Prospectus January __, 1997

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Cross-Reference Sheet 3

Cover Sheet 5

Summary of Fund Expenses 6

Prospectus Summary 8

Investment Objective and Policies 9

Basic Investment Techniques 10

Certain Investment Strategies and Special Risk Considerations 13

Management 14

How to Purchase Shares 16

Distribution Plan and Service Fees 17

How to Redeem Shares 18

Retirement Plans 19

Dividends, Distributions and Taxes 19

General Information 21
- ---------------
</TABLE>

No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus,
and if given or made, such information or representation may not be relied upon
as being authorized by the Fund, the Advisor, certain registered broker-dealers
("selected broker-dealers") or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy in any state
to any person to whom it is unlawful to make such offer in such state.

<PAGE> 3

THE CHACONIA INCOME & GROWTH FUND, INC.

Cross-Reference Sheet
(as required by Rule 495)

<TABLE>
<CAPTION>
Form N-1A Item
Part A Prospectus Caption
- ------ ------------------
<S> <C> <C>
1 Cover Page Cover Page
2 Synopsis Summary of Fund Expenses;
Prospectus Summary
3 Condensed Financial Information Not Applicable
4 General Description of Registrant Investment Objective and Policies;
The Fund and Its Management;
Cover Page; Investment
Restrictions; Prospectus Summary
5 Management of the Fund Management; Back Cover; Investment
Objective and Policies
6 Capital Stock and Other Securities Dividends, Distributions and
Taxes; General Information
7 Purchase of Securities Being Offered How to Purchase Shares
8 Redemption or Repurchase How to Redeem Shares
9 Pending Legal Proceedings Legal Proceedings

Part B
- ------
Statement of Additional Information Caption
-------------------------------------------
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Management
13 Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions; Portfolio
Transactions and Brokerage
14 Management of the Fund Management
15 Control Persons and Principal Holders
of Securities Directors and Officers
16 Investment Advisory and Other Services Management
17 Brokerage Allocation and Other
Practices Portfolio Transactions and
Brokerage
18 Capital Stock and Other Securities Prospectus-General Information
19 Purchase, Redemption and Pricing of
Securities Being Offered How to Purchase Shares; How to
Redeem Shares
20 Tax Status Dividends, Distributions and
Taxes
21 Underwriters Not applicable
22 Calculation of Performance Data Not applicable
23 Financial Statements Financial Statements
</TABLE>

<PAGE> 4

Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

<PAGE> 5

DATED JANUARY__, 1997

THE CHACONIA INCOME & GROWTH FUND, INC.

c/o American Data Services, Inc.
24 West Carver Street
Huntington, NY 11743

1-800-368-3322

The Chaconia Income & Growth Fund, Inc. (the "Fund") is an
open-end, nondiversified management investment company which seeks high current
income and capital appreciation. It seeks to meet its objective by investing
the Fund's assets in: U.S. Government securities including U.S. Treasury
obligations and obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, the First and Second Unit Schemes (the "Schemes") of the
Trinidad and Tobago Unit Trust Corporation, certificates of deposit and money
market funds. The minimum initial investment is $250. Subsequent investments
will be a minimum of $100. There is no minimum initial investment if
stockholders choose the continuing automatic transfer plan. (See "How to
Purchase Shares"). For further information, contact the Fund at the address or
telephone number shown above. There can be no assurance that the Fund's
investment objective will be achieved.

INVESCO CAPITAL MGMT. INC. (the "Investment Manager") serves
as Investment Manager to the Fund. The Investment Manager receives a
management fee from the Fund and may be reimbursed by the Fund for certain
distribution expenses in connection with a Rule 12b-1 distribution plan.

This prospectus concisely sets forth information a
prospective investor should know about the Fund before investing. A Statement
of Additional Information about the Fund and an Annual Report to Shareholders
of the Fund has been filed with the Securities and Exchange Commission and is
available upon request and without charge by calling or writing the Fund at the
above address or by contacting certain registered broker-dealers ("selected
broker-dealers"). The "Statement of Additional Information" is dated
January __, 1997 and is incorporated by reference into this Prospectus in its
entirety.

-----------------------

Investors are advised to read this Prospectus and retain it
for future reference.

-----------------------

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.

<PAGE> 6
SUMMARY OF FUND EXPENSES

Shareholder Transaction Expenses:

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price) None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable) None
Redemption Fees (as a percentage of
amount redeemed) None
Exchange Fee None

Annual Fund Operating Expenses
(as a percentage of average net assets):

Management Fees(a) (variable--as a
percentage of average daily net assets) 0.67%
12b-1 Fees 0.50%
Service Fees(b) 0.01%
Other Expenses 1.40%
Total Fund Operating Expenses(a)(b) 2.58%
</TABLE>

(a)The management fee will vary depending upon the Fund's average
daily net assets and will be the greater of $50,000 or 0.75% of 1% on the first
$10 million, 0.50% of 1% on the next $10 million and 0.25% of 1% over
$20 million of the Fund's average daily net assets. Total Fund operating
expenses will vary depending upon the management fee.

(b) The service fees are payments made by the Fund to registered
broker-dealers for personal service and/or the maintenance of shareholder
accounts. The total Fund Operating Expense ratio is as of September 30, 1996.

<TABLE>
<CAPTION>
Example 1 year 5 years 10 years
<S> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
(i) 5% annual return and
(ii) redemption at the end of
each time period: $26 $137 $291
</TABLE>

The purpose of this table is to assist the investor in
understanding the various costs and expenses of an investment in the Fund. The
example should not be considered a representation of past or future expenses;
actual expenses may be greater or less than those shown. The average
commission rate period as of September 30, 1996 is $.0635.

<PAGE> 7
FINANCIAL HIGHLIGHTS

The following Financial Highlights for a share of beneficial interest
outstanding throughout the period shown has not been audited by Coopers &
Lybrand, L.L.P., independent accountants, whose most recent report on the
financial statements appears in the Fund's annual report, as filed with the
Securities and Exchange Commission (the "SEC") on March 4, 1996. The Fund's
Semi-Annual Report to Shareholders for the period June 30, 1996 was filed with
the SEC on August 28, 1996. This table should be read in conjunction with the
financial statements and notes thereto which are contained in such annual and
semi-annual reports.

<TABLE>
<CAPTION>
---------------------------------------------------------- -------------------- ------------------- -------------------
19961 1995 1994
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C>
Per share operating performance:
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Net asset value, beginning of period $12.13 $9.94 $10.20
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------

---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Income from investment operations:
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Net investment income 0.12 0.24 0.13
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Net realized and unrealized gain (loss) on 0.08 2.47 (0.13)
investments
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------

---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Less distributions:
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Dividend from net investment income (0.00) (0.23) (0.13)
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Distribution in excess of net investment (0.00) 0.002 0.002
income and realized gains
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Distribution from realized gains (0.00) (0.28) (0.13)
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------

---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Ratios to average net assets:
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Expenses 2.58%4 2.37% 2.87%
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------
Net investment income 1.33%4 2.09% 1.25%
---------------------------------------------------------- -------------------- ------------------- -------------------
---------------------------------------------------------- -------------------- ------------------- -------------------

- --------------------

1 Unaudited financial numbers for the period ended September 30, 1996.

2 Less than $.01 per share.

3 Not annualized, excluding sales charge.

4 Annualized.

<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus:

THE FUND: The Fund is a Maryland corporation, incorporated
on October 24, 1990, and registered as a open-ended, nondiversified, management
investment company under the Investment Company Act of 1940 ("1940 Act").

INVESTMENT OBJECTIVE: The Fund's investment objective is to
seek high current income and capital appreciation. It seeks to meet its
objective by investing the Fund's assets in: U.S. Government securities
including U.S. Treasury obligations and obligations issued or guaranteed by
U.S. Government agencies or instrumentalities, investment grade corporate
bonds, investment grade foreign government bonds, equity securities of U.S.,
Canadian, British and Trinidad and Tobago companies, American Depository
Receipts ("ADRs"), the Schemes of the Trinidad and Tobago Unit Trust
Corporation, certificates of deposit and money market funds. Under normal
market conditions, the Fund will maintain a level of at least 25% of its total
assets invested in debt securities and at least 25% of its total assets
invested in equity securities. For purposes of this investment policy, equity
securities are defined as: common stocks, preferred stocks, warrants, stock
rights, convertible bonds and convertible debentures.

There is no assurance that the Fund will achieve its
investment objective. The investment objective of the Fund and its investment
restrictions described in the Statement of Additional Information are
fundamental and may not be changed without stockholder approval. Its other
investment policies may be changed by the Board of Directors without
stockholder approval.

INVESTMENT RISKS: All investments, including mutual funds,
have risks and no investment is suitable for all investors. The Fund may
invest in both large and small companies. Investment in small companies
involve greater risk than is customarily associated with more established
companies. The Fund may invest in short, medium or long term interest bearing
obligations which have the risk of principal fluctuation due to changing
interest rates and the ability of the issuer to repay the obligation at
maturity. The Fund may invest in securities of companies and governments of
foreign nations that involve certain risks which are in addition to the usual
risks inherent in U.S. investments.

MANAGEMENT AND FEES: The Investment Manager is compensated
for its services and its related expenses at an annual rate of the greater of
$50,000 or 0.75 of 1% on first $10 million, 0.50 of 1% on next $10 million and
0.25% of 1% over $20 million of the Fund's average daily net assets. The
Investment Manager may receive 12b-1 fees as reimbursement for certain
distribution expenses.

HOW TO PURCHASE SHARES: Shares of the Fund may be purchased
through selected broker-dealers and from American Data Services, Inc., Transfer
Agent for the Fund ("Transfer Agent"), at the public offering price per share
next determined after receipt of an order by either a registered broker-dealer
or the Fund's Transfer Agent, in proper form with accompanying check or other
bank wire payment arrangements satisfactory to the Fund. The minimum initial
investment is $250. Subsequent investments will be a minimum of $100. There
is no minimum initial investment if stockholders opt to invest through the
continuing automatic transfer plan. See "How to Purchase Shares." Investments
through an Individual Retirement Account or other retirement plans, however,
have different requirements. See "Retirement Plans."

HOW TO SELL SHARES: Shares of the Fund may be redeemed
through selected broker-dealers and the Transfer Agent by the stockholder at
any time at the net asset value per share next determined after the redemption
request is received by either a registered broker-dealer or the Transfer Agent
in proper form. See "How to Redeem Shares."

<PAGE> 9

DIVIDENDS AND REINVESTMENT: Each dividend and capital gains
distribution, if any, declared by the Fund on its outstanding shares will,
unless a stockholder elects otherwise, be paid on the payment date in
additional shares of the Fund having an aggregate net asset value as of the
ex-dividend date of such dividend or distribution equal to the cash amount of
such distribution. An election may be changed by notifying the Fund in writing
at any time prior to the record date for a particular dividend or distribution.
There are no sales or other charges in connection with the reinvestment of
dividends and capital gains distributions. There is no fixed dividend rate,
and there can be no assurance that the Fund will pay any dividends or realize
any capital gains. However, the Fund currently intends to pay dividends and
capital gains distributions, if any, on an annual basis. See "Dividends,
Distributions and Taxes."

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to seek high current
income and capital appreciation. It seeks to meet its objective by investing
the Fund's assets in: U.S. Government securities including U.S. Treasury
obligations and obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, ADRs, the Schemes of the Trinidad and Tobago Unit Trust
Corporation, certificates of deposit and money market funds. There can be no
assurance that the Fund will be able to achieve its objective.

The Fund intends to invest in the Schemes of the Trinidad and
Tobago Unit Trust Corporation only if the Fund determines that there are no
adverse restrictions to realizing an investment in the Schemes of the Trinidad
and Tobago Unit Trust Corporation and the Investment Manager believes the
potential rewards from the Schemes of the Trinidad and Tobago Unit Trust
Corporation are greater than the other investments described above.

The Fund's investment policy will emphasize debt instruments
to achieve the Fund's current income objective. Under normal market
conditions, the Fund will maintain a level of at least 25% of its total assets
invested in debt securities and at least 25% of its total assets invested in
equity securities. The investment in equity securities versus debt securities
will depend upon the Investment Manager's evaluation of the relative merits and
risks of equity securities versus bonds.

The attractiveness of nongovernment instruments will be
judged based upon their potential return enhancement and creditworthiness.
Potential return is determined by observing the existing yield spread
differential within a historical context and purchasing such instruments only
when the differential is at levels which are above a long-term mean. Within
the investment credit spectrum, to ensure protection of principal, additional
credit analysis will be undertaken in employing the Investment Manager's
proprietary analytical techniques and data bases to further reduce the risk.

In determining the maturity of the debt securities the Fund
invests in, the Investment Manager will focus on whether the level of real
yield, after taking into account inflation, is adequate to compensate for the
greater volatility and risks associated with debt securities having a greater
maturity. Generally, the longer the maturity of a debt security, the greater
its price volatility. Conversely, the shorter the maturity, the lower its
price volatility. During a typical credit cycle, the average duration implied
by this discipline will likely average 5 years within a range normally of 2.5
to 8 years.

In determining what equity securities the Fund will invest
in, the Investment Manager will focus on the actual earnings, return on equity
and dividend history of the company. The Investment Manager will seek to
invest in equity securities of companies whose shares are undervalued based on
the current price relative to the long-term record of the company. For
purposes of this investment policy, equity securities are defined as: U.S. and
foreign common stocks, ADRs, warrants, convertible bonds, convertible
debentures, preferred stock and stock rights. No more than 5% of the Fund's
net assets may be used to purchase warrants or stock rights. For purposes of
this investment policy, a warrant is defined as a certificate giving the holder
the right to purchase securities at a stipulated price within a specified time
limit or perpetually. Sometimes a warrant is offered with

<PAGE> 10

securities as an inducement to buy. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. The Fund may not
purchase options on equity securities. Debt securities are defined as: U.S.
and foreign nonconvertible company bonds, U.S. and foreign government securities
and commercial paper.

The Fund intends to invest in a variety of securities, with
differing issuers, maturities and interest rates. If the Investment Manager
believes that stocks in general are overvalued, or that interest rates may rise
substantially, or that the general economic environment may be deteriorating,
the Investment Manager may assume a temporary defensive position and may invest
up to 100% of the Fund's assets in high quality commercial paper and short-term
U.S. Government securities such as Treasury Bills and Treasury Notes. The Fund
intends to operate as a "regulated investment company" under Subchapter M of
the Internal Revenue Code. See "Dividends, Distributions and Taxes." The
average U.S. dollar weighted duration of the Fund's portfolio is not expected
to exceed ten years.

The Fund does not expect to trade in securities for
short-term gain. It is anticipated that the annual portfolio turnover rate
will not exceed 100%. The portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by the average monthly
value of the Fund's portfolio securities. For purposes of this calculation,
portfolio securities exclude debt securities having a maturity at the date of
purchase of one year or less.

Subject to its investment policy of normally investing at
least 25% of its total assets in U.S. Government securities, investment grade
corporate bonds and investment grade foreign government bonds, the Fund is
permitted to invest in (1) U.S. dollar denominated debt securities, similar in
nature to those described above, regardless of the domicile of the issuers and
(2) income producing equity securities of companies domiciled in the United
States (some of which may be denominated other than in U.S. dollars). Some of
these securities are issued in the Eurodollar market by multinational banks and
companies which may have operations in Trinidad and Tobago.

The Fund may not borrow money except for (1) short-term
credits from banks as may be necessary for the clearance of portfolio
transactions, and (2) borrowings from banks for temporary or emergency
purposes, including the meeting of redemption requests, which would otherwise
require the untimely disposition of its portfolio securities. Borrowing for
any purpose including redemptions may not, in the aggregate, exceed 5% of total
assets after giving effect to the borrowing and borrowing for purposes other
than meeting redemptions may not exceed 5% of the value of the Fund's total
assets after giving effect to the borrowing. The Investment Manager of the
Fund will not purchase securities when borrowings exceed 5% of total assets.
The Fund may mortgage, pledge or hypothecate assets to secure such borrowings.

BASIC INVESTMENT TECHNIQUES

Securities Subject to Reorganization

The Fund may invest in both debt and equity securities for
which a tender or exchange offer has been made or announced and in securities
of companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of the Investment Manager,
there is a reasonable prospect of capital appreciation significantly greater
than the brokerage and other transaction expenses involved.

<PAGE> 11

securities to be received as a result of the contemplated transaction but also
the financial resources and business motivation of the offeror and the dynamics
and business climate when the offer or proposal is in process. In making these
investments, the Fund will not violate any of its investment restrictions
including the requirement that: (a) as to 75% of its total assets, it will not
invest more than 5% of its total assets in the securities of any one issuer, and
(b) it will not invest 25% or more of its total assets in any one industry.
Since such investments are ordinarily short-term in nature, they will tend to
increase the turnover ratio of the Fund, thereby increasing its brokerage and
other transaction expenses, as well as make it more difficult for the Fund to
meet the test for favorable tax treatment as a "Regulated Investment Company"
under Subchapter M of the Internal Revenue Code of 1986 (the "Code") (see
"Dividends, Distributions and Taxes"). The Investment Manager intends to select
investments of the type described which, in its view, have a reasonable prospect
of capital appreciation which is significant in relation to both risk involved
and the potential of available alternative investments, as well as to monitor
the effect of such investments on the tax qualifications test of the Code.

The Fund may not invest more than 15% of its net assets in
(1) securities which are restricted or for which market quotations are not
readily available; (2) fixed time deposits subject to withdrawal penalties
(other than overnight deposits); (3) repurchase agreements having a maturity of
more than seven days; and (4) other illiquid securities. The Fund will also
treat non-U.S. Government interest-only or principal-only securities as
illiquid securities so long as the staff of the SEC maintains its position that
such securities are illiquid.

Nonconvertible Debt Securities

Under normal market conditions, the Fund will invest at least
25% of its assets in nonconvertible debt securities. For purposes of this
investment policy, nonconvertible debt securities are defined as: (1) Rated
corporate bonds, as well as variable amount master demand notes; (2) Government
securities which include securities of, or guaranteed by, the U.S. Government,
its agencies or instrumentalities; (3) Commercial paper which include
commercial paper of companies rated A-1 or A-2 by Standard & Poor's Corporation
("S&P") or rated P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's").
Fixed income securities rated, at the time of investment, less than BBB by S&P
or Baa by Moody's or which are unrated but of comparable quality as determined
by the Investment Manager, are not investment grade. These securities are
viewed by the rating agencies as being predominantly speculative in nature.
They may be characterized by substantial risk concerning payments of interest
and principal, sensitivity to economic conditions and changes in interest
rates, as well as by market price volatility and/or relative lack of secondary
market trading, among other risks. The Fund will not invest any of its assets
in noninvestment grade debt securities.

Although fixed income securities rated BBB by S&P or Baa by
Moody's, at the time of investment, are investment grade, these securities are
subject to risks such as market price volatility, creditworthiness, relative
liquidity of secondary trading market and other speculative characteristics of
lower-rated securities which could have an adverse effect on the net asset
value of the Fund. These securities are subject to certain risks with respect
to the issuing entity and to greater market fluctuations than certain
lower-yielding, higher-rated, investment grade fixed income securities. The
Fund will liquidate any fixed income securities held in its portfolio whose
rating is downgraded below BBB by S&P or Baa by Moody's. The net asset value
of the Fund could be adversely affected by such liquidation transactions.

The market values of fixed income securities generally fall
when interest rates rise and, conversely, rise when interest rates fall.

U.S. Government Securities

The U.S. Government Securities in which the Fund may invest
include direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds, and obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith
and credit of the United States, such as Government National Mortgage
Association ("GNMA") certificates, securities that are supported by the right
of the issuer to borrow from the U.S. Treasury, such as securities of the
Federal Home Loan Banks,

<PAGE> 12

and securities supported solely by the creditworthiness of the issuer, such as
Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") securities.

The Fund may invest in mortgage-backed securities issued or
guaranteed by GNMA, FNMA or FHLMC and representing undivided ownership
interests in pools of mortgages. The mortgages backing these securities
include, among others, conventional 30-year fixed-rate mortgages, 15-year
fixed-rate mortgages, graduated payment mortgages and adjustable rate
mortgages. The U.S. Government or the issuing agency guarantees the payment of
the interest on and principal of these securities. The guarantees do not
extend to the securities' yield or value, however, which are likely to vary
inversely with fluctuations in interest rates, and, the guarantees do not
extend to the yield or value of the Fund's shares. These securities are in
most cases "pass-through" instruments, through which the holders receive a
share of all interest and principal payments from the mortgages underlying the
securities, net of certain fees. The principal amounts of such underlying
mortgages generally may be prepaid in whole or in part by the mortgagees at any
time without penalty and the prepayment characteristics of the underlying
mortgages may vary. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Fund will reinvest the prepaid
amounts in other income producing securities, the yields of which will reflect
interest rates prevailing at the time. Accelerated prepayments adversely
affect yields for pass-through securities purchased at a premium and may
involve additional risk of loss of principal because the premium may not have
been fully amortized at the time the obligation is repaid. The opposite is
true for pass-through securities purchased at a discount.

In addition to GNMA, FNMA or FHLMC certificates through which
the holder receives a share of all interest and principal payments from the
mortgages underlying the certificate, the Fund may also invest in mortgage
pass-through securities issued by the U.S. Government or its agencies and
instrumentalities, commonly referred to as mortgage-backed security strips or
MBS strips. MBS strips are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of stripped mortgage security will have one
class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and
the remainder of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class).
The yields to maturity on IOs and POs are sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
principal payments may have a material effect on yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may not fully recoup its initial investments in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially adversely
affected.

The Schemes of the Trinidad and Tobago Unit Trust Corporation

The Unit Trust Corporation was created by the Unit Trust
Corporation of Trinidad and Tobago Act, 1981 (Republic of Trinidad and Tobago
Act No. 26 of 1981). The Unit Trust Corporation's main office is located in
the City of Port-of-Spain, Trinidad. The affairs of the Unit Trust Corporation
are managed by a board of directors.

The Schemes of the Trinidad and Tobago Unit Trust Corporation
are investment companies as defined under the 1940 Act and their respective
investments are at all times identified separate from the investments of the
Unit Trust Corporation itself. Accounts of each of the Schemes of the Trinidad
and Tobago Unit Trust Corporation are prepared separately from those of the
Unit Trust Corporation. When an investor purchases units from the Unit Trust
Corporation, he is purchasing units issued from the Schemes of the Trinidad and
Tobago Unit Trust Corporation. The transaction is administered by the Unit
Trust Corporation on behalf of the Schemes of the Trinidad and Tobago Unit
Trust Corporation.

<PAGE> 13

the Schemes of the Trinidad and Tobago Unit Trust Corporation had an aggregate
of $212,850,000 (U.S. dollars) under management and approximately 137,000
unitholders.

The financial records of the Unit Trust Corporation are
examined and audited by the Auditor General of Trinidad and Tobago. The
financial statements and records of the Unit Trust Corporation are prepared in
accordance with the Trinidad and Tobago Accounting Standards and are reported
in Trinidad and Tobago dollars.

The 1940 Act limits the extent to which the Fund may purchase
equity securities of the Schemes of the Trinidad and Tobago Unit Trust
Corporation or any other investment companies. No more than 10% of the Fund's
total assets may be used to purchase any securities of investment companies.
The Fund will not purchase more than 3% of the total outstanding voting stock
of an investment company nor purchase securities of an investment company
having an aggregate value in excess of 5% of the value of the total assets of
the investment company. The Fund will pay an investment management fee when it
invests in the Schemes of the Trinidad and Tobago Unit Trust Corporation.

As of September 30, 1996, the Unit Trust Corporation
beneficially owned 12.363% of the outstanding voting stock of the Fund.

CERTAIN INVESTMENT STRATEGIES AND SPECIAL RISK CONSIDERATIONS

All investments, including those in mutual funds, have risks.
No investment is suitable for all investors. The Fund is designed for long
term investors who can accept the fluctuations in portfolio value and other
risks associated with the primary objective of seeking current income and
capital appreciation through investment in securities. There can be no
assurance that the Fund will achieve its objective.

The Fund will not make significant investments in securities
of any one issuer to reduce risk. Although risk cannot be eliminated, this
strategy reduces the impact of any single investment. The Fund may invest in
both large and small companies. Investments in small companies involve greater
risk than is customarily associated with more established companies. Smaller
companies often have limited product lines, markets, management personnel,
research and/or financial resources. The securities of small companies, which
may be thinly capitalized, may have more limited marketability and be subject
to more abrupt or erratic market movements than securities of larger companies
or the market averages in general.

Any investment by the Fund in short, medium or long term
interest bearing obligations has the risk of principal fluctuation due to
changing interest rates and the ability of the issuer to repay the obligation
at maturity. Fixed income instrument prices are inversely related to interest
rate movements, but proportional to the maturity of the instruments. That is,
long-term instrument prices rise or fall more than short-term instruments for a
given change in interest rates. Certain risk factors are also associated with
other investment practices of the Fund (none of which is expected to involve
more than 25% of the Fund's net assets), including investing in debt securities
and investing in foreign securities. Although the Fund does not purchase
securities with a view of rapid turnover, there are no limitations on the
length of time portfolio securities must be held. The Fund's portfolio
turnover rate is not expected to exceed 100%. A portfolio turnover exceeding
100% generally results in increased transaction expenses and the realization of
capital gains and losses.

<PAGE> 14

about the securities and about the foreign company or government issuing them
than is available about a U.S. company or U.S. Government entity. Foreign
issuers are not subject to uniform financial reporting standards, practices and
requirements comparable to those applicable to U.S. issuers. Furthermore, with
respect to some foreign countries, there is the possibility of expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, including the withholding of dividends, political or
social instability or domestic developments that could affect U.S. investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital investment, resource
self-sufficiency and balance of payments positions. The Fund may invest in
securities of foreign governments (or agencies or instrumentalities thereof) and
many, if not all, of the foregoing considerations apply to such investments as
well. Finally, securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies, and
certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold.

Foreign securities may be subject to foreign government taxes
that would reduce the net return on such securities and the Fund may be
affected unfavorably by exchange control regulations. Investment in foreign
securities will also result in higher expenses due to the cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges and the expense of maintaining securities with foreign
custodians.

MANAGEMENT

Board of Directors

The overall management of the business and affairs of the
Fund is vested with its Board of Directors. The board approves all significant
agreements between the Fund and persons or companies furnishing services to it,
including the Fund's agreement with its Investment Manager, its Custodian, its
Transfer Agent, selected broker-dealers and its Administrator. The day-to-day
operations of the Fund are delegated to its officers, subject to the investment
objectives and policies of the Fund and to general supervision by the Board of
Directors.

The Board of Directors is presently comprised of five
members, three of whom reside outside the United States. Directors
Rolston Nelson, Roosevelt Williams and Clarry Benn are residents of the
Republic of Trinidad and Tobago. The Fund presently has one vacancy on the
Board of Directors which it expects to fill by April 1, 1997. Clarry Benn also
serves as an executive officer of the Fund.

The Maryland General Corporation Law subjects all directors
and officers of the Fund to fiduciary duties for the lawful management of the
Fund's organization and operation, including federal and state securities laws.
Investors of the Fund may not be able to effect service of process within the
United States upon the Fund's nonresident directors and officers for the
enforcement of civil liabilities under federal and state securities laws. The
Fund has appointed an agent for service of process in the states where the Fund
has registered its securities for offer and sale.

The United States and the Republic of Trinidad and Tobago are
not parties to a convention governing the mutual recognition and enforcement of
foreign money judgments. Investors of the Fund may not be able to enforce a
United States or Trinidad and Tobago court judgment against nonresident
directors and officers of the Fund.

The Investment Manager

The Investment Manager is subject to the control of the
Fund's Board of Directors. The Investment Manager was incorporated as a
registered investment advisor in 1971. In November 1985, the Investment
Manager entered into a limited partnership with Britannia Arrow Holdings, PLC,
a major U.K. financial services company, to pursue global investment business.
The Investment Manager was the general

<PAGE> 15

partner. In December 1988, the two firms completed a merger, creating the
global investment organization of INVESCO, with offices worldwide.

The Investment Manager manages over $35 billion in retirement
fund assets for over 300 institutional clients located throughout the U.S., the
U.K. and Japan. The Investment Manager's clients include corporate pension and
profit sharing plans, public funds, jointly-trusteed funds, endowment and
foundation accounts. The Investment Manager has provided investment advisory
services to registered investment companies.

On November 4, 1996, the Investment Manager announced that it
has agreed to merge with A I M Management Group, Inc. ("AIM"), one of the
largest mutual fund managers in the United States. AIM's business is primarily
retail-oriented and focused on mutual funds marketed by financial consultants
in the United States. AIM's business fits well within the Investment Manager's
focus on institutional money management and no-load funds. The Investment
Manager will be able to sell its successful value products through AIM's
extensive marketing organization. AIM will have access to the Investment
Manager's extensive international capabilities. This merger will result in a
new financial services company, well-equipped to provide the Fund and investors
with a comprehensive spectrum of investment management capabilities. The
merger is expected to be completed in February 1997, upon which time the new
name of the Investment Manager will be AMVESCO. The Investment Manager
believes that the intended merger will in no way impair its service to the
Fund.

The Investment Manager is authorized to consider sales of
shares of the Fund as a factor in the selection of brokers to execute brokerage
and principal transactions, subject to the requirements of "best execution,"
i.e., prompt and efficient execution at the most favorable securities price.

Under the Investment Management Agreement, between the Fund
and the Investment Manager, the Fund pays the Investment Manager a fee,
computed daily, and payable monthly, at the annual rate of the greater of
$50,000 or 0.75% of 1% on first $10 million, 0.50% of 1% on next $10 million
and 0.25% of 1% over $20 million of the Fund's average daily net assets. The
minimum management fee of $50,000 or 0.75% of 1% on the first $10 million is
higher than most investment companies are charged. The management fee charged
on average daily net assets in excess of $10 million is not higher than most
investment companies are charged. The Fund and the Investment Manager believe
the fee is appropriate considering the investment objective of the Fund.

Administrator

American Data Services, Inc. (the "Administrator"), located
at 24 West Carver Street, Huntington, New York 11743, serves pursuant to an
agreement with the Fund (the "Administrative Services Agreement"). Pursuant to
the Administrative Services Agreement, subject to the overall authority of the
Fund's Board of Directors in accordance with Maryland law, the Administrator
will assist in the Fund's administration and operation, including, but not
limited to, the preparation of statistical and research data, data processing
services, preparation of management reports for performance and compliance, as
well as prepare and maintain the Fund's operating expense budget.

Fund Operating Expenses

In addition to the management fee payable to the Investment
Manager, the Fund is responsible for its operating expenses, including:
(i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums;
(iv) compensation and expenses of, directors other than those affiliated with
the Investment Manager; (v) legal and audit expenses; (vi) fees and expenses of
the Custodian, shareholder service or Transfer Agent; (vii) fees and expenses
for registration or qualification of the Fund and its shares under federal or
state securities laws; (viii) expenses of preparing, printing and mailing
reports and notices and proxy material to stockholders; (ix) other expenses
incidental to holding any stockholder meetings; (x) dues or assessments of or
contributions to the Investment Company Institute or any successor;
(xi) Rule 12b-1 fees paid by the Fund in connection with the Distribution Plan;
(xii) service fees paid by the Fund in connection with the personal service
and/or maintenance

<PAGE> 16

of shareholder accounts; and (xiii) such nonrecurring expenses as may arise,
including litigation affecting the Fund and the legal obligations with respect
to which the Fund may have to indemnify its officers and directors.

See the Statement of Additional Information for more
information as to the Fund's Board of Directors, Officers, the Investment
Manager and its operating expenses.

HOW TO PURCHASE SHARES

Opening an Account

In order to invest in the Fund, an investor must first
complete and sign an account application. Shares of the Fund may be purchased
either by mail or by telephone through selected broker-dealers who have a sales
agreement with the Fund or through the Transfer Agent, at the offering price
next determined after receipt of an order by selected broker-dealers or the
Transfer Agent, in proper form. The offering price is the net asset value per
share of the Fund.

The Fund may from time to time pay a bonus or other incentive
to the selected dealers that employ a sales representative who sells a minimum
dollar amount of shares of the Fund. Such bonus or other incentives may take
the form of payment for travel expense including lodging, incurred in
connection with trips taken by qualifying registered representatives and
members of their families to places within or without the United States.

The minimum initial investment in the Fund including
purchases for an Individual Retirement Account is $250. Subsequent investments
are a minimum of $100 except for accounts that elect the continuing automatic
transfer plan.

The minimum initial investment is waived for accounts that
elect the continuing automatic transfer plan ($50 minimum monthly payment). To
elect the continuing automatic transfer plan, complete the continuing automatic
transfer plan section of the Fund's account application and include a voided
unsigned check from the bank account to be debited. If you discontinue the
continuing automatic transfer plan before your account reaches the required
minimum initial investment, then the Fund reserves the right to close your
account in accordance with the procedures described in "How to Redeem Shares."
You should consider your financial ability to continue in the continuing
automatic transfer plan in light of the Fund's right to close your account
under certain circumstances or that you may find it necessary to redeem your
account, either of which may occur in periods of declining Fund share prices or
during periods of rising prices.

The Fund reserves the right to reject any order.

Purchase orders may either be placed with selected
broker-dealers or submitted to the Transfer Agent as follows:

Purchase Placed With Selected Broker-Dealers

Selected broker-dealers may place orders for shares of the
Fund on behalf of clients at the offering price next determined after receipt
of the client's order made by calling the Transfer Agent. If the order is
placed by a client with a selected dealer prior to 4 p.m. Eastern time on any
day the New York Stock Exchange is open for trading, and forwarded to the
Transfer Agent prior to 5 p.m. Eastern time on that day, it will be confirmed
to the selected dealer at the applicable offering price determined that day.
The selected broker-dealer is responsible for placing purchase orders promptly
with the Transfer Agent and for forwarding payment.

<PAGE> 17

Purchase Placed With Transfer Agent

Investors may mail an application form, together with a check
payable to the Fund, directly to the Transfer Agent, at the following address:

American Data Services, Inc.
24 West Carver Street
Huntington, New York 11743

If the purchase being made is a subsequent investment, the
stockholder should send a stub from a confirmation previously received from the
Transfer Agent in lieu of the application form. If no such stub is available,
a brief letter giving the registration of the account, the name of the Fund and
the account number should accompany the check. In addition, the stockholder's
account number should be written on the check. Checks do not need to be
certified but are accepted subject to face value in United States dollars and
must be drawn on United States banks.

Shares of the Fund will be purchased for the account of the
investor by the Transfer Agent as agent for the investor's selected dealer at
the offering price next determined after receipt by the Transfer Agent of the
check together with the appropriate form or other identifying information.

The Fund offers additional services to investors, including
plans for the systematic investment and withdrawal of money as well as
prototype retirement programs. Information about these services is also
available in the Statement of Additional Information or from selected
broker-dealers or the Transfer Agent.

Net Asset Value

The Fund's net asset value per share is determined on each
day that the New York Stock Exchange (the "Exchange") is open for trading, as
of the close of the Exchange, currently 4 p.m., Eastern time. The net asset
value per share is the value of the Fund's assets, less its liabilities,
divided by the number of shares of the Fund outstanding. The value of the
Fund's portfolio securities will be the market value of such securities. See
the Statement of Additional Information for further information.

DISTRIBUTION PLAN AND SERVICE FEES

The Board of Directors has adopted a Distribution Plan
applicable to the Fund under Section 12(b) of the 1940 Act and Rule 12b-1
thereunder.

Pursuant to the Plan, registered broker-dealers and others
("Qualified Recipients") that have rendered distribution assistance (whether
direct, administrative or both) and that enter into written agreements with the
Fund may receive fees at rates determined by the Fund's Board of Directors. In
addition, the Fund will purchase advertising, sales literature, other
promotional material and marketing services. The Fund will reimburse the
Investment Manager and Qualified Recipients for these expenditures, including
interest expenses and other overhead items, during a fiscal year of the Fund,
up to a limit of 0.50% of 1% on an annual basis of the Fund's average daily net
assets, subject to compliance with guidelines adopted from time to time by the
Board of Directors of the Fund.

No reimbursements under the Plan will be made for
expenditures or fees for fiscal years prior to the fiscal year in question or
in contemplation of future fees or expenditures. In addition to payments
received pursuant to the Plan, Qualified Recipients which are selected dealers
will receive a service fee in the amount of .25% of each shareholder account
opened with the Fund as a result of a sale made by them of Fund shares. The
service fee is paid by the Fund to the Qualified Recipient for the personal
service and/or maintenance of shareholder accounts; and the Qualified Recipient
may receive commissions on Fund portfolio transactions subject to the
provisions of the Management Agreement (see the Statement of Additional
Information).

<PAGE> 18

The enactment of the National Securities Markets Improvement
Act in October 1996 created an amendment to the 1940 Act. The changes in
legislation will enable the Fund to distribute its shares to a broader number
of states.

HOW TO REDEEM SHARES

The Fund will redeem for cash all of its full and fractional
shares at the net asset value per share next determined after receipt by the
Transfer Agent of a redemption request in proper form, as described below. A
stockholder wishing to redeem shares may do so at any time by writing to the
Fund in care of its Transfer Agent at 24 West Carver Street, Huntington, New
York 11743. The instructions should specify the name of the Fund, the number
of shares to be redeemed and be signed by all registered owners exactly as the
account is registered. The redemption request will not be accepted unless it
contains all required documents in proper form, as described below.

Proper Form

In addition to written instructions, if any shares being
redeemed are represented by stock certificates, the certificates must be
surrendered. The certificates must either be endorsed or accompanied by a
stock power signed by the registered owners, exactly as the certificates are
registered. The signatures on the certificates or stock powers, as well as the
signatures on any redemption request concerning shares not represented by
certificates, must conform to the requirements of the Transfer Agent.
Additional documents may be required from corporations or other organizations,
fiduciaries or anyone other than the stockholder of record. Any questions
concerning documents needed should be directed to the Transfer Agent.

Payments

Payment for shares tendered will be made within seven days
after receipt by the Transfer Agent of instructions, certificates, if any, and
other documents, all in proper form. Payment may be delayed under unusual
circumstances, as specified in the 1940 Act or as determined by the SEC.
Payment may also be delayed for any shares purchased by check until the Fund
has determined that the purchase check will be honored, which may take up to
15 calendar days.

Redemption in Kind

If the Fund's Board of Directors determines that it would be
detrimental to the best interests of the remaining stockholders of the Fund to
make payment wholly or partly in cash, the redemption value may be paid in
whole or in 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 SEC. The
Fund, however, has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which it is obligated to redeem shares of the Fund solely in cash
up to the lesser of $250,000 or one percent of the net asset value of the Fund
during any 90-day period for any one stockholder. Should redemptions by any
stockholder exceed such limitation, the Fund will have the option of redeeming
the excess in cash or in kind. If shares are redeemed in kind, the redeeming
stockholder would incur brokerage costs in converting the assets into cash.

<PAGE> 19

Reinvestment Privilege

A stockholder who has redeemed all or part of his or her
shares of the Fund may reinvest all or part of the redemption proceeds in
shares of the Fund at the net asset value next computed after receipt of the
reinvestment order if such reinvestment is effected within 30 days after the
redemption. The privilege may be exercised only once by a stockholder.
However, a stockholder has not used up this one-time privilege if the sole
purpose of a prior redemption was to invest the proceeds at net asset value in
a qualified retirement plan. If the stockholder has realized a gain on the
redemption, the transaction is taxable and reinvestment will not alter any
capital gains tax payable. If there has been a loss on the redemption, some or
all of the loss may not be allowed as a tax deduction depending on the amount
reinvested.

Redemption of Small Accounts

The Fund's Board of Directors may, in order to reduce the
expenses of the Fund, redeem all of the shares of any stockholder (other than a
qualified retirement plan) whose account has declined to a net asset value of
less than $100, as a result of a transfer or redemption, or if the continuing
automatic transfer plan is discontinued by a stockholder before the required
minimum initial investment is attained, at the net asset value determined as of
the close of business on the business day preceding the sending of notice of
such redemption. Stockholders will be given 60 days' prior written notice in
which to purchase sufficient shares to avoid such redemption.

RETIREMENT PLANS

If you are eligible, you may set up your account under an
Individual Retirement Account ("IRA") which is obtainable from selected
broker-dealers or the Transfer Agent. The minimum investment required to open
an IRA for investment in shares of the Fund is $250 for an individual except
that both the individual and his or her spouse would be able to establish
separate IRAs if their combined investment is $400.

If you are under age 70-1/2, you can contribute up to the
lesser of $2,000 or 100% of your compensation annually to an IRA. If your
spouse is not employed, contributions of up to $2,000 may be made annually for
each spouse (totaling $4,000) if the combined compensation of both spouses is
at least equal to the contributed amount. Contributions to IRAs are tax
deductible only if you and your spouse are not covered by existing qualified
retirement plans or, if covered, your incomes do not exceed certain amounts.
However, whether your contributions are deductible or not, the income and
capital gains on your IRA are not taxed until they are withdrawn. Investors
should consult their own tax advisors about the establishment of retirement
plans.

Fund shares may also be a suitable investment for other types
of qualified pension or profit sharing plans which are employer-sponsored,
including deferred compensation or salary reduction plans known as 401(k) plans
which give participants the right to defer portions of their compensation for
investment on a tax deferred basis until distributions are made from the plans.
The minimum initial investment for an individual under such plans is $50 and a
$50 minimum for additional investments.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions

Each dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, unless the stockholder
elects otherwise, be paid on the payment date fixed by the Fund's Board of
Directors in additional shares of the Fund having an aggregate net asset value
as to the ex-dividend date of such dividend or distribution equal to the cash
amount of such distribution. An election to receive dividends and
distributions may be changed by notifying the Fund in writing at any time prior
to the record date for a particular dividend or distribution. There are no
sales or other charges in connection with the reinvestment of dividends and

<PAGE> 20

capital gains distributions. There is no fixed dividend rate, and there can be
no assurance that the Fund will pay any dividends or realize any capital gains.
However, the Fund currently intends to pay dividends and capital gains
distributions, if any, on an annual basis.

Taxes

The Fund intends to qualify for tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code") in order to be relieved of federal income tax on that part of its net
investment income and realized capital gains which it pays out to its
stockholders. To qualify as a regulated investment company and to avoid
payment of taxes at the fund level, the Fund will distribute substantially all
of the net ordinary income and net capital gains to its stockholders as
described above.

The Fund must meet the Code's diversification requirement
that, at the end of each calendar quarter, no more than 25% of the Fund's
assets may be invested in securities of a single issuer (other than Government
Securities or the securities of other regulated investment companies) and at
least 50% of the assets of the Fund must be invested in cash, cash items,
receivables, U.S. Government Securities, securities of other regulated
investment companies and other securities provided that, with respect to such
other securities, the Fund does not (i) invest more than 5% of its assets in
any one issuer; or (ii) own more than 10% of the outstanding voting securities
of such issuer. The Fund (i) must also derive at least 90% of its annual gross
income from certain specified sources and (ii) may not derive 30% or more of
its annual gross income from the disposition of securities (or foreign currency
positions not directly related to the Fund's principal business of investing in
securities) held for less than three months. The U.S. Treasury Department is
authorized to promulgate regulations under which certain foreign currency gains
realized by the Fund may no longer be regarded as qualifying income under the
90% requirement.

All distributions, other than long-term capital gain
distributions and exempt-interest dividends, are taxable to the Fund
stockholders as ordinary income. Distributions of long-term capital gains, if
designated as such by the Fund, are taxable as such, regardless of how long the
stockholder has owned shares in the Fund. If a stockholder disposes of shares
at a loss before having held the shares for longer than six months, such loss
will be treated as a long-term capital loss to the extent a stockholder
previously received a long-term capital gains dividend on the shares. Fund
distributions are taxable whether distributed to stockholders in cash or
additional shares. However, many tax-exempt entities may not be subject to tax
on Fund distributions.

The Code generally requires the Fund to distribute, prior to
December 31 in each year without regard to its fiscal year end, 98% of its
ordinary income for that year and 98% of the capital gain net income, if any,
realized during the one-year period ending on October 31 in that year.
Distributions declared and payable to stockholders of record in October,
November or December and paid in January will be treated for federal income tax
purposes as if received by the stockholder in December. To the extent that the
distribution requirement for a calendar year is not met, a 4% nondeductible
excise tax on the undistributed amount would be assessed against the Fund.

In addition to the 98% distribution test described above
necessary to avoid excise taxation, a second distribution test applies. To
qualify for the preferential tax treatment under Subchapter M of the Code, the
Fund must distribute annually the sum of 90% of its investment company taxable
income (i.e., its taxable ordinary income and net short-term capital gain) and
90% of its net tax-exempt interest.

The Fund's investments in foreign currency denominated debt
obligations and hedging activities will likely produce a difference between its
book income and its taxable income. This difference may cause a portion of the
Fund's income distributions to constitute a return of capital for tax purposes
or require the Fund's income distributions to constitute a return of capital
for tax purposes or require the fund to make distributions exceeding book
income to qualify as a regulated investment company.

Current federal tax law requires the holder of a security
issued with "original issue discount" (including a zero coupon U.S. Treasury
security) to accrue as income each year a portion of the discount at which

<PAGE> 21

the security was purchased, even though the holder receives no interest payment
in cash on the security during the year. A security has "original issue
discount" if its face amount at maturity exceeds its issue price by more than a
de minimis amount. Accordingly, the Fund may be required to pay out as an
income distribution each year an amount which is greater than the total amount
of cash interest the Fund actually received. Such distributions may be made
from the cash assets of the Fund or by liquidation of its portfolio securities,
if necessary. The Fund may realize gains or losses from such liquidations. If
the Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.

The Transfer Agent will send stockholders and the Internal
Revenue Service an annual statement detailing federal tax information,
including information about dividends and distributions (both taxable and
tax-exempt) paid to stockholders during the preceding year. This statement
should be kept as a permanent record. A fee may be charged for any duplicate
information requested.

Before investing in the Fund, individuals are advised to
check the consequences of local and state tax laws, and the consequences for
any retirement plan offering tax benefits.

GENERAL INFORMATION

Description of Shares, Voting Rights and Liabilities

The Fund is a Maryland corporation, incorporated on
October 24, 1990, and registered as an open-ended, nondiversified, management
investment company under the 1940 Act. The authorized capital stock consists
of 2,000,000 shares of common stock having a par value of ($.01) per share.
The Fund's Board of Directors is authorized to divide the unissued shares into
one or more classes of common stock (which may be referred to as portfolios,
funds or series), each class representing a separate, additional Fund
portfolio, and to fix the number of shares in any such class.

Shares of all classes will have identical voting rights,
except where by law, certain matters must be approved by a majority of the
shares of the affected class. Each share of any class of shares when issued
has equal dividend, liquidation and voting rights within the class for which it
was issued and each fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Shares will
be voted in the aggregate.

There are no conversion or preemptive rights in connection
with any shares of the Fund. All shares, when issued in accordance with the
terms of the offering, will be fully paid and nonassessable. Shares will be
redeemed at net asset value, at the option of the stockholder.

The Fund sends semiannual and annual reports to all of its
stockholders which include a list of portfolio securities and the Fund's
financial statements which shall be audited annually.

The shares of the Fund have noncumulative voting rights which
means that the holders of more than 50% of the shares can elect 100% of the
directors if the holders choose to do so, and, in that event, the holders of
the remaining shares will not be able to elect any person or persons to the
Board of Directors. Unless specifically requested in writing to the Transfer
Agent by an investor who is a stockholder of record, the Fund does not issue
certificates evidencing Fund shares.

The Corporation will hold an annual stockholder meeting each
year. Special meetings of the stockholders will be held for the consideration
of proposals requiring stockholder approval by law, such as changing
fundamental policies or upon the written request of 25% of the Fund's
outstanding shares. The directors will promptly call a meeting of stockholders
to consider the removal of a director or directors when requested to do so by
the holders of not less than 10% of the outstanding shares and that
stockholders will receive communication assistance in connection with calling
such a meeting. At any meeting of stockholders duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the holders
of at least

<PAGE> 22

two-thirds of the votes entitled to be cast thereon, remove any director or
directors from office, with or without cause, and may elect a successor or
successors to fill any resulting vacancies for the unexpired term of the removed
director.

The Fund's organizing documents have been filed with the SEC
as exhibits to the Fund's registration statement and can be found at the SEC,
at the Fund's principal office or at the offices of the Fund's legal counsel.

Stockholder Approval

Other than elections of directors, which is by plurality, any
matter for which stockholder approval is required by Maryland General
Corporation Law and the 1940 Act, requires the affirmative vote of at least a
"majority" (as defined by the 1940 Act) of the outstanding voting securities of
the Fund at a meeting called for the purpose of considering such approval. A
majority of the Fund's outstanding securities is the lesser of (1) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy or (2) more than 50% of the
outstanding shares.

Legal Proceedings

There are currently no pending material legal proceedings
against the Fund or the Unit Trust Corporation.

Performance Information

The Fund may furnish data about its investment performance in
advertisements, sales literature and reports to stockholders. "Total return"
represents the annual percentage change in value of $1,000 invested at the
maximum public offering price for the one and five year periods and the life of
the Fund through the most recent calendar quarter, assuming reinvestment of all
dividends and distributions. Quotations of "yield" will be based on the
investment income per share earned during the particular 30-day period, less
expenses accrued during the period, with the remainder being divided by the
maximum offering price per share on the last day of the period. The Fund may
also furnish total return and yield calculations for other periods and/or based
on investments at various sales charge levels or net asset values. Any
performance data which is based on the Fund's net asset value per share would
be reduced if a sales charge were taken into account.

Custodian

Star Bank is the custodian for the Fund's cash and securities.

Independent Accountants

Coopers & Lybrand, L.L.P. has been appointed independent
accountants for the Fund.

Information for Stockholders

All stockholder inquiries regarding administrative procedures
including the purchase and redemption of shares should be directed to the
Transfer Agent. For assistance, call 516-385-9580 or 1-800-368-3322.

This Prospectus omits certain information contained in the
Registration Statement filed with the SEC. Copies of the Registration
Statement, including items omitted herein, may be obtained from the Commission
by paying the charges prescribed under its rules and regulations. The
Statement of Additional Information included in such Registration Statement and
the Annual Report to Shareholders of the Fund may be obtained without charge
from the Fund or selected broker-dealers.

<PAGE> 23

DATED JANUARY __, 1997

THE CHACONIA INCOME & GROWTH FUND, INC.

Statement of Additional Information

Information contained herein is subject to completion or
amendment. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission (the "SEC"). These
securities may not be sold nor many any offers to buy be accepted prior to the
time the registration becomes effective.

This Statement of Additional Information is not a prospectus,
and it should be read in conjunction with the Prospectus of The Chaconia
Income & Growth Fund, Inc. (the "Fund"). A copy of the Prospectus may be
obtained from the Fund c/o American Data Services, Inc., 24 West Carver Street,
Huntington, New York 11743.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Cross-Reference
to Page in the
Page Prospectus
---- ----------
<S> <C> <C>
Investment Objective and Policies 24 9

Basic Investment Techniques 25 10

U.S. Government Securities 27 11

Certain Investment Strategies and Special
Risk Considerations 28 13

Investment Restrictions 29 -

Management 30 14

Portfolio Transactions and Brokerage 33 -

Purchase and Redemption of Shares 34 16 & 18

Retirement Plans 35 19

Dividends, Distributions and Taxes 36 19

Investment Performance Information 38 -

General Information 39 21

Financial Statements 40 -

Appendix-Description of Ratings 41 -
</TABLE>

<PAGE> 24

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to seek high current
income and capital appreciation. It seeks to meet its objective by investing
the Fund's assets in: U.S. Government securities including U.S. Treasury
obligations and obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, American Depository Receipts ("ADRs"), the First and Second
Unit Schemes (the "Schemes") of the Trinidad and Tobago Unit Trust Corporation,
certificates of deposit and money market funds. There can be no assurance that
the Fund will be able to achieve its objective.

The Fund's investment policy will emphasize debt instruments
to achieve the Fund's current income objective. The Fund will maintain a level
of at least 25% of its total assets invested in debt securities and at least
25% of its total assets invested in equity securities. The investment in
equity securities versus bonds will depend upon the Investment Manager's
evaluation of the relative merits and risks of equity securities versus bonds.

In determining what equity securities the Fund will invest
in, the Investment Manager will focus on the price trend of the company's
shares to determine the volatility of the price trend and how it relates to the
earnings, return on equity and dividend history of the company. The Investment
Manager will seek to invest in equity securities of companies whose shares are
undervalued based on the inherent or long-term record of the company. For
purposes of this investment policy, equity securities are defined as: U.S. and
foreign common stocks, ADRs, warrants, convertible bonds, convertible
debentures, preferred stock and stock rights. No more than 5% of the Fund's
net assets may be used to purchase stock rights. The Fund may not purchase
options on equity securities. Debt securities are defined as: U.S. and
foreign nonconvertible company bonds, U.S. and foreign government securities
and commercial paper.

<PAGE> 25

Subject to its investment policy of normally investing at
least 25% of its assets in U.S. Government securities, investment grade
corporate bonds and investment grade foreign government bonds, the Fund is
permitted to invest in (1) U.S. dollar denominated debt securities, similar in
nature to those described above, regardless of the domicile of the issuers and
(2) income producing equity securities of companies domiciled in the United
States (some of which may be denominated other than in U.S. dollars). Some of
these securities are issued in the Eurodollar market by multinational banks and
companies which may have operations in Trinidad and Tobago.

BASIC INVESTMENT TECHNIQUES

Securities Subject to Reorganization

The Fund may invest in both debt and equity securities for
which a tender or exchange offer has been made or announced and in securities
of companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of INVESCO CAPITAL MGMT., INC.
(the "Investment Manager"), there is a reasonable prospect of capital
appreciation significantly greater than the brokerage and other transaction
expenses involved.

In general, securities which are the subject of such an offer
or proposal sell at a premium to their historic market price immediately prior
to the announcement of the offer or may also discount what the stated or
appraised value of the security would be if the contemplated transaction were
approved or consummated. Such investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
stockholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility that
the offer or proposal may be replaced or superseded by an offer or proposal of
greater value. The evaluation of such consistencies requires unusually broad
knowledge and experience on the part of the Investment Manager which must
appraise not only the value of the issuer and its component businesses, as well
as the assets or securities to be received as a result of the contemplated
transaction but also the financial resources and business motivation of the
offeror and the dynamics and business climate when the offer or proposal is in
process. In making these investments, the Fund will not violate any of its
investment restrictions including the requirement that: (a) as to 75% of its
total assets, it will not invest more than 5% of its total assets in the
securities of any one issuer, and (b) it will not invest more than 25% of its
total assets in any one industry. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the
Fund, thereby increasing its brokerage and other transaction expenses, as well
as make it more difficult for the Fund to meet the test for favorable tax
treatment as a "Regulated Investment Company" under Subchapter M of the
Internal Revenue Code of 1986 (the "Code") (see "Dividends, Distributions and
Taxes"). The Investment Manager intends to select investments of the type
described which, in its view, have a reasonable prospect of capital
appreciation which is significant in relation to both risk involved and the
potential of available alternative investments, as well as to monitor the
effect of such investments on the tax qualifications test of the Code.

Nonconvertible Debt Securities

<PAGE> 26

paper of companies rated A-1 or A-2 by Standard & Poor's Corporation ("S&P") or
rated P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's"). Fixed income
securities rated, at the time of investment, less than BBB by S&P or Baa by
Moody's or which are unrated but of comparable quality as determined by the
Investment Manager, are not investment grade and are viewed by the rating
agencies as being predominantly speculative in character and are characterized
by substantial risk concerning payments of interest and principal, sensitivity
to economic conditions and changes in interest rates, as well as by market price
volatility and/or relative lack of secondary market trading, among other risks.
The Fund will not invest any of its assets in noninvestment grade debt
securities.

The market values of fixed income securities generally fall
when interest rates rise and, conversely, rise when interest rates fall.

If the Investment Manager believes that stocks in general are
overvalued, or that interest rates may rise substantially, or that the general
economic environment may be deteriorating, the Investment Manager may assume a
temporary defensive position and may invest up to 100% of the Fund's assets in
high quality commercial paper and short term U.S. Government securities such as
Treasury Bills and Treasury Notes.

Warrants and Rights

The Fund may invest up to 5% of its net assets in warrants or
rights (other than those acquired in units or attached to other securities)
which entitle the holder to buy equity securities at a specific price during or
at the end of a specific period of time. The Fund will not invest more than 2%
of its total assets in warrants or rights which are not listed on the New York
or American Stock Exchange. For purposes of this investment policy, a warrant
is defined as a certificate giving the holder the right to purchase securities
at a stipulated price within a specific time limit or perpetually. Sometimes a
warrant is offered with securities as an inducement to buy. The prices of
warrants do not necessarily correlate with the prices of the underlying
securities.

When Issued, Delayed Delivery Securities and Forward Commitments

The Fund may enter into forward commitments for the purchase
or sale of securities, including on a "when issued" or "delayed delivery" basis
in excess of customary settlement periods for the type of security involved.
In some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the
security, the Fund may sell the security before the settlement date if it is
deemed advisable.

Borrowing

Loans of Portfolio Securities

To increase income, the Fund may lend its portfolio
securities to securities broker-dealers or financial institutions if (1) the
loan is collateralized in accordance with applicable regulatory requirements
(2) the loan is subject to termination by the Fund at any time, (3) the Fund
receives reasonable interest or fee payments

<PAGE> 27

on the loan, (4) the Fund is able to exercise all voting rights with respect to
the loaned securities and (5) the loan will not cause the value of all loaned
securities to exceed 33% of the value of the Fund's assets.

U.S. GOVERNMENT SECURITIES

The U.S. Government securities in which the Fund may invest
include direct obligations of the U.S. Treasury, such as Treasury bills, notes
and bonds, and obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith
and credit of the United States, such as Government National Mortgage
Association ("GNMA") certificates, securities that are supported by the right
of the issuer to borrow from the U.S. Treasury, such as securities of the
Federal Home Loan Banks, and securities supported solely by the
creditworthiness of the issuer, such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") securities.

The Schemes of the Trinidad and Tobago Unit Trust Corporation

The assets of the Schemes of the Trinidad and Tobago Unit
Trust Corporation are predominantly invested in equity securities of Trinidad
and Tobago corporations, and in fixed income securities of those corporations,
as well as in Trinidad and Tobago government securities. As of
September 30, 1996, the Schemes of the Trinidad and Tobago Unit Trust
Corporation had an aggregate of $212,850,000 (U.S. dollars) under management
and approximately 137,000 unitholders.

<PAGE> 28

in accordance with the Trinidad and Tobago Accounting Standards and are reported
in Trinidad and Tobago dollars.

As of September 30, 1996, the Unit Trust Corporation
beneficially owned 12.363% of the outstanding voting stock of the Fund.

CERTAIN INVESTMENT STRATEGIES AND SPECIAL RISK CONSIDERATIONS

There are certain risks involved in investing in securities
of companies and governments of foreign nations that are in addition to the
usual risks inherent in U.S. investments. These risks include those resulting
from fluctuations in currency exchange rates, devaluation of currencies, future
adverse political and economic developments and the possible imposition of
currency exchange blockages or from other foreign governmental laws or
restrictions. Changes in foreign currency exchange rates may affect the value
of the Fund's assets, the value of dividends and interest earned, gains and
losses realized on the sale of securities and net investment income and gains
to be distributed to stockholders by the Fund. In addition, many of the
securities held by the Fund will not be registered with, nor the issuers
thereof be subject to reporting requirements of, the Securities and Exchange
Commission (the "SEC"). Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a U.S. company or U.S. Government entity.
Foreign issuers are not subject to uniform financial reporting standards,
practices and requirements comparable to those applicable to U.S. issuers.
Furthermore, with respect to some foreign countries, there is the possibility
of expropriation, nationalization or confiscatory taxation, limitations on the
removal of funds or other assets of the Fund, including the withholding of
dividends, political or social instability or domestic developments that could
affect U.S. investments in those countries. Moreover,

<PAGE> 29

individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital investment, resource self-sufficiency and balance of payments positions.
The Fund may invest in securities of foreign governments (or agencies or
instrumentalities thereof) and many, if not all, of the foregoing considerations
apply to such investments as well. Finally, securities of some foreign
companies are less liquid and their prices are more volatile than securities of
comparable U.S. companies, and certain foreign countries are known to experience
long delays between the trade and settlement dates of securities purchased or
sold.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions as
fundamental policies, which may not be changed without the favorable vote of
the holders of a "majority," as defined in the Investment Company Act of 1940
(the "1940 Act"), of the Fund's outstanding voting securities. Under the 1940
Act, the vote of the holders of a majority of a Fund's outstanding voting
securities means the vote of the holders of the lesser of (i) 67% of the shares
of the Fund represented at a meeting at which the holders of more than 50% of
its outstanding shares are represented or (ii) more than 50% of the outstanding
shares.

The Fund may not:

1. Purchase securities on margin, except such
short-term credits as may be necessary for the clearance of transactions.

2. Make short sales of securities or maintain a short
position and may not purchase or write options on securities, indices, foreign
currencies or futures.

3. Issue senior securities, borrow money or pledge its
assets, except that the Fund may borrow on an unsecured basis from banks for
temporary or emergency purposes or for the clearance of transactions in amounts
not exceeding 5% of its total assets (not including the amount borrowed) and
will not purchase securities while borrowings in excess of 5% of the value of
the Fund's total assets are outstanding.

4. Buy or sell commodities or commodity contracts
including futures contracts or buy or sell real estate or interests in real
estate (although it may purchase and sell securities which are secured by real
estate and securities of companies which invest or deal in real estate).

5. Make loans (except for purchases of publicly-traded
debt securities consistent with the Fund's investment policies).

6. Make investments for the purpose of exercising
control or management.

7. Act as underwriter (except to the extent the Fund
may be deemed to be an underwriter in connection with the sale of securities in
the Fund's investment portfolio), exclusive of Fund purchases of restricted
securities (i.e., securities that must be registered under the Securities Act
of 1933 before they may be offered or sold to the public) if such purchases at
the time thereof would not cause more than 15% of the value of the Fund's net
assets to be invested in all such restricted or illiquid assets.

8. Invest 25% or more of its total assets at the time
of purchase in any securities of issuers in one industry. U.S. Government
securities are excluded from this restriction.

<PAGE> 30

The Fund observes the following restrictions as a matter of
operating policy but not fundamental policy, pursuant to positions taken by
federal and state regulatory authorities:

The Fund may not:

9. Invest more than 15% of its net assets in
(i) securities which are restricted or for which market quotations are not
readily available; (ii) fixed time deposits subject to withdrawal penalties
(other than overnight deposits); and (iii) repurchase agreements having a
maturity of more than seven days.

10. Purchase any security if as a result the Fund would
then hold more than 10% of any class of securities of an issuer (taking all
common stock issues as a single class, all preferred stock issues as a single
class, and all debt issues as a single class) or more than 10% of the
outstanding voting securities of an issuer.

11. Invest in securities of any issuer if, to the
knowledge of the Fund, any officer or director of the Fund or of the Investment
Manager owns more than 1/2 of 1% of the outstanding securities of such issuer,
and such directors who own more than 1/2 of 1% own in the aggregate more than
5% of the outstanding securities of such issuer.

12. Invest more than 5% of the value of its net assets
in warrants (included, in that amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchange).

13. Invest in any security if as a result the Fund would
have more than 5% of its total assets invested in securities of companies which
together with any predecessor have been in continuous operation for fewer than
three years.

14. Invest in real estate limited partnerships, or oil,
gas and other mineral leases.

MANAGEMENT

Board of Directors

The Board of Directors is presently comprised of five
members, three of whom reside outside the United States. Directors Rolston
Nelson, Roosevelt Williams and Clarry Benn are residents of the Republic of
Trinidad and Tobago. The Fund presently has one vacancy on the Board of
Directors which it expects to fill by April 1997. Clarry Benn also serves as
an executive officer of the Fund.

7
The Maryland General Corporation Law subjects all directors
and officers of the Fund to fiduciary duties for the lawful management of the
Fund's organization and operation, including federal and state securities laws.
Investors of the Fund may not be able to effect service of process within the
United States upon the Fund's nonresident directors and officers for the
enforcement of civil liabilities under federal and state securities laws. The
Fund has appointed an agent for service of process in the states where the Fund
has registered its securities for offer and sale.

The United States and the Republic of Trinidad and Tobago are
not parties to a convention governing the mutual recognition and enforcement of
foreign money judgments. Investors of the Fund may not

<PAGE> 31

be able to enforce a United States or Trinidad and Tobago court judgment against
nonresident directors and officers of the Fund.

The directors and officers of the Fund, their business
addresses and principal occupations during the past five years are as follows.
Directors deemed to be "interested persons" of the Fund for purposes of the
1940 Act are indicated by an asterisk.

<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With Registrant During Last Five Years
- ---------------- ---------------- ----------------------
<S> <C> <C>
*Rolston Nelson Director Barrister, Chambers of
Trinidad and Tobago Rolston Nelson,
Unit Trust Corporation Port-of-Spain,
74 Independence Square Trinidad and Tobago;
Port-of-Spain Chairman of Trinidad
Trinidad and Tobago, W.I. and Tobago Unit Trust
Corporation 1987 to
Present.

*Clarry Benn Director and President Executive Director, 9-96
Trinidad and Tobago to Present; Executive
Unit Trust Corporation Manager, Investments and
74 Independence Square Financial Trust
Port-of-Spain Accounting, 8-92
Trinidad and Tobago, W.I. to 8-96; Manager of
Investments both with
Trinidad and Tobago
Unit Trust Corporation.

Renrick Nickie Vice President & Executive Manager,
Trinidad and Tobago Treasurer Marketing and Operations,
Unit Trust Corporation 8-92 to Present, Manager of
74 Independence Square Marketing, both with the Trinidad
Port-of-Spain and Tobago Unit Trust
Trinidad and Tobago, W.I. Corporation.

Dr. John A. Cole Director Professor of Finance,
2943 Landing Way 8-95 to Present,
Orangeburg, SC 29115 South Carolina State
University; Associate Professor of
Finance, 8-89 to 7-95,
Florida A&M University;
Executive VP, 9-84 to Present,
Financial Research Associates, Inc.
</TABLE>

<PAGE> 32

<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With Registrant During Last Five Years
- ---------------- ----------------- ----------------------
<S> <C> <C>
Dr. Roosevelt J. Williams, Ph.D. and Director Education Consultant, 1-96 to
Education Consultant Present; Assistant Professor
16 Purple Heart Drive of Howard University,
Homeland Gardens, Phase IV 1989 to 12-95.
Cunupia, Trinidad, W.I.

Ulice Payne, Jr. Secretary Attorney and Shareholder,
Reinhart, Boerner, Reinhart, Boerner,
Van Deuren, Norris & Van Deuren, Norris &
Rieselbach, s.c. Rieselbach, s.c.,
Milwaukee, WI 53202 February 1990 to Present.
</TABLE>

The Fund pays directors who are not "interested persons" of
the Fund nor employees of the Investment Manager $500 per meeting of the board
attended by the director. Directors also are reimbursed for any expenses
incurred in attending meetings.

The Investment Manager and the Management Agreement

Subject to supervision by the Fund's Board of Directors,
investment management and administration services will be provided to the Fund
by INVESCO CAPITAL MGMT. Inc. (the "Investment Manager") pursuant to an
Investment Management Agreement dated October 29, 1992 ("Management Contract").
Under the Management Contract, the Investment Manager will provide a continuous
investment program for the Fund and make decisions and place orders to buy,
sell or hold particular securities and futures. The Investment Manager also
will supervise all matters relating to the operation of the Fund and will
obtain clerical staff, office space, equipment and services. As compensation
for its services, the Investment Manager will receive a monthly fee at an
annual rate of the greater of $50,000 or 0.75% of 1% on first $10 million,
0.50% of 1% on next $10 million and 0.25% of 1% over $20 million of the Fund's
average daily net assets. This fee is greater than that paid by most other
funds.

Under the Management Contract, the Investment Manager will
not be liable to the Fund for any error of judgment by the Investment Manager
or any loss sustained by the Fund except in the case of a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case
any award of damages will be limited as provided in the 1940 Act) or of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.

The Management Contract was approved by the Board of
Directors and by a majority of the directors who neither are interested persons
of the Fund nor have any direct or indirect financial interest in the
Management Contract or any agreement related thereto ("Independent Directors"),
and by the Fund's initial shareholder on September 25, 1992. The Management
Contract will remain in effect until terminated by either party. The
Management Contract shall be specifically approved at least annually (i) by a
majority vote of the Independent Directors cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board of Directors
or by vote of a majority of the outstanding voting securities of the Fund. The
Management Contract will be submitted to the stockholders of the Fund for their
approval at the first meeting of stockholders following the offering of the
Fund's shares.

<PAGE> 33

The Management Contract is terminable by vote of the Board of
Directors or by the holders of a majority of the outstanding voting securities
of the Fund at any time without penalty, on 60 days' written notice to the
Investment Manager. The Management Contract also may be terminated by the
Investment Manager on 60 days' written notice to the Fund. The Management
Contract terminates automatically upon its assignment (as defined in the
1940 Act).

Administrator

American Data Services, Inc. (the "Administrator") is located
at 24 West Carver Street, Huntington, New York 11743, and serves pursuant to an
agreement with the Fund (the "Administrative Services Agreement"). Pursuant to
the Administrative Services Agreement, subject to the overall authority of the
Fund's Board of Directors in accordance with Maryland law, the Administrator
will assist in the Fund's administration and operation, including, but not
limited to, the preparation of statistical and research data, data processing
services, preparation of management reports for performance and compliance, as
well as prepare and maintain the Fund's operating expense budget.

Fund Operating Expenses

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Management Contract states that in connection with its
duties to arrange for the purchase and the sale of securities and futures held
in the portfolio of the Fund by placing purchase and sale orders for the Fund,
the Investment Manager shall select such registered broker-dealers ("brokers")
as shall, in its judgment, achieve the policy of "best execution," i.e., prompt
and efficient execution at the most favorable securities price. In making such
selection, the Investment Manager is authorized in the Management Contract to
consider the reliability, integrity and financial condition of the brokers.
The Investment Manager also is authorized by the Management Contract to
consider whether the brokers provide brokerage and/or research services to the
Fund and/or other accounts of the Investment Manager.

The Management Contract states that the commissions paid to
brokers may be higher than other brokers would have charged if a good faith
determination is made by the Investment Manager that the commission

<PAGE> 34

is reasonable in relation to the services provided, viewed in terms of either
that particular transaction on the Investment Manager's overall responsibilities
as to the accounts as to which it exercises investment discretion and that the
Investment Manager shall use its judgment in determining that the amount of
commissions paid are reasonable in relation to the value of brokerage and
research services provided and need not place or attempt to place a specific
dollar value on such services or on the portion of commission rates reflecting
such services. The Management Contract provides that to demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Investment Manager shall be prepared to show that
commissions paid (i) were for purposes contemplated by the Management Contract;
(ii) were for products or services which provide lawful and appropriate
assistance to its decision making process; and (iii) were within a reasonable
range as compared to the rates charged by brokers to other institutional
investors as such rates may become known from available information. The
Investment Manager also is authorized to consider sales of shares of the Fund
and/or of any other investment companies for which the Investment Manager acts
as Investment Manager or advisor as a factor in the selection of brokers to
execute brokerage and principal transactions, subject to the requirements of
"best execution," as defined above.

The research services discussed above may be in written form
or through direct contact with individuals and may include information as to
particular companies and securities as well as market, economic or
institutional areas and, information assisting the Fund in the valuation of the
Fund's investments. The research which the Investment Manager receives for the
Fund's brokerage commissions, whether or not useful to the Fund, may be useful
to it in managing the accounts of its other advisory clients. Similarly, the
research received for the commissions of such accounts may be useful to the
Fund.

The debt securities which will be the principal component of
the Fund's portfolio are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission although the
price of the security usually includes a profit to the dealer. Money market
instruments usually trade on a "net" basis as well. On occasion, certain money
market instruments may be purchased by the Fund directly from an issuer in
which case no commissions or discounts are paid. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.

Brokerage commissions in Trinidad and Tobago, as in the U.S.,
are negotiable. Trinidad and Tobago brokers, which act as agent, and dealers,
which act as principal, are subject to government regulation if they deal with
public investors.

PURCHASE AND REDEMPTION OF SHARES

The procedures for purchasing shares of the Fund are
summarized in the prospectus under "How to Purchase Shares" and the procedures
for redemption of shares are summarized in the prospectus under "How to Redeem
Shares." Investors may now elect to purchase shares through the continuing
automatic transfer plan as described in the prospectus.

The Fund will redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value during any 90-day period for any one
stockholder. The Fund reserves the right to pay other redemptions, either
total or partial, by a distribution in kind of readily marketable securities
(instead of cash) from the Fund's portfolio. The securities distributed in
such a distribution would be valued at the same amount as that assigned to them
in calculating the net asset value for the shares being redeemed. If a
stockholder receives a distribution in kind, he or she should expect to incur
transaction costs when he or she converts the securities to cash.

Cancellation of purchase orders for Fund shares (as, for
example, when checks submitted to purchase shares are returned unpaid) cause a
loss to be incurred when the net asset value of the Fund shares on the date of
cancellation is less than the original date of purchase. The investor is
responsible for such loss and the Fund may reimburse itself or selected
broker-dealers for such loss by automatically redeeming shares from any account
registered in that stockholder's name, or by seeking other redress.

<PAGE> 35

Determination of Net Asset Value

The net asset value of the Fund's shares will fluctuate and
is determined as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4 p.m. Eastern time) each business day. The Exchange
annually announces the days on which it will not be open for trading. The most
recent announcement indicates that it will not be, open on the following days:
New Years Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. However, the Exchange may close
on days not included in that announcement.

The net asset value per share is computed by dividing the
value of the securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of Fund shares
outstanding at such time. The Fund values its assets based on their current
market value when market quotations are readily available. If such value
cannot be established, assets are valued at fair value as determined in good
faith by or under the direction of the Board of Directors.

Securities for which market quotations are not readily
available are valued at fair market value as determined in good faith under
procedures established by the Fund's Board of Directors. Short-term debt
securities which mature in more than 60 days are valued at current market
quotations. Short-term debt securities which mature in 60 days or less are
valued at amortized cost if their term to maturity from the date of purchase
was 60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their term to maturity from the date of purchase exceeded 60 days,
unless the Board of Directors determines that such valuation does not represent
fair value.

Following the calculation of security values in terms of
currency in which the market quotation used is expressed ("local currency"),
the valuing agent shall calculate these values in terms of United States
dollars on the basis of the conversion of the local currencies (if other than
U.S.) into United States dollars at the rates of exchange prevailing at the
value time as determined by the valuing agent. The value of other property
owned by the Fund shall be determined in a manner which, in the discretion of
the valuing agent of the Fund, most fairly reflects fair market value of the
property on such date.

Trading in securities on European securities exchanges and
over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the New York
Stock Exchange is open). In addition, European securities trading generally or
in a particular country or countries may not take place on all business days in
New York. Furthermore, trading takes place in various foreign markets on days
which are not business days in New York and on which the Fund's net asset value
is not calculated. The Fund calculates net asset value per share and,
therefore, effects sales, redemptions and repurchases of its shares, as of the
close of the New York Stock Exchange once on each day on which the New York
Stock Exchange is open. Such calculation does not take place contemporaneously
with the determination of the prices of the majority of the portfolio
securities used in such calculation. If events materially affecting the value
of such securities occur between the time when their price is determined and
the time when the Fund's net asset value is calculated, such securities will be
valued at fair value as determined in good faith by the Board of Directors.

RETIREMENT PLANS

The Fund has made available an Individual Retirement Plan
which is obtainable from selected broker-dealers or the Transfer Agent. The
minimum investment required to open an IRA for investment in shares of the Fund
is $250 for an individual except that both the individual and his or her spouse
would be able to establish separate IRAs.

<PAGE> 36

contributed amount. Contributions to IRAs are tax deductible only if you and
your spouse are not covered by existing qualified retirement plans or, if
covered, your incomes do not exceed certain amounts. However, whether your
contributions are deductible or not, the income and capital gains on your IRA
are not taxed until they are withdrawn. Investors should consult their own tax
advisors about the establishment of retirement plans.

DIVIDENDS, DISTRIBUTIONS AND TAXES

General

The Fund intends to qualify as a regulated investment company
under Subchapter M of the Code and generally intends to take all other action
required to insure that little or no federal income or excise taxes will be
payable by the Fund. If so qualified, the Fund will not be subject to federal
income tax on its net investment income and net short-term capital gains, if
any, realized during any fiscal year in which it distributes such income and
capital gains to its stockholders.

The Fund will determine either to distribute or to retain all
or part of any net long-term capital gains in any year for reinvestment. If
any such gains are retained, the Fund will be subject to a tax of 34% of such
amount. In that event, the Fund expects to designate the retained amount as
undistributed capital gains in a notice to its stockholders, each of whom
(1) will be required to include in income for tax purposes as long-term capital
gains, such stockholders' share of such undistributed amount; (2) will be
entitled to credit proportionate share of the tax paid by the Fund against
federal income tax liability and to claim the Fund to the extent the credit
exceeds such liability; and (3) will increase basis in shares of the Fund by an
amount equal to 66% of the amount of undistributed capital gains included in
such stockholder's gross income.

Under the Code, amounts not distributed on a timely basis in
accordance with certain distribution requirements are subject to a
nondeductible 4% excise tax. To avoid the tax, the Fund must distribute,
during each calendar year, an amount equal to, at the minimum, the sum of
(1) 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year; (2) 98% of its capital gains in excess of its
capital losses for the 12-month period ending on October 31 of the calendar
year; and (3) all ordinary income and net capital gains for previous years that
were not previously distributed. A distribution will be treated as paid during
the calendar year if it is paid during the calendar year or declared by the
Fund in October, November or December of the year, payable to stockholders of
record on a date during such month and paid by the Fund during January of the
following year. Any such distributions paid during January of the following
year will be deemed to be received on December 31 of the year the distributions
are declared, rather than when the distributions are received.

Gains or losses on the sales of securities by the Fund will
be long-term capital gains or losses if the securities have been held by the
Fund for more than 12 months. Gains or losses on the sale of securities held
for 12 months or less will be short-term capital gains or losses.

<PAGE> 37

Taxation of Distributions

Distributions of investment company taxable income (which
includes taxable interest income and the excess of net short-term capital gains
over long-term capital losses) are taxable to a U.S. stockholder as ordinary
income, whether paid in cash or shares. Dividends paid by the Fund will
qualify for the 70% deduction for dividends received by corporations to the
extent the Fund's income consists of qualified dividends received from U.S.
corporations. Distributions of net capital gains (which consist of the excess
of long-term capital gains over net short-term capital losses), if any, are
taxable as long-term capital gains, whether paid in cash or in shares,
regardless of how long the stockholder has held the Fund's shares, and are not
eligible for the dividends received deduction. Stockholders receiving
distributions in the form of newly issued shares will have a basis in such
shares of the Fund equal to the fair market value of such shares on the
distribution date. If the net asset value of shares is reduced below a
stockholder's cost as a result of a distribution by the Fund of current or
accumulated earnings and profits, such distribution will be taxable even though
it represents a return of invested capital. The price of shares purchased at
this time may reflect the amount of the forthcoming distribution. Those
purchasing just prior to a distribution will receive a distribution which will
nevertheless be taxable to them.

Sales of Shares

Upon a sale or exchange of his or her shares, a stockholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the
shares have been held for more than one year. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30 days after
the shares are disposed of.

In such case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a stockholder on
the sale of Fund shares held by the stockholder for six months or less will be
treated for tax purposes as a long-term capital loss to the extent of any
distributions of net capital gains received by the stockholder with respect to
such shares.

Backup Withholding

The Fund may be required to withhold federal income tax at
the rate of 31% of all taxable distributions payable to stockholders who fail
to provide the Fund with their correct taxpayer identification number or to
make required certifications or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against a
stockholder's federal income tax liability.

Foreign Withholding Taxes

Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. It is impossible to determine the rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known.

<PAGE> 38

If more than 50% of the Fund's assets at year-end consist of
the debt and equity securities of foreign corporations, the Fund intends to
qualify for and make the election permitted under Section 853 of the Code, but
there can be no assurance that it will qualify. If the Fund makes such
elections, the stockholders may claim a credit or deduction on their income tax
returns for, and will be required to treat as part of the amount distributed to
them, their pro rata portion of qualified taxes that the Fund paid to foreign
countries (which taxes relate primarily to investment income). A stockholder's
ability to claim such a foreign tax credit will be subject to certain
limitations imposed by the Code, as a result of which stockholders may not get
full credit for the amount of foreign taxes so paid by the Fund. Stockholders
who do not itemize on their federal income tax returns may claim a credit (but
no deduction) for such foreign taxes. Stockholders are urged to consult their
attorneys or tax advisors regarding specific questions as to federal, state or
local taxes.

The Corporation reserves the right to offer investors a range
of investment opportunities by providing a choice of investments in various
portfolios and, consequently, the right to create and issue a number of
different series shares each of which relate to the assets of the separate
portfolios. In such case the shares of each series would participate equally
in the earnings, dividends and assets of a particular portfolio and would vote
separately to approve management agreements or changes in investment policies.
However, shares of all series would vote together in the election or selection
of directors, principal underwriters and accountants and on any proposed
material amendment to the Corporation's Certificate of Incorporation. For
federal tax purposes, each "fund" of a series is treated as a separate
corporation.

Upon liquidation of the Fund or any series, stockholders of
the affected series would be entitled to share pro rata in the net assets of
their respective series available for distribution to such stockholders.

INVESTMENT PERFORMANCE INFORMATION

Quotations of yield will be based on the investment income
per share earned during a particular 30-day (or one month) period, less
expenses accrued during the period ("net investment income") and will be
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:

2[( a-b + 1)6 - 1]
YIELD = ---
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends and
d = the maximum offering price per share on the last day of the period.

Quotations of total return will reflect only the performance
of a hypothetical investment in the Fund during the particular time period
shown. The Fund's total return and current yield may vary from time to time
depending on market conditions, the compositions of the Fund's portfolio and
operating expenses. These factors and possible differences in the methods used
in calculating yield should be considered when comparing the Fund's current
yield to yields published for other investment companies and other investment
vehicles. Total return and yield should also be considered relative to changes
in the value of the Fund's shares and the risks associated with the Fund's
investment objectives and policies. At any time in the future, total returns
and yields may be higher or lower than past total returns and yields and there
can be no assurance that any historical return or yield will continue.

<PAGE> 39

In connection with communicating its yield or total return to
current or prospective stockholders, the Fund may also compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to other unmanaged indexes which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.

Quotations of the Fund's total return will represent the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of one, five and ten years (up to the life of the Fund), and
are calculated pursuant to the following formula:

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 redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). All
total return figures will reflect the deduction of Fund expenses (net of
certain expenses reimbursed by the Advisor) on an annual basis and will assume
that all dividends and distributions are reinvested and will deduct the maximum
sales charge, if any is imposed.

GENERAL INFORMATION

The Fund, incorporated in the State of Maryland on
October 24, 1990, is authorized to issue 2,000,000 shares of common stock,
$.01 par value (the "Common Stock"). Shares of the Fund, when issued, are
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund in certain circumstances as described in
the Fund's Prospectus under "How to Redeem Shares." All Fund shares are equal
as to earnings assets and voting privileges. There are no conversion,
preemption or other subscription rights. Under the Fund's Certificate of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock, with such preferences, privileges, limitations and
voting and dividend rights as the board may determine. Each share of the Fund
outstanding is entitled to share equally in dividends and other distributions
and in the net assets of the Fund on liquidation. Accordingly, in the event of
liquidation, each share of the Fund's common stock is entitled to its portion
of all the Fund's assets after all debts and expenses have been paid. The
shares of the Fund do not have cumulative voting rights for the election of
directors.

The Fund's organizing documents have been filed with the SEC
as exhibits to the Fund's registration statement and can be found at the SEC or
at the Fund's principal office or at the offices of the Fund's legal counsel.

<PAGE> 40

FINANCIAL STATEMENTS

The Fund's audited financial statements were filed with the
SEC on March 4, 1996 as part of the Fund's annual report. The Fund's unaudited
financial statements were filed on Form N-SAR with the SEC on August 28, 1996
as part of the Fund's Semi-Annual Report to Shareholders. The financial
statements contained in such annual and semi-annual reports are incorporated by
reference herein.

<PAGE> 41

APPENDIX--DESCRIPTION OF RATINGS

APPENDIX A TO STATEMENT OF ADDITIONAL INFORMATION

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S ("MOODY'S") CORPORATE BOND
RATINGS

Aaa: Bonds which 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 which are rated as 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 made 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 which 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. Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class. B: Bonds which are rated B
generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small. Caa: Bonds which are
rated Caa are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Ca: Bonds
which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or there may be marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ("S&P'S") CORPORATE DEBT RATINGS

AAA: Debt rated AAA has the highest rating assigned by
S&P's. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated 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 changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories. BB, B, CCC, CC, C: Debt
rated BBB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions. Cl: The
rating Cl is reserved for income bonds on which no interest is being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are

<PAGE> 42

not made on the date due even if the applicable grace period has not expired,
unless S&P's believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS

aaa: An issue which is rated aaa is considered to be a
top-quality preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of preferred stocks.
aa: An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and
asset protection will remain relatively well maintained in the foreseeable
future. a: An issue which is rated a is considered to be an upper medium
grade preferred stock. While risks are judged to be somewhat greater than in
the aaa and aa classifications, earnings and asset protection are nevertheless
expected to be maintained at adequate levels. baa: An issue which is rated
baa is considered to be medium grade, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present, but may be
questionable over great length of time. ba: An issue which is rated ba is
considered to have speculative elements and its future cannot be considered
well assured. Earnings and asset protection may be very moderate and not well
safeguarded during adverse periods. Uncertainty of position characterizes
preferred stocks in this class. b: An issue which is rated b generally lacks
the characteristics of a desirable investment. Assurance of dividend payments
and maintenance of other terms of the issue over any long period of time may be
small. caa: An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payment. ca: An issue which is rated ca is speculative in a
high degree and is likely to be in arrears on dividends with the little
likelihood of eventual payment. c: This is the lowest rated class of
preferred or preference stock. Issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.

Note: Moody's may apply numerical modifiers 1, 2 and 3 in
each rating classification from "aa" through "b" in its preferred stock rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF S&P'S PREFERRED STOCK RATINGS

AAA: This is the highest rating that may be assigned by
S&P's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations. AA: A preferred stock issue rated AA
also qualifies as a high-quality fixed income security. The capacity to pay
preferred stock obligations is very strong, although not as overwhelming as for
issues rated AAA. A: An issue rated A is backed by a sound capacity to pay
the preferred stock obligations, although it is somewhat more susceptible to
the adverse effect of changes in circumstances and economic conditions.
BBB: An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category. BB, B,
CCC: Preferred stock rated BB, B and CCC are regarded on balance as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. BB indicates the lowest degree of speculation and
CCC the highest degree of speculation. While such issues will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. CC: The rating
CC is reserved for a preferred stock in arrears on dividends or sinking Equity
Fund payments but that is a nonpaying issue with the issuer in default on debt
instruments.

PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

<PAGE> 43

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

<TABLE>
<S> <C>
(a) Financial Statements. Included in Part A of the Registration Statement:
Table of Fees and Expenses
Financial Highlights

Included in Part B of the Registration Statement:
Audited financial statement dated
December 31, 1995

(b) Exhibits:

(1) Articles of Incorporation5** and Articles of Amendment5
(2) By-Laws6
(3) Not Applicable
(4) Specimen Stock Certificate5
(5) Management Agreement5
(6) Distribution Agreement5
(7) Not Applicable
(8) Custodial Services Agreement7
(9) Fund Accounting Service Agreement, Shareholder
Servicing Agent Agreement, Administration Services
Agreement and Related Agreement5
(10) Opinion and Consent of Counsel5
(11) Consent of Accountants5
(12) Not Applicable
(13) Subscription Agreement5
(14) IRA Disclosure Documents
(15) Distribution Plan8***
(16) Not Applicable
</TABLE>

Item 25. Persons Controlled by or under Common Control with Registrant.

See "Management" in Part A of this Registration Statement.

- ----------------------
5 Filed previously by amendment.

6 Filed previously by amendment and revised By-Laws filed by Post-Effective
Amendment.

7 Filed previously by amendment. The Custodial Services Agreement with the
Fund's new custodian, Star Bank, is attached.

8 Filed previously by amendment and revised Distribution Plan filed by
Post-Effective Amendment.

<PAGE> 44

Item 26. Number of Holders of Securities.

As of December 18, 1996, the approximate number of holders
was:

<TABLE>
<CAPTION>
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common 1,532
</TABLE>

Item 27. Indemnification.

The basic effect of the respective indemnification provisions
of the Registrant's Articles of Incorporation and By-Laws and section 2-418 of
the Maryland General Corporation Law is to indemnify each officer and director
of both the Registrant, the Investment Manager and selected broker-dealers, to
the full extent permitted under the General Laws of the State of Maryland,
except that such indemnity shall not protect any such person against any
liability 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.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant, Investment Manager and selected broker-dealers
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 1940 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, office or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person or the Investment Manager and selected
broker-dealers in connection with the shares 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 1940 Act and will be governed by the final adjudication of
such issue.

Item 28. Business and Other Connections of Investment Advisor.

Reference is made to Part A of this Registration Statement
and to Form ADV filed under the Investment Advisers Act of 1940 by the
Investment Manager.

Item 29. Principal Underwriters.

The Fund has no principal underwriters and has adopted a
Distribution Plan pursuant to section 12 of the Investment Company Act of 1940
and Rule 12b-1 thereunder.

Item 30. Location of Accounts and Records.

The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the 1940 Act and the
rules promulgated thereunder are in the possession of Registrant and
Registrant's custodian, as follows: the documents required to be maintained by
paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be
maintained by the Registrant, and all other records will be maintained by the
Custodian.

Item 31. Management Services.

The Registrant is not party to any management-related
services contract not discussed in Part A or Part B hereof.

<PAGE> 45

Item 32. Undertakings.

Registrant undertakes to provide its Annual Report to
Shareholders without charge to any recipient of its Prospectus who requests the
information.

Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of the removal of a director or
directors when requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such meeting to
comply with the provisions of section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.

<PAGE> 46
SIGNATURE

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, thereunto
duly authorized, in the City of Port-of-Spain, Country of Trinidad and Tobago,
on the 31st day of October, 1996.

THE CHACONIA INCOME & GROWTH FUND, INC.

BY /s/ R F NELSON
----------------------------
Rolston F. Nelson, Chairman

KNOW ALL MEN BY THESE PRESENTS, that each person whose name
appears below constitutes and appoints Rolston F. Nelson, his true and lawful
attorneys-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intends and purposes as he might or could do in
person, hereby ratifying and confirming that said attorney-in-fact and agent,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.

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.

<PAGE> 47

<TABLE>
<CAPTION>
- ---------------------------------------------- ----------------------------------- -------------------------
Signature Title Date
- ---------------------------------------------- ----------------------------------- -------------------------
<S> <C> <C>
/s/ CLARRY BENN
- ---------------------------------
Clarry Benn President and Director October 31 , 1996
- ---------------------------------------------- ----------------------------------- -------------------------
/s/ JOHN A. COLE
- --------------------------------
John A. Cole Director October 31, 1996
- ---------------------------------------------- ----------------------------------- -------------------------
/s/ ROOSEVELT WILLIAMS
- --------------------------------
Roosevelt Williams Director October 31, 1996
- ---------------------------------------------- ----------------------------------- -------------------------

- --------------------------------
Renrick A. Nickie Vice President and Treasurer October __, 1996
- ---------------------------------------------- ----------------------------------- -------------------------

- --------------------------------
Ulice Payne, Jr. Secretary October __, 1996
- ---------------------------------------------- ----------------------------------- -------------------------
</TABLE>

<PAGE> 48

Exhibit Index

Pursuant to Securities Act Rule 483

Exhibit 1 Articles of Incorporation and Articles of Amendment(9)

Exhibit 2 By-Laws(9)

Exhibit 4 Specimen Stock Certificate(9)

Exhibit 5 Management Agreement(9)

Exhibit 6 Distribution Agreement(9)

Exhibit 8 Custodial Services Agreement

Exhibit 9 Fund Accounting Service Agreement, Shareholder Servicing Agent
Agreement, Administrative Services Agreement and Related
Agreement(9)

Exhibit 10 Opinion and Consent of Counsel(9)

Exhibit 11 Consent of Accountants(9)

Exhibit 13 Subscription Agreement(9)

Exhibit 14 IRA Disclosure Documents(10)

Exhibit 15 Distribution Plan(9)

- -------------------
9 Incorporated by reference.

10 The IRA Disclosure Documents will be amended to conform to recent
changes in legislation.

<PAGE> 49

The Chaconia Income & Growth Fund, Inc. (the "Fund") is
incorporating by reference Parts A, B and C of Pre-Effective Amendment No. 5 to
the Registration Statement of the Fund, file nos. 33-37426 and 811-6194, dated
March 19, 1993.

<PAGE> 1

EXHIBIT 8

CUSTODY AGREEMENT

This agreement (the "Agreement") is entered into as of the ___ day of
October, 1996, by and between The Chaconia Income & Growth Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland and
having its office c/o American Data Services, Inc., 24 West Carver Street,
Huntington, NY 11743; and Star Bank, N.A. (the "Custodian"), a national banking
association having its principal office and place of business at Star Bank
Center, 425 Walnut Street, Cincinnati, Ohio 45202.

WHEREAS, the Fund and the Custodian desire to enter into this Agreement to
provide for the custody and safekeeping of the assets of the Fund as required by
the Investment Company Act of 1940, as amended (the "Act").

WHEREAS, the Fund hereby appoints the Custodian as custodian of all the
Fund's Securities and moneys at any time owned by the Fund during the term of
this Agreement (the "Fund Assets").

WHEREAS, the Custodian hereby accepts such appointment as Custodian and
agrees to perform the duties thereof as hereinafter set forth.

THEREFORE, in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:

ARTICLE I
Definitions

The following words and phrases, when used in this Agreement, unless the
context otherwise requires, shall have the following meanings:

Authorized Person - the Chairman, President, Secretary, Treasurer,
Controller, or Senior Vice President of the Fund, or any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund, and listed in the Certificate annexed hereto
as Appendix A, or such other Certificate as may be received by the Custodian
from time to time.

1
<PAGE> 2

Book-Entry System - the Federal Reserve Bank book-entry system for United
States Treasury securities and federal agency securities.

Depository - The Depository Trust Company ("DTC"), a limited purpose trust
company its successor(s) and its nominee(s) or any other person or clearing
agent.

Dividend and Transfer Agent - the dividend and transfer agent appointed,
from time to time, pursuant to a written agreement between the dividend and
transfer agent and the Fund.

Foreign Securities - a) securities issued and sold primarily outside of the
United States by a foreign government, a national of any foreign country, or a
trust or other organization incorporated or organized under the laws of any
foreign country or; b) securities issued or guaranteed by the government of the
United States, by any state, by any political subdivision or agency thereof, or
by any entity organized under the laws of the United States or of any state
thereof, which have been issued and sold primarily outside of the United
States.

Money Market Security - debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States or agencies or
instrumentalities thereof, commercial paper, obligations (including certificates
of deposit, bankers' acceptances, repurchase agreements and reverse repurchase
agreements with respect to the same), and time deposits of domestic banks and
thrift institutions whose deposits are insured by the Federal Deposit Insurance
Corporation, and short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or their equivalent
on the same day as such purchase and sale, all of which mature in not more than
thirteen (13) months.

Officers - the Chairman, President, Secretary, Treasurer, Controller, and
Senior Vice President of the Fund listed in the Certificate annexed hereto as
Appendix A, or such other Certificate as may be received by the Custodian from
time to time.

Oral Instructions - verbal instructions received by the Custodian from an
Authorized Person (or from a person that the Custodian reasonably believes in
good faith to be an Authorized Person) and confirmed by Written Instructions
in such a manner that such Written Instructions are received by the Custodian
on the business day immediately following receipt of such Oral Instructions.

Prospectus - the Fund's then currently effective prospectus and Statement
of Additional Information, as filed with and declared effective from time to
time by the Securities and Exchange Commission.

Security or Securities - Money Market Securities, common stock, preferred
stock, options, financial futures, bonds, notes, debentures, corporate debt
securities, mortgages, and any certificates, receipts, warrants, or other
instruments representing rights to receive, purchase, or subscribe for the same
or evidencing or representing any other rights or interest therein, or any
property or assets.

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<PAGE> 3

Written Instructions - communication received in writing by the Custodian
from an Authorized Person.

ARTICLE III
DOCUMENTS AND NOTICES TO BE FURNISHED BY THE FUND

A. The following documents, including any amendments thereto, will be
provided contemporaneously with execution of the Agreement, to the Custodian by
the Fund:

1. A copy of the Articles of Incorporation of the Fund certified by the
Secretary.

2. A copy of the By-Laws of the Fund certified by the Secretary.

3. A copy of the resolution of the Board Of Directors Of the Fund
appointing the Custodian, certified by the Secretary.

4. A copy of the then current Prospectus.

5. A Certificate of the President and Secretary of the Fund setting
forth the names and signatures of the Officers of the Fund.

B. The Fund agrees to notify the Custodian in writing of the
appointment of any Dividend and Transfer Agent.

ARTICLE III
RECEIPT OF FUND ASSETS

A. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all moneys constituting Fund Assets. The
Custodian shall be entitled to reverse any deposits made on the Fund's behalf
where such deposits have been entered and moneys are not finally collected
within 30 days of the making of such entry.

B. During the term of this Agreement, the Fund will deliver or cause to
be delivered to the Custodian all Securities constituting Fund Assets. The
Custodian will not have any duties or responsibilities with respect to such
Securities until actually received by the Custodian.

C. As and when received, the Custodian shall deposit to the account(s)
of the Fund any and all payments for shares of the Fund issued or sold from
time to time as they are received from the Fund's distributor or Dividend and
Transfer Agent or from the Fund itself.

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<PAGE> 4

ARTICLE IV
DISBURSEMENT OF FUND ASSETS

A. The Fund shall furnish to the Custodian a copy of the resolution of the
Board Of Directors of the Fund, certified by the Fund's Secretary, either (i)
setting forth the date of the declaration of my dividend or distribution in
respect of shares of the Fund, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the payment date, or
(ii) authorizing the declaration of dividends and distributions in respect of
shares of the Fund on a daily basis and authorizing the Custodian to
rely on a Certificate setting forth the date of the declaration of any such
dividend or distribution, the date of payment thereof, the record date as of
which Fund shareholders entitled to payment shall be determined, the amount
payable per share to Fund shareholders of record as of that date, and the total
amount to be paid by the Dividend and Transfer Agent on the payment date.

On the payment date specified in such resolution or Certificate
described above, the Custodian shall segregate such amounts from moneys held
for the account of the Fund so that they are available for such payment.

B. Upon receipt of Written Instructions so directing it, the Custodian
shall segregate amounts necessary for the payment of redemption proceeds to be
made by the Dividend and Transfer Agent from moneys held for the account of the
Fund so that they are available for such payment
C. Upon receipt of a Certificate directing payment and setting forth the
name and address of the person to whom such payment is to be made, the amount
of such payment, and the purpose for which payment is to be made, the Custodian
shall disburse amounts as and when directed from the Fund Assets. The Custodian
is authorized to rely on such directions and shall be under no obligation to
inquire as to the propriety of such directions.
D. Upon receipt of a Certificate directing payment, the Custodian shall
disburse moneys from the Fund Assets in payment of the Custodian's fees and
expenses as provided in Article VIII hereof.

ARTICLE V
CUSTODY OF FUND ASSETS

A. The Custodian shall open and maintain a separate bank account or
accounts in the United States in the name of the Fund, subject only to draft or
order by the Custodian acting

<PAGE> 5

pursuant to the terms of this Agreement, and shall hold all cash received by it
from or for the account of the Fund, other than cash maintained by the Fund in
a bank account established and used by the Fund in accordance with Rule 17-f3
under the Act. Moneys held by the Custodian on behalf of the Fund may be
deposited by the Custodian to its credit as Custodian in the banking department
of the Custodian. Such moneys shall be deposited by the Custodian in its
capacity as such, and shall be withdrawable by the Custodian only in such
capacity.
B. The Custodian shall hold all Securities delivered to it in safekeeping
in a separate account or accounts maintained at Star Bank, N.A. for the benefit
of the Fund.
C. All Securities held which are issued or issuable only in bearer form,
shall be held by the Custodian in that form; all other Securities hold for the
Fund shall be registered in the name of the Custodian or its nominee. The Fund
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold, or deliver in proper form for transfer, any Securities that
it may hold for the account of the Fund and which may, from time to time, be
registered in the name of the Fund.
D. With respect to all Securities held for the Fund, the Custodian shall
on a timely basis (concerning items 1 and 2 below, as defined in the Custodian's
Standards of Service Guide, as amended from time to time, annexed hereto as
Appendix C):
1.) Collect all income due and payable with respect to such
Securities;
2.) Present for payment and collect amounts payable upon all
Securities
3.) Surrender Securities in temporary form for definitive Securities;
and
4.) Execute, as agent, any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
E. Upon receipt of a Certificate AND NOT OTHERWISE, the Custodian
shall:
1.) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other
2.) Deliver any Securities in exchange for other Securities or cash
issued
3.) Deliver any Securities to any protective committee,
reorganization receive and hold under the terms of this Agreement
such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery;
4.) Make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Certificate to
be for the
5.) Deliver any Securities held for the Fund to the depository agent
for
F. The Custodian shall promptly deliver to the Fund all notices,
proxy material and executed but unvoted proxies pertaining to shareholder
meetings of Securities held by the Fund. The Custodian shall not vote or
authorize the voting of any Securities or give any consent,

<PAGE> 6

waiver or approval with respect thereto unless so directed by a Certificate or
Written Instruction.
G. The Custodian shall promptly deliver to the Fund all information
received by the Custodian and pertaining to Securities held by the Fund with
respect to tender or exchange offers, calls for redemption or purchase, or
expiration of rights.

ARTICLE VI
PURCHASE AND SALE OF SECURITIES

A. Promptly after each purchase of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, Written Instructions, and (ii) with respect to
each purchase of Money Market Securities, Written Instructions, or Oral
Instructions, specifying with respect to each such purchase the;
1.) name of the issuer and the title of the Securities,
2.) principal amount purchased and accrued interest, if any,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable, and
6.) name of the person from whom, or the broker through which, the
purchase was made.
The Custodian shall, against receipt of Securities purchased by or for the Fund,
pay out of the Fund Assets, the total amount payable to the person from whom or
the broker through which the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
B. Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, Written Instructions and (ii) with respect to each
sale of Money Market Securities, Written Instructions or Oral Instructions,
specifying with respect to each such sale the;
1.) name of the issuer and the title of the Securities,
2.) principal amount sold and accrued interest, if any,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable, and
6.) name of the person to whom, or the broker through which, the
sale was made.

<PAGE> 7
The Custodian shall deliver the Securities against receipt of the total amount
receivable, provided that the same conforms to the total amount receivable as
set forth in such Written Instructions or Oral Instructions, as the case may be.
C. On contractual settlement date, the account of the Fund will be
charged for all purchased Securities settling on that day, regardless of whether
or not delivery is made. Likewise, on contractual settlement date, proceeds
from the sale of Securities settling that day will be credited to the account of
the Fund, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian will be
made on a delivery versus payment basis. The Custodian may, in its sole
discretion, upon receipt of a Certificate, elect to settle a purchase or sale
transaction in some other manner, but only upon receipt of acceptable
indemnification from the Fund.
E. The Custodian shall, upon receipt of a Written Instructions so
directing it, establish and maintain a segregated account or accounts for and
on behalf of the Fund. Cash and/or Securities may be transferred into such
account or accounts for specific purposes, to-wit:
1.) in accordance with the provision of any agreement among the Fund,
the Custodian, and a broker-dealer registered under the
Securities and Exchange Act of 1934, as amended, and also a
member of the National Association of Securities Dealers (NASD)
(or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of
the Options Clearing Corporation and of any registered national
securities exchange, the Commodity Futures Trading Commission,
any registered contract market, or any similar organization or
organizations requiring escrow or other similar arrangements in
connection with transactions by the Fund;
2.) for purposes of segregating cash or government securities in
connection with options purchased, sold, or written by the Fund
or commodity futures contacts or options thereon purchased or
sold by the Fund;
3.) for the purpose of compliance by the fund with the procedures
required for reverse repurchase agreements, firm commitment
agreements, standby commitment agreements, and short sales by Act
Release No. 10666, or any subsequent release or releases or rule
of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment
companies; and
4.) for other corporate purposes, ONLY IN THE CASE OF THIS CLAUSE 4
UPON receipt of a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary of the Fund, setting
forth the purposes of such

<PAGE> 8

segregated account.

F. Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with any Written Instructions to
settle the purchase of any Securities on behalf of the Fund unless there is
sufficient cash in the account(s) at the time or to settle the sale of any
Securities from an account(s) unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such Securities exceeds
the amount of cash in the account(s) at the time of such purchase, the Custodian
may, in its sole discretion, advance the amount of the difference in order to
settle the purchase of such Securities. The amount of any such advance shall be
deemed a loan from the Custodian to the Fund payable on demand and bearing
interest accruing from the date such loan is made up to but not including the
date such loan is repaid at a rate per annum customarily charged by the
Custodian on similar loans.

ARTICLE VII
FUND INDEBTEDNESS

In connection with any borrowings by the Fund, the Fund will cause to be
delivered to the Custodian by a bank or broker requiring Securities as
collateral for such borrowings (including the Custodian if the borrowing is from
the Custodian), a notice or undertaking in the form currently employed by such
bank or broker setting forth the amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to each such
borrowing: (a) the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an attached
promissory note duly endorsed by the Fund, or a loan agreement, (c) the date,
and time if known, on which the loan is to be entered into, (d) the date on
which the loan becomes due and payable, (e) the total amount payable to the Fund
on the borrowing date, and (f) the description of the Securities securing the
loan, including the name of the issuer, the title and the number of shares or
the principal amount. The Custodian shall deliver on the borrowing date
specified in the Certificate the required collateral against the lender's
delivery of the total loan amount then payable, provided that the same conforms
to that which is described in the Certificate. The Custodian shall deliver, in
the manner directed by the Fund, such Securities as additional collateral, as
may be specified in a Certificate, to secure further any transaction described
in this Article VII. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. The Custodian may, at the option of the lender, keep such collateral in its
possession,

<PAGE> 9

subject to all rights therein given to the lender because of the loan. The
Custodian may require such reasonable conditions regarding such collateral and
its dealings with third-party lenders as it may deem appropriate.

ARTICLE VIII
CONCERNING THE CUSTODIAN

A. Except as otherwise provided herein, the Custodian shall not be liable
for any loss or damage resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own gross
negligence or willful misconduct. The Fund shall defend, indemnify and hold
harmless the Custodian and its directors, officers, employees and agents with
respect to any loss, claim, liability or cost (including reasonable attorneys'
fees) arising or alleged to arise from or relating to the Fund's duties
hereunder or any other action or inaction of the Fund or its Directors,
officers, employees or agents, except such as may arise from the negligent
action, omission, willful misconduct or breach of this Agreement by the
Custodian. The Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel, at the expense of the Fund, and shall
be fully protected with respect to anything done or omitted by it in good faith
in conformity with the advice or opinion of counsel. The provisions under this
paragraph shall survive the termination of this Agreement.

B. Without limiting the generality of the foregoing, the, Custodian,
acting in the capacity of Custodian hereunder, shall be under no obligation to
inquire into, and shall not be liable for:
1.) The validity of the issue of any Securities purchased by or for
the account of the Fund, the legality of the purchase thereof, or
the propriety of the amount paid therefor;
2.) The legality of the sale of any Securities by or for the account
of the Fund, or the propriety of the amount for which the same
are sold;
3.) The legality of the issue or sale of any shares of the Fund, or
the sufficiency of the amount to be received therefor;
4.) The legality of the redemption of any share of the Fund, or the
propriety of the amount to be paid therefor;

<PAGE> 10
5.) The legality of the declaration or payment of any dividend by the
Fund in respect of shares of the Fund;
6.) The legality of any borrowing by the Fund on behalf of the Fund,
using Securities as collateral;
C. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from any Dividend and
Transfer Agent of the Fund nor to take any action to effect payment or
distribution by any Dividend and Transfer Agent of the Fund of any amount paid
by the Custodian to any Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction (including prepayment thereof) of reimbursement of
its costs and expenses in connection with any such action.
E. The Fund acknowledges and hereby authorizes the Custodian to hold
Securities through its various agents described in Appendix B annexed hereto.
The Fund hereby represents that such authorization has been duly approved by the
Board Of Directors of the Fund as required by the Act. The Custodian
acknowledges that although certain Fund Assets are held by its agents, the
Custodian remains primarily liable for the safekeeping of the Fund Assets.
In addition, the Fund acknowledges that the Custodian may appoint one or
more financial institutions, as agent or agents or as sub-custodian or
sub-custodians, including, but not limited to, banking institutions located in
foreign countries, for the purposes of holding Securities and moneys at any time
owned by the Fund. The Custodian shall not be relieved of any obligation or
liability under this Agreement, in connection with the appointment or activities
of such agents or sub-custodians. Any such agent or sub-custodian shall be
qualified to serve as such for assets of investment companies registered under
the Act. Upon request,

<PAGE> 11
the Custodian shall promptly forward to the Fund any documents it receives from
any agent or sub-custodian appointed hereunder which may assist trustees of
registered investment companies fulfill their responsibilities under Rule 17f-5
of the Act.
F. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Fund under the provisions of
the Articles of Incorporation and the Fund's By-Laws.
G. The Custodian shall treat all records and other information relating
to the Fund and the Fund Assets as confidential and shall not disclose any such
records or information to any other person unless (i) the Fund shall have
consented thereto in writing or (ii) such disclosure is required by law.
H. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian such compensation as shall be determined pursuant to Appendix D
attached hereto, or as shall be determined pursuant to amendments to such
Appendix D. The Custodian shall be entitled to charge against any money held by
it for the account of the Fund, the amount of any of its fees, any loss, damage,
liability or expense, including counsel fees. The expenses which the Custodian
may charge against the account of the Fund include, but are not limited to, the
expenses of agents or sub-custodians incurred in settling transactions involving
the purchase and sale of Securities of the Fund.
I. The Custodian shall be entitled to rely upon any Oral Instructions and
any Written Instructions. The Fund agrees to forward to the Custodian Written
Instructions confirming Oral Instructions in such a manner so that such Written
Instructions are received by the Custodian, whether by hand delivery, facsimile
or otherwise, on the same business day on which such Oral Instructions were
given. The Fund agrees that the failure of the Custodian to receive such
confirming instructions shall in no way affect the validity of the transactions
or enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund for acting upon
Oral Instructions given to the

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<PAGE> 12
Custodian hereunder concerning such transactions.
J. The Custodian will (i) set up and maintain proper books of account and
complete records of all transactions in the accounts maintained by the Custodian
hereunder in such manner as will meet the obligations of the Fund under the Act,
with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder and those records are the property of the Fund, and (ii) preserve for
the periods prescribed by applicable Federal statute or regulation all records
required to be so preserved. All such books and records shall be the property
of the Fund, and shall be open to inspection and audit at reasonable times and
with Prior Notice by Officers and auditors employed by the Fund.
K. The Custodian shall send to the Fund any report received on the systems
of internal accounting control of the Custodian, or its agents or
sub-custodians, as the Fund may reasonably request from time to time.
L. The Custodian performs only the services of a custodian and shall have
no responsibility for the management, investment or reinvestment of the
Securities from time to time owned by the Fund. The Custodian is not a selling
agent for shares of the Fund and performance of its duties as custodian shall
not be deemed to be a recommendation to the Fund's depositors or others of
shares of the Fund as an investment.
M. The Custodian shall take all reasonable action, that the Fund may from
time to time request, to assist the Fund in obtaining favorable opinions from
the Fund's independent accountants, with respect to the Custodian's activities
hereunder, in connection with the, preparation of the Fund's Form N-1A, Form
N-SAR, or other annual reports to the Securities and Exchange Commission.
N. The Fund hereby pledges to and grants the Custodian a security interest
in any Fund Assets to secure the payment of any liabilities of the Fund to the
Custodian, whether acting in its capacity a Custodian or otherwise, or on
account of money borrowed from the Custodian. This pledge is in addition to any
other pledge of collateral by the Fund to the Custodian.

<PAGE> 13

ARTICLE X
Termination

A. Either of the parties hereto may terminate this Agreement for any
reason by giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than ninety (90) days after the date
of giving of such notice. If such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board Of Directors of the Fund,
certified by the Secretary of the Fund, electing to terminate this Agreement and
designating a successor custodian or custodians. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board Of Directors of the
Fund, certified by the Secretary, designating a successor custodian or
custodians to act on behalf of the Fund. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $100,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian, provided that it has received a
notice of acceptance by the successor custodian, shall deliver and that date,
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian. Upon termination of this Agreement, the Fund
shall pay to the Custodian on behalf of the Fund such compensation as may be due
as of the date of such termination. The Fund agrees on behalf of the Fund that
the Custodian shall be reimbursed for its reasonable costs in connection with
the termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or by the
Custodian in accordance with the preceding paragraph, or the designated
successor cannot or will not serve, the Fund shall, upon the delivery by the
Custodian to the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys owned by the
Fund, be deemed to be the custodian for the Fund, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the

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<PAGE> 14

duty with respect to Securities held in the Book-Entry System, which cannot be
delivered to the Fund, which shall be held by the Custodian in accordance with
this Agreenment.

ARTICLE XI
MISCELLANEOUS

A. Appendix A sets forth the names and the signatures of all Authorized
Persons, as certified by the Secretary of the Fund. The Fund agrees to furnish
to the Custodian a new Appendix A in form similar to the attached Appendix A, if
any present Authorized Person ceases to be an Authorized Person or if any other
or additional Authorized Persons are elected or appointed. Until such new
Appendix A shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the then current Authorized Persons as set forth in the last delivered Appendix
A.
B. No recourse under any obligation of this Agreement or for any claim
based thereon shall be had against any organizer, shareholder, Officer,
Director, past, present future as such, of the Fund or of any predecessor or
successor, either directly or through the Fund or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against the Fund, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers. shareholders, Officers, Directors of the Fund or of any predecessor
or successor, or any of them as such. To the extent that any such liability
exists, it is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement as having been made by the
Fund have been made by the Board Of Directors, acting as such Directors for and
on behalf of the

<PAGE> 15

Fund, pursuant to the authority vested in them under the laws of the State of
Maryland, the Articles of Incorporation and the By-Laws of the Fund. This
Agreement has been executed by Officers of the Fund as officers, and not
individually, and the obligations contained herein are not binding upon any of
the Directors, Officers, agents or holders of shares, personally, but bind only
the Fund.

D. Provisions of the Prospectus and any other documents (including
advertising material) specifically mentioning the Custodian (other than merely
by name and address) shall be reviewed with the Custodian by the Fund prior to
publication and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
E. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at Star
Bank Center 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the Custodian may
from time to time designate in writing.
F. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given when
delivered to the Fund or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Fund
c/o American Data Services, Inc., 24 West Carver Street, Huntington, NY 11743
or at such other place as the, Fund may from time to time designate in writing.
G. This Agreement, with the exception of the Appendices, may not be
amended or modified in any manner except by a written agreement executed by
both parties with the same formality as this Agreement, and authorized and
approved by a resolution of the Board of Directors of the Fund.
H. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund or by the Custodian and no
attempted assignment by the Fund or the Custodian shall be effective without
the written consent of the other party hereto.

<PAGE> 16
I. This Agreement shall be construed in accordance with the laws of the
State of Ohio.

J. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized as of the day
and year first above written.

ATTEST: Chaconia Fund

By: R F Nelson
- ------------------ -------------------------
Rolston F. Nelson

Title: President
---------------------

ATTEST: Star Bank, N.A.

By:
- ------------------ ------------------------

Title:
---------------------

<PAGE> 17
APPENDIX A

Authorized Persons Specimen Signatures
------------------ -------------------

Chairman: Rolston F. Nelson R F Nelson
------------------ -------------------
President: --
------------------ -------------------

Secretary: Clarry Benn Clarry Benn
------------------ -------------------

Treasurer: --
------------------ -------------------

Controller: --
------------------ -------------------

Adviser Employees: --
------------------ -------------------

--
------------------ -------------------

Transfer Agent/Fund Accountant

Employees:

----------------- -------------------

<PAGE> 18

APPENDIX B

The following agents are employed currently by Star Bank N.A. for securities
processing and control...

The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004

The Federal Reserve Bank
Cincinnati and Cleveland Branches

Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible Securities)

<PAGE> 19

APPENDIX C

STANDARDS OF SERVICE GUIDE

<PAGE> 20

STANDARDS OF SERVICE GUIDE

STAR BANK, N.A.
MAIL LOCATION #6118,
425 WALNUT STREET
CINCINNATI, OH 45202

September, 1996

<PAGE> 21

Star Bank, N.A.
Standards of Service Guide

Star Bank,N.A. is committed to providing superior quality service to all
customers and their agents at all times. We have compiled this guide as a tool
for our clients to determine our standards for the Processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to compete all
processing on a timely basis.

Star Bank is a direct participant of the Depository Trust Company, a direct
member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust
Company as its agent for ineligible and foreign securities.

For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the Wall Street
Journal.

For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Star Bank will not notify clients of optional put opportunities.

Any securities delivered free to Star Bank or its agents must be received
three (3) business days prior to any payment or settlement in order for the Star
Bank standards of service to apply.

Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.

The information contained in this Standards of Service Guide is
subject to change. Should any changes be made Star Bank will
provide you with an updated copy of its Standards of Service
Guide.

<PAGE> 22
STAR BANK SECURITY SETTLEMENT STANDARDS

<TABLE>
<CAPTION>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
<S> <C> <C>
DTC 1:30 P.M. on Settlement Date DTC Participation #2219
Agent Bank ID 27895
Institutional # ______________________
For Account # ________________________

Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
for Star Bank, NA, ABA# 042000013
For Account # ________________________

Federal Reserve Book Entry (Repurchase 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec
Agreement Collateral Only) for Star Bank N.A, ABA# 042000013
For Account # ________________________

PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) Sub Account: Star Bank, NA #090334
Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334

CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Euroclear Via Cedel Bridge
Date minus 2 In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354

Cash Wire Transfer 3:00 P.M. Star Bank, N. A. Cinti/Trust
ABA# 042000013
Credit Account #9901877
Further Credit to ___________________
Account # ___________________________

</TABLE>

*All times listed are Eastern Standard Time.

<PAGE> 23
STAR BANK PAYMENT STANDARDS

SECURITY TYPE INCOME PRINCIPAL

Equities Payable Date

Municipal Bonds* Payable Date Payable Date

Corporate Bonds* Payable Date Payable Date

Federal Reserve Bank Book Entry* Payable Date Payable Date

PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1

CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1

SBA Loan Certificates When Recevied When Received

Unit Investment Trust Certificates* Payable Date Payable Date

Certificates of Deposit* Payable Date + 1 Payable Date + 1

Limited Partnerships When Received When Received

Foreign Securities When Received When Received

*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1

NOTE: If a payable date falls on a weekend or bank holiday, payment will
be made on the immediately following business day.

<PAGE> 24
STAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>

TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
<S> <C> <C> <C>

Rights, Warrants Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
and Optional Mergers or receipt of notice

Mandatory Puts with Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Option to Retain or receipt of notice

Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt

Voluntary Tenders, Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Exchanges, or receipt of notice
and Conversions

Mandatory Puts, At posting of funds or securities received None Upon receipt
Defaults,
Liquidations,
Bankruptcies, Stock
Splits, Mandatory
Exchanges

Full and Partial Later of 10 business days prior to expiration None Upon receipt
Calls or receipt of notice

</TABLE>

NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.

<PAGE> 25

or receipt at notice

cm
Later of 10 business days prior to expiration 5 business days prior to
expiration UPon receipt
QC receipt of notice

10 business days prior to expiration date 5 business days prior to
expiration Upon receipt

Later of 10 business, days prior to expiration 5 business days prior to
expiration Upon receipt
or receipt of notice

At posting of funds or securities received None
Upon, receipt

full and Partial Calls Later or
10 business days prior to expiration None Of
receipt or notice

NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.

<PAGE> 26

APPENDIX D
SCHEDULE OF COMPENSATION

<PAGE> 27

STAR BANK, N.A.

THIRD PARTY ACCESS COMPENSATION SCHEDULE FOR CHACONIA FUND

Third Party access is available within two (2) weeks and requires dial-up
software which will allow your organization to access its Star Bank account from
any location.

REQUIREMENTS AND EXPENSES

There will be a one time expense for the purchase of software
from SEI which includes internal password control and ability
to dial a Local IBM Information Systems number.
(Generally anywhere in the continental U.S.A.) $250.00

ONGOING EXPENSES

Telephone Connect time $.37/minute

<PAGE> 28

Star Bank, N.A.
Proposed Custody Fee Schedule for Chaconia Fund

Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following schedule:

I. Portfolio Transaction Fees:

(a) For each repurchase agreement transaction $7.00

(b) For each portfolio transaction processed through $9.00
DTC or Federal Reserve

(d) For each GNMA/Amortized Security Purchase $16.00

(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00

(f) For each option/future contract written,
exercised or expired. $40.00

(g) For each Cedel/Euro clear transaction $80.00

(h) For each Disbursement (Fund expenses only) $5.00

A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:

II. Market Value Fee

Based upon an annual rate of: Million
.0003 (3 Basis Points) on First $20
.0002 (2 Basis Points) on Next $20
$.00015(1.5 Basis Points) on Balance

III. Monthly Minimum Fee-Per Fund $400.00

IV. Out of Pocket Expenses.
The only out-of-pocket expenses charged to your account
will be shipping fees or transfer fees.

V. IRA Documents
Per Shareholder/year to hold each IRA Document $8.00

VI. Earnings Credits
On a monthly basis any earnings credits generated from uninvested
custody balances will be applied against any cash management
service fees generated. Earnings credits are based on a cost of
funds tiered earnings credit rate.

<PAGE> 29

STAR BANK

PROPOSED CASH MANAGEMENT FEE SCHEDULE FOR CHACONIA FUND

SERVICES UNIT COST($) MONTHLY COST($)

D.D.A. Account Maintenance 14.00
Deposits .399
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00
ACH Transaction .095
ACH Monthly Maintenance 40.00
Controlled Disbursement (1st account) 110.00
Each additional account 25.00
Deposited Items Returned .006
International Items Returned 10.00
NSP Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 110.00
Data Capture* .10
Drafts Cleared .179
Lockbox Maintenance** 55.00
Lockbox items Processed
with copy of check .32
without copy of check .26
Checks Printed .20
Positive Pay .06
Issued Items .015
Wires Incoming
Domestic 10.00
International 10.00
Wires Outgoing
Domestic
Repetitive 12.00
Non-Repetitive 13.00
International
Repetitive 35.00
Non-Repetitive 40.00
PC-Initiated Wires
Domestic
Repetitive 9.00
Non-Repetitive 9.00
International
Repetitive 25.00
Non-Repetitive 25.00

***Uncollected Charge Star Bank Prime Rate as of first of month plus 4%
* Price can vary depending upon what information needs to be captured
** With the use of lockbox, the collected balance in the demand deposit
account will be significantly increased and therefore earnings to offset
cash management service fees will be maximized.
*** Fees for uncollected balances are figured on the monthly average of all
combined accounts.
**** Other available cash management services are priced separately.

Revised 0/31/95

<PAGE> 30

STAR MONEY MARKET

RESPONSE CARD

TO: STAR BANK

I hereby authorize the use of the STAR TREASURY FUND or STAR TAX-FREE FUND for
the purpose of meeting the liquidity needs of the account and sweeping income
and other cash receipts pending long term investment, all as directed by the
investment manager of the account. This authorization is valid until revoked in
writing.

Please check the selected Fund.

STAR TREASURY FUND
- -----
STAR TAX-FREE FUND
- -----

R F Nelson
--------------------------------------
Signature (Rolston F. Nelson)

--------------------------------------
All Authorized Amount Numbers

--------------------------------------
Date

Investments in mutual funds are net deposits of or guaranteed by Star Bank and
are not insured by the Federal Deposit Insurance Corporation or by any other
government sponsored agency of The Federal Government or by any state. The
value of shares in mutual funds are not guaranteed and may fluctuate.

<PAGE> 1

EXHIBIT 14

IRA

A Retirement Plan for Individuals

Fund
P.O. Box

Cincinnati, OH 45264-

This disclosure document will be amended to conform to recent changes in
legislation.
<PAGE> 2
IRA DISCLOSURE STATEMENT
1. RIGHT TO REVOKE THE ACCOUNT. You have the right to revoke this Individual
Retirement Account (IRA) within seven days of receiving this Disclosure
Statement. To revoke your IRA account, simply contact the person designated in
the booklet instructions. You may notify us in person, in writing, or by
telephone. Written notice must be sent by first-class mail at the address
listed on the application and will be accepted as of the date such notice is
postmarked. If you revoke your IRA account, we will refund your entire IRA
contribution. If you do not use this right within seven days of the date you
receive this Disclosure Statement, you have accepted the terms and conditions
of the IRA agreement and may no longer revoke the IRA account.
2. DEFINITIONS. In this Disclosure Statement the terms "you," "your," or "IRA
Owner" means the person who established the IRA. The terms "Custodian," "our,"
"us," or "we" shall mean the financial organization acting as the Custodian of
your IRA. The term "IRS" shall refer to the Internal Revenue Service. The term
"IRA" shall mean Individual Retirement Account within the meaning of section
408 of the Code and shall also refer to your Custodial Account. The term "Code"
shall mean the Internal Revenue Code.
3. ACCOUNT GROWTH. Your IRA is self-directed, we will not take any action
except at your written direction. Earnings and capital appreciation on
investments chosen by you will depend on overall economic conditions and the
success of that particular investment. EARNINGS ON THESE INVESTMENTS ARE NOT
GUARANTEED BY THE CUSTODIAN AND MAY OR MAY NOT BE REASONABLY PROJECTED. For
example, if the initial investment is a passbook, time deposit or money market
account, the account projection can be made based on the current rate of
earnings paid. On the other hand, if the initial investment is an investment
security (stocks, bonds, or mutual funds), the rate of growth of the earnings
on these types of investments cannot be reasonably projected.
4. ELIGIBILITY FOR IRAS.
A. REGULAR CONTRIBUTIONS. You must be under the age 70 1/2 and have "earned
income" in order to contribute to an IRA. For tax years during or after
which you reach the age 70 1/2 you are not allowed to contribute to an
IRA. "Earned income" includes compensation received as wages, tips,
bonuses, as well as other compensation received for personal services.
Compensation also includes taxable alimony. (If you are self-employed,
compensation is your net earnings from your trade or business reduced by
your deduction for contributions made on your behalf to retirement plans
and the deduction allowed for one-half of your self-employment taxes.) If
you meet the above eligibility requirements, you may contribute up to
100% of your compensation or $2,000, whichever is less. Regular and
spousal IRA contributions must be made by your tax filing due date
excluding extensions.
B. SPOUSAL CONTRIBUTIONS. You may make a contribution into your spouse's IRA
if you meet the special spousal IRA rules. You must be married, file a
joint federal income tax return, and the spouse receiving the spousal
contribution must be under 70 1/2 during the entire tax year.
Additionally, the spouse receiving the spousal contribution cannot have
any compensation during the tax year or must elect to be treated as
having no compensation. (The spousal IRA is generally designed to benefit
a nonworking spouse.) The total combined contribution you can make each
year to your IRA and a spousal IRA is the smaller of $2,250 or your
earned income for the year. You can divide your total IRA contribution
between your IRA and the spousal IRA in any way you choose, as long as
you do not contribute more than $2,000 to either IRA. You are not allowed
to make a spousal contribution for the tax year during which you are
divorced or legally separated.
C. ROLLOVER, TRANSFER, AND SEP CONTRIBUTIONS. You may be eligible to roll
over, directly roll over, or transfer your existing IRA or qualified plan
assets. The rules covering rollovers and transfers are discussed later in
this disclosure statement. Simplified Employee Pension (SEP) plan
contributions may also be made to this IRA. Your employer is responsible
for verifying the SEP eligibility requirements and determining the
contribution amount. The IRS or your employer can provide additional
information concerning SEP eligibility.
5. DEDUCTIBILITY. You may or may not be allowed to deduct your IRA
contribution on your income tax return. Whether or not you may deduct your
contribution depends upon whether you or your spouse are active participants in
an employer-maintained retirement plan, your income level, and your filing
status.
A. ACTIVE PARTICIPANT. You are an "active participant" for a year if you, or
your spouse, are covered by a retirement plan. For example, if you are
covered under a profit sharing plan, a 401(k) plan, a tax-sheltered
annuity plan (403(b)), certain government plans, a Simplified Employee
Pension (SEP) plan, or a plan which promises you a retirement benefit
which is based upon the number of years of service you have with the
employer, you are likely to be an active participant. The W-2, Wage and
Tax Statement, includes a box (the "Pension Plan" box) to indicate
whether or not you are covered for the plan year. If you are not certain
whether or not you are covered (an "active participant") you should ask
your employer or tax advisor. If you are not an active participant, you
may fully deduct your IRA contribution regardless of your compensation.
B. ADJUSTED GROSS INCOME. If you are an active participant in a retirement
plan, your ability to deduct your IRA contribution begins to be phased
out when your federal adjusted gross income exceeds certain limits.

<TABLE>
<CAPTION>
AGI (FOR ACTIVE MARRIED, FILING MARRIED, FILING
PARTICIPANTS) SINGLE JOINTLY SEPARATELY
- ----------------- -------------- --------------- ---------------
<S> <C> <C> <C>
$10,000 or less Full Deduction Full Deduction Phaseout*
$10,001 - $25,000 Full Deduction Full Deduction No Deduction
$25,001 - $35,000 Phaseout* Full Deduction No Deduction
$35,001 - $40,000 No Deduction Full Deduction No Deduction
$40,001 - $50,000 No Deduction Phaseout* No Deduction
$50,001 or over No Deduction No Deduction No Deduction
</TABLE>
- ---------------
*If subject to phaseout of deductibility, please see part C, Phaseout
Calculation.

C. PHASEOUT CALCULATION. If you are an active participant and your income
falls within the phaseout limits from the previous chart, you can determine
your deductible amount according to the deduction formula below.

<TABLE>
<CAPTION>
FILING STATUS
---------------------------------------------------------------
Single and
Qualifying
DEDUCTION Married, Filing Married, Filing Married, Filing
FORMULA Separately Jointly Separately
- -------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
A. Adjusted gross income
(AGI) limit* $35,000 $50,000 $10,000
B. Your adjusted
gross income* $______ $______ $______
C. Subtract B
from A $______ $______ $______

Line C multiplied by .2 equals
the amount you may deduct.** x .2 x .2 x .2

Deductible Amount $______ $______ $______

With a Spousal IRA, Line C
multiplied by .225 equals the x .225
amount you may deduct.*** $______
</TABLE>
- ---------------
*AGI from IRS Forms 1040 or 1040A.
**In computing the maximum deduction limit, if the adjusted dollar deduction
limit is not a multiple of ten, it is rounded up to the next highest $10
increment. If your partial deduction is less than $200 but greater than $0,
you are allowed to claim an IRA deduction of $200.
***To calculate the maximum deductible Spousal IRA contribution, you must use a
two-step process. First, the adjusted dollar deduction limit for the Spousal
IRA contribution is calculated using the factor .225. Second, to determine
the maximum deductible Spousal IRA contribution to a single account, the
calculation is made using the factor .2.
You are still allowed to contribute up to the lesser of $2,000 or 100% of your
earned income; however, if your contribution exceeds your maximum deductible
amount, the remainder will be treated as a nondeductible contribution.
6. ROLLOVERS, TRANSFERS, AND DIRECT ROLLOVERS. Distributions from IRAs,
qualified plans or tax-sheltered annuity programs may be eligible for a
tax-free rollover or transfer into an IRA. Transfer and rollover contributions
are not deductible and will not be applied against the $2,000 or $2,250 annual
contribution limits mentioned above.
A. ROLLOVERS AND TRANSFERS FROM IRAs. Assets in IRAs may be directly
transferred or rolled over to another IRA. A rollover occurs when you
take a distribution of the assets and roll them into an IRA within 60
calendar days from the date of receipt. If you retain the assets for any
period of time beyond the 60 days, the rollover is no longer allowed. An
additional restriction on rollovers is that you are only allowed one
rollover for each 12-month period.
B. ROLLOVERS AND DIRECT ROLLOVERS FROM QUALIFIED PLANS. An eligible rollover
distribution from a qualified retirement plan or tax-sheltered annuity
program may be rolled over or directly rolled over to an IRA. Generally,
an eligible rollover distribution is any distribution except: (1) one of
a series of substantially equal periodic payments over the single or
joint life expectancy of the employee and beneficiary or for a specific
period of ten years or more, (2) a nontaxable distribution, or (3) a
required distribution for an employee age 70 1/2 or older. To complete a
direct rollover you would instruct your employer to deliver the funds
directly to the IRA. To complete a rollover, you would take control of
the assets and would have 60 calendar days from the date of receipt to
roll over the taxable portion of the distribution to an IRA.
7. REQUIRED DISTRIBUTIONS AFTER AGE 70 1/2. After you reach age 70 1/2, the
rules require you to take minimum distributions from your IRA each year. The
distribution for your first year, the year in which you reach age 70 1/2, must
be made no later than April 1 of the following year. Distributions for
subsequent years must be taken by December 31 of each year.
You must elect a method to receive your distributions in a manner which
distributes the funds at least as rapidly as the minimum required
distributions. Unless you elect otherwise, the minimum required distribution
for each year is determined by dividing your ending account balance for the
previous year (adjusted by any outstanding rollovers) by your joint life
expectancy with the appropriate beneficiary. If no beneficiary exists or a
beneficiary other than a natural person is named (except certain trusts), your
single life expectancy must be used for this calculation.
For years after the first distribution year, you may elect to annually
recalculate your life expectancy and/or your spouse's life expectancy. If you
do not choose a method, it is presumed that recalculation is elected. If
recalculation is elected, a new life expectancy factor is determined each year
based upon the ages of you and/or your spouse as of your birthdays during the
year. If the person whose life is being recalculated dies, the life expectancy
for that individual becomes zero. If recalculation is not chosen, the life
expectancy is calculated by determining the life expectancy at the end of the
first distribution year and subtracting 1 for each year which has elapsed
since. If no recalculation is elected, the death of the IRA Owner or the
beneficiary is disregarded.
<PAGE> 3
IRA APPLICATION
P.O. Box
Cincinnati, OH 45264
888-532-7862
Please print or type.
<TABLE>
<S> <C>
1 IRA OWNER INFORMATION

Name _________________________________________________ Date of Birth ________________________ Soc. Sec. No. ___________________

Street Address _____________________________________ City ______________________ State __________________ ZIP ______________

State of Residence _______________ Citizen or permanent resident of USA? [ ] yes [ ] no If no, country of residence ____________

Daytime Phone ( )_____________________ Evening Phone ( )__________________ Employer's Name _________________________________

2 CONTRIBUTION INFORMATION

INITIAL CONTRIBUTION TYPE ACCOUNT TYPE:

Type: Amount: Tax Year
(if applicable): [ ] Regular [ ] Conduit
[ ] Regular $__________.____ __________ [ ] Spousal IRA Note: If you are moving assets from a
[ ] Spousal IRA $__________.____ __________ [ ] SEP IRA qualified plan or TSA and do not want
[ ] SEP IRA $__________.____ __________ [ ] Rollover to commingle these assets with regular
[ ] Rollover $__________.____ __________ [ ] Transfer IRA contributions select this option.
[ ] Transfer $__________.____ __________
Date ________________________

3 INVESTMENT INFORMATION

Fund Amount _______________.____

4 DESIGNATION OF BENEFICIARY
In the event of my death, pay my IRA balance to the following primary beneficiary(ies):(See the Instructions for additional
conditions.)

Name SSN OR TIN Relationship Date of Birth Address (optional) %*
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
If all of the primary beneficiaries die before me pay my IRA balance to the following contingent beneficiaries: Total 100
=========
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
__________________________________ ___________________ ____________________ ___________________ ______________________ _________
*If no percentage rate is indicated, the beneficiaries will share equally. Total 100
=========

5 SIGNATURES AND CERTIFICATIONS

I certify under the penalty of perjury that my social security number stated above is correct, that I am of legal age in my state
of residence and I agree that the designation of the tax year for my contribution and my election to treat a contribution as a
rollover (if applicable) are irrevocable. By signing this application, I hereby authorize and appoint Star Bank N.A. to act as
Custodian of my account. I indemnify Star Bank N.A. when making distributions in accordance with my beneficiary designation on
file or in accordance with the Custodial Account Agreement absent any such designation. I acknowledge that I have received the IRA
Disclosure Statement and the IRA Custodial Account Agreement at least seven days prior to the date I signed this application. I
have read both, which are incorporated in this application by reference, and I accept and agree to be bound by the terms and
conditions contained in the IRA Custodial Account Agreement. I also certify that I have received and read the current Prospectus
and understand that mutual fund shares are not obligations of or guaranteed by a bank, nor are they insured by the FDIC.

COMPLETE ONLY IF REQUIRED BY STATE LAW.
---------------------------------------------------------------
SPOUSAL CONSENT: I am the spouse of the IRA Owner and I approve
______________________________________________________________ and consent to the naming of a beneficiary other than myself. I
IRA Owner's Signature Date transmute (transfer) any community property interest I have in
this IRA into the separate property of my spouse.

______________________________________________________________ ______________________________________________________________
Star Bank N.A. Date Spouse's Signature Date

Star Bank N.A. accepts this application and agrees to act as
Custodian of the account. A confirmation will be sent to you
regarding the above transaction(s) and will serve as
notification of the Custodian's acceptance.
</TABLE>
<PAGE> 4

IRA APPLICATION P.O. Box
Cincinnati, OH 45264-
888-532-7862

Fund

Please print or type.

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1. IRA OWNER INFORMATION

Name______________________________ Date of Birth__________________________________ Soc. Sec. No. ____________________________

Street Address ______________________________ City ______________________________ State__________________ ZIP ______________

State of Residence _________________ Citizen or permanent resident of USA? [ ] yes [ ] no If no, country of residence ________

Daytime Phone ( )__________________ Evening Phone ( )___________________ Employer's Name __________________________________

2. CONTRIBUTION INFORMATION

INITIAL CONTRIBUTION TYPE ACCOUNT TYPE:

Type: Amount: Tax Year
(if applicable):
[ ] Regular [ ] Conduit
[ ] Regular $____________ ___________ [ ] Spousal IRA Note: If you are moving
[ ] Spousal IRA $____________ ___________ [ ] SEP IRA assets from a qualified
[ ] SEP IRA $____________ ___________ [ ] Rollover plan or TSA and do not
[ ] Rollover $____________ ___________ [ ] Transfer want to commingle these
[ ] Transfer $____________ ___________ assets with regular IRA
Date______________________ contributions select this
option.
3. INVESTMENT INFORMATION

Fund Amount ________________

4. DESIGNATION OF BENEFICIARY

In the event of my death, pay my IRA balance to the following primary beneficiary(ies): (See the Instructions for additional
conditions.)

Name SSN OR TIN Relationship Date of Birth Address (optional) %*

_____________________ __________________ __________________ ___________________ _______________________ ______

_____________________ __________________ __________________ ___________________ _______________________ ______
If all of the primary beneficiaries die before me pay my IRA balance to the following contingent beneficiaries: Total 100
======
_____________________ __________________ __________________ ___________________ _______________________ ______

_____________________ __________________ __________________ ___________________ _______________________ ______

_____________________ __________________ __________________ ___________________ _______________________ ______
*If no percentage rate is indicated, the beneficiaries will share equally. Total 100
======

5. SIGNATURES AND CERTIFICATIONS

act as Custodian of my account. I indemnify Star Bank N.A. when making distributions in accordance with my beneficiary
designation on file or in accordance with the Custodial Account Agreement absent any such designation. I acknowledge that I
have received the IRA Disclosure Statement and the IRA Custodial Account Agreement at least seven days prior to the date I
signed this application. I have read both, which are incorporated in this application by reference, and I accept and agree to be
bound by the terms and conditions contained in the IRA Custodial Account Agreement. I also certify that I have received and read
the current Prospectus and understand that mutual fund shares are not obligations of or guaranteed by a bank, nor are they
insured by the FDIC.

COMPLETE ONLY IF REQUIRED BY STATE LAW.
--------------------------------------------
SPOUSAL CONSENT: I am the spouse of the IRA Owner
and I approve and consent to the naming of a
______________________________________________________ beneficiary other than myself. I transmute
IRA Owner's Signature Date (transfer) any community property interest I have in
this IRA into the separate property of my spouse.

______________________________________________________ _____________________________________________________
Star Bank N.A. Date Spouse's Signature Date

Star Bank N.A. accepts this application and agrees to
act as Custodian of the account. A confirmation will
be sent to you regarding the above transactions(s) and
will serve as notification of the Custodian's acceptance.

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<PAGE> 5
IRA TRANSFER OR P.O. BOX
DIRECT ROLLOVER REQUEST FORM CINCINNATI, OH 45264
888-532-7862
PLEASE PRINT.

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1 GENERAL INFORMATION
Name................................................... Date of Birth ............................. Soc. Sec. No..................

Street Address ........................................ City .............................. State................ZIP..............

Daytime Phone .................................Evening Phone .............................. Account No............................

2 TRANSFER/DIRECT ROLLOVER REQUEST

WIRE INSTRUCTIONS FOR STAR BANK N.A./ FUND:

Account # ...................... For further credit to: ............................. .....................
ABA Routing # Shareholder Name Shareholder Account #

I have established an IRA with the Fund of which Star Bank N.A. serves as custodian.
I request that my retirement funds be: (check one) / / Transferred from another IRA
/ / Directly rolled over from my employer-sponsored retirement plan.

I authorize my present Custodian/Trustee of my IRA, or my present employer of my retirement plan, to directly send the assets
indicated in Section 3 below to my IRA with the

Name of present Custodian, Trustee or Employer ..................................................................................
Street Address .......................................... City .............................. State .............. ZIP ..........
If you choose to wire-transfer your funds, contact your financial organization for information regarding any incoming
wire-transfer fees that may apply.

3 PAYMENT INFORMATION
Payment Schedule, I authorize and direct you to send my assets as follows:
(1) / / Immediately liquidate all assets and send the cash proceeds.
(2) / / Send cash proceeds of all investments at maturity.
(3) / / Send the assets received at maturity for each of the investments listed below.

Investment Maturity Date (if applies)
............................... ....................................
............................... ....................................

(4) / / Immediately send all assets "in kind."
(5) / / Other .........................................................................
.........................................................................
.........................................................................

Conduit IRA. Do you want these funds kept in a separate IRA? / / yes / / no

4 AGE 70 1/2 INFORMATION
Check one of the following:
/ / I am under age 701/2 and do not turn age 70 1/2 at anytime during the calendar year.
/ / I am age 70 1/2 or older and understand that no part of my required distribution is eligible for transfer or rollover. I
further understand that there may be significant tax penalties resulting if I do transfer or roll over any part of my
required distribution.

5 INVESTMENT INFORMATION
I direct my transfer or direct rollover to be invested as follows:

Amount ............................
6 SIGNATURES AND CERTIFICATIONS
I certify that I have established an IRA with the Fund, of which Star Bank N.A. is the Custodian. I agree to contact
my present Custodian that I am transferring from to determine if specific documentation or a signature guarantee is required. I
understand that I am responsible for determining my eligibility for all transfers or direct rollovers. I agree to hold the
Custodian harmless against any and all situations arising from an ineligible transfer or direct rollover. I acknowledge that the
Custodian cannot provide legal advice and I agree to consult with my own tax professional for advice.

--------------------------------------------------- ------------------------------------------------------------
Signature of Individual Date Signature of Custodian Date
(You may wish to retain a copy of this form for your records.)
====================================================================================================================================

TO BE COMPLETED BY A STAR BANK N.A. REPRESENTATIVE (FOR OFFICE USE ONLY)
Star Bank N.A. hereby confirms that it has accepted its appointment as Custodian of the Fund IRA.

Make check payable to: Mail check to: Fund
Fund, FBO........................................ P.O. Box
Cincinnati, OH 45264

-------------------------------------------

Title .......................................... Date .....................

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<PAGE> 6
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
FORM 5305-A (Rev. October 1992) Department of the Treasury Internal Revenue
Service

DO NOT File with Internal Revenue Service / / Amendment

The Depositor and the Custodian make the following agreement:

ARTICLE I
The Custodian may accept the additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years. The
life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70-1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70-1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial account
as of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70-1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section
408(i) and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
ARTICLE VIII DEFINITIONS.
8.1 "CODE." The term "Code" shall mean the Internal Revenue Code.
8.2 "CUSTODIAL ACCOUNT." Your IRA shall be referred to as the "custodial
account" or "account."
8.3 "IRA." IRA shall mean Individual Retirement Account within the
meaning of Section 408 of the Code.
8.4 "IRS." The term "IRS" shall mean the Internal Revenue Service.
8.5 "WE." The IRS selected the term "Custodian" to describe us, your
financial organization. In other parts of this agreement, the "Custodian" will
be referred to as "us," "we," "our," or the "Custodian."
8.6 "YOU." The IRS selected the term "Depositor" to describe "you," the
IRA Owner. In other parts of this agreement, you will be referred to as "you,"
"your," or "IRA Owner."
8.7 "FUND(S)." The "Fund(s)" shall mean the mutual fund(s) identified in
the IRA Application used to establish this IRA.
ARTICLE IX FEES AND EXPENSES.
9.1 FEES. You agree to pay any fees we establish pursuant to the
Application or a separate fee schedule which we will publish from time to time.
Such fees may include, without limitation, establishment fees, annual
administration fees, termination fees, transfer fees, transaction fees, legal
fees, investment commissions, and such other fees as we determine applicable.
You agree to pay such fees either by a separate billing or direct deduction
from the custodial account; the method of payment is at our discretion. Some
fees, such as brokerage commissions, must be deducted from the custodial
account. The Custodian shall have the right to liquidate sufficient shares in
the custodial account to pay such fees. In the case of a third party receiving
payments, such as brokerage fees and commissions, we may receive a portion of
these fees in return for services provided in completing these transactions. We
agree to give you at least 30 days prior written notice prior to changing a fee
or imposing a new fee.
9.2 EXPENSES. You agree to pay any income, transfer, and other taxes of
any kind that may be levied or assessed upon the custodial account, and all
other administrative expenses reasonably incurred by us in the performance of
our duties. These expenses may include legal, or other professionals hired by
us in connection with your custodial account. You agree to reimburse us for any
reasonable expenses incurred in the administration of the account. The
Custodian shall have the right to liquidate sufficient shares in the custodial
account to pay such expenses.
ARTICLE X AMENDMENTS.
We may amend your custodial account at any time to comply with necessary
laws and regulations or for any other reason. Amendments may be made
retroactively when required to meet a law or regulatory change. You are deemed
to have automatically consented to any amendment 30 days after we mail you a
copy of the amendment. Your actual written or verbal consent is not required to
amend. We shall send you a copy of such amendment within 30 days of the
amendment's effective date.
ARTICLE XI LIMITED LIABILITY.
11.1 HOLD HARMLESS. You agree to hold us harmless, to indemnify, and to
defend us against any and all claims arising from and liabilities incurred by
reason of any action taken by us, except to the extent such liability arises
from the willful misconduct or gross negligence of the Custodian.
11.2 NO INVESTMENT DISCRETION. You agree that all contributions shall be
invested according to your sole discretion in whole or fractional shares of the
Fund(s) identified in the IRA Application. All dividends and capital gain
distributions received on shares of the Fund(s) shall be reinvested in the
shares of the same Fund(s) which shall be credited to the custodial account. We
shall not be responsible or liable for any investment decisions or
recommendations with respect to the investment, reinvestment, or sale of assets
in the custodial account. We shall not be responsible for reviewing any assets
held in the custodial account and shall not be responsible for questioning any
of your
<PAGE> 7
investment decisions. We shall not be responsible for any loss resulting from
any failure to act because of the absence of directions from you. In the event
we determine your investment instructions are unclear, then we shall act as
soon as practical to obtain clarification of such instructions. Pending
clarification, we shall hold without investing all or any portion of the
contribution, without liability for loss of income or appreciation and without
liability for interest of dividends.

11.3 TRANSACTION RESPONSIBILITY. We are not responsible for inquiring
into the nature or amount of any contribution made by you, nor into the amount
or timing of any distribution requested. This includes, without limitation,
that you are solely responsible for all your required minimum distributions. We
have no responsibility to notify you of any required minimum distribution nor
do we have any responsibility to determine the correct minimum amount for you.
You shall have full responsibility for determining your required minimum
distributions as well as for any tax or investment consequences of all
contributions to and distributions from the custodial account. We shall not be
bound to take any action on behalf of you, except upon receipt of written
instructions from you. We shall have no obligation to inquire into the
genuineness of any such written instruction without liability for any action
taken pursuant thereto, so long as we act in good faith. You shall bear sole
responsibility for assuring the deductibility of any deposits to the custodial
account.

11.4 NO ASSUMED RESPONSIBILITIES. We assume no responsibilities and
agree only to provide the administrative and custodial services required under
IRC section 408 and applicable regulations.

ARTICLE XII DEFAULT PROVISIONS (70 1/2 AND DEATH).

12.1 70 1/2 DISTRIBUTIONS. If you fail to make a written election of
payment by your required beginning date, the minimum required distribution will
be calculated using the joint life expectancy of you and your designated
beneficiary. If no beneficiary exists or a beneficiary other than a natural
person is named (except certain trusts), your single life expectancy will be
used for this calculation. See section 11.3 above. The recalculation method
will be used to the extent allowed.

12.2 DEATH DISTRIBUTIONS. If you die before your required beginning
date, then your designated beneficiary must elect a method of distribution
under Article IV-4(b)(i) and (b)(ii) by the earlier of December 31 of the
calendar year in which the life expectancy distributions must begin under
Article IV-4(b)(ii) or December 31 of the calendar year which contains the
fifth anniversary of the date of your death. If you use the designation of
beneficiary form provided in the Application then the following rules apply (i)
the designation in the Application revokes all previously made designations,
(ii) if any of the beneficiaries dies before you, the deceased beneficiary's
share will be reallocated to the surviving beneficiaries on a pro rata basis,
and (iii) if none of the beneficiaries survive you, or if the Custodian cannot
locate your beneficiary(ies) after a reasonable search, any balance in your IRA
will be paid to your estate. The Custodian may refuse to accept a designation
not made on its standard form. You agree to release the Custodian from and
indemnify it for any and all claims arising from the Custodian's actions under
your designation of beneficiary.

ARTICLE XIII REPORTS AND RECORDS. We shall keep accurate and detailed
records of all contributions, receipts, investments, distributions,
disbursements, and other transactions relating to the custodial account. We
shall provide reports to the IRS and to you as required by law and regulations.
Unless you file a written statement with us within 60 days after you receive a
statement, we shall be relieved and discharged from all liability to you
(including any of your beneficiaries) with respect to all matters set forth in
such report.

ARTICLE XIV POWERS. We shall have the right to hire attorneys or
other professionals if we deem it necessary for the proper administration of
your custodial account. This includes the right to have a party affiliated with
the Fund(s) to perform administrative duties. We shall also have the power to
request a judicial settlement of your account or to enter into a lawsuit for
your account. We shall also have the power to do whatever else we determine
necessary for the proper administration of your account.

ARTICLE XV RESIGNATION OR REMOVAL OF US AS CUSTODIAN. We may resign
as Custodian without your consent and you may remove us as Custodian without
our consent. We must provide notice to you of any resignation 30 days prior to
the effective date of the resignation. In the event of resignation by us, you
shall appoint a qualified successor Custodian. Upon our receipt of a written
acceptance of such appointment by the successor Custodian, we shall transfer
and pay over the assets of the custodial account to the successor Custodian. If
after 30 days from notice of resignation, you have not appointed a successor
Custodian or we have not received a written acceptance of such appointment by
the successor Custodian, we shall have the right to transfer the assets
remaining in the custodial account to a successor Custodian that we choose in
our sole discretion or we may liquidate the assets and distribute the cash
proceeds, or we may make an in-kind distribution, or we may otherwise
distribute to you the assets remaining in the custodial account. We are
authorized, however, to reserve such funds as we deem advisable for payment of
any liabilities constituting a charge against the assets of the custodial
account or against us, with any balance of such reserve remaining after payment
of all such items to be paid over the successor Custodian.

ARTICLE XVI TERMINATION. In the event the balance of the custodial
account is less than the minimum value prescribed from time to time by the
appropriate Fund(s), we may liquidate the custodial account by making a
distribution in cash or in-kind of the assets in the account less any fees
owing. If we terminate for any reason, we shall not be liable for any loss or
penalty incurred upon termination and liquidation of the custodial account.
Upon liquidation of the custodial account this Agreement shall terminate and we
shall be relieved of all further duties and any liability relative to this
Agreement, the custodial account, and the assets distributed hereunder.

ARTICLE XVII CUSTODIAN'S RESPONSIBILITIES. We shall act as an agent
for you, we shall receive funds and invest them at your direction and in
accordance with this Agreement. All shares of the Fund(s) shall be held in our
name as Custodian or our nominee's name. The parties do not intend to confer
any fiduciary responsibilities upon the Custodian and none shall be implied. We
shall deliver, or cause to be executed or delivered to you all notices,
prospectuses, financial statements, proxies and proxy solicitation materials
relative to shares of the appropriate Fund(s) held in the custodial account.
The Custodian shall vote such shares only in accordance with your written
instructions.

ARTICLE XVIII CONTRIBUTIONS. The Custodian is under no duty to compel
you to make any contributions and shall have no duty to assure that such
contributions are appropriate in amount. You have sole responsibility for
assuring the deductibility of any contributions. We may request additional
information in the case of rollovers and direct rollovers. We may request a
Transfer Form, or other forms prior to a transfer.

ARTICLE XIX MISCELLANEOUS

19.1 NOTICE. Any notice, payment, report, or other material mailed to
you shall be deemed delivered and effective three days after the date mailed by
us to you. We shall send such material to your last address you provided and we
shall assume no obligation to ascertain the actual address or whereabouts of
you. Any notice you send us shall be deemed delivered when actually received by
us. Except as otherwise permitted by us, all instructions to us must be in
writing.

19.2 HEADINGS. The headings and articles of this agreement are for
convenience of reference only, and shall have no substantive effect on
provisions of this agreement.

19.3 SINGULAR FORM. Throughout this agreement, the singular form
includes the plural where applicable.

19.4 STATE LAW. This agreement shall be construed and interpreted in
accordance with the laws of the state in which our principal office is located,
except to the extent superseded by federal law.

19.5 DISQUALIFYING PROVISION. Any provision of this agreement which
would disqualify the custodial account as an IRA shall be disregarded to the
extent necessary to make the custodial account an IRA.

19.6 INTERPRETATION. If any question arises as to the meaning of any
provision of this agreement, then we shall be authorized to interpret any such
provision, and our interpretation shall be binding upon all parties.

19.7 ADDITIONAL PROVISIONS. Additional provisions to this agreement
may be attached on a separate sheet.

GENERAL INSTRUCTIONS

(Section references are to the Internal Revenue Code unless otherwise noted.)

PURPOSE OF FORM

Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by
both the individual (Depositor) and the Custodian and must be completed no
later than the due date of the individual's income tax return for the tax year
(without regard to extensions). This account must be created in the United
States for the exclusive benefit of the Depositor or his or her beneficiaries.

Individuals may rely on regulations for the Tax Reform Act of 1986 to
the extent specified in those regulations.

Do not file Form 5305-A with the IRS, instead, keep it for your
records.

For more information on IRAs, including the required disclosure you can
get from your Custodian, get Pub. 590, Individual Retirement Arrangements
(IRAs).

DEFINITIONS

CUSTODIAN. -- The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as Custodian.

DEPOSITOR. -- The Depositor is the person who establishes the custodial
account.

IDENTIFYING NUMBER

The depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is required only for an
IRA for which a return is filed to report unrelated business taxable income. An
employer identification number is required for a common fund created for IRAs.

IRA FOR NONWORKING SPOUSE

Form 5305-A may be used to establish the IRA custodial account for a nonworking
spouse.

Contributions to an IRA custodial account for a nonworking spouse must
be made to a separate IRA custodial account established by the nonworking
spouse.

SPECIFIC INSTRUCTIONS

ARTICLE IV. -- Distributions made under this article may be made in a single
sum, periodic payment, or a combination of both. The distribution option should
be reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.

ARTICLE VIII. -- Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.

NOTE: Form 5305-A may be reproduced and reduced in size for adoption to
passbook purposes.

<PAGE> 8
The joint life expectancy of you and a beneficiary other than your spouse
is limited by the Minimum Distribution Incidental Benefit (MDIB) tables. The
tables give life expectancies for the IRA Owner and a beneficiary ten years
younger. If this factor is less than your joint life expectancy with the
applicable beneficiary, the factor from the MDIB table must be used to calculate
the minimum distribution. If you have more than one IRA at the same or different
financial organization(s), the minimum distribution must be calculated
separately for each IRA. However, the minimum distribution from each IRA can be
withdraw, from any one or more of your IRAs.
8. DISTRIBUTIONS AFTER DEATH.
A. DEATH AFTER THE REQUIRED BEGINNING DATE. If you die after the date
when payments must have begun (after you reach age 70 1/2), the
payments to your beneficiary or estate must continue so that the funds
will be distributed at least as rapidly as they would have been
distributed if the death had not occurred. A spouse beneficiary may
elect to roll over a distribution (other than a required minimum
distribution) into his or her own IRA.
B. DEATH BEFORE THE REQUIRED BEGINNING DATE. If you die before the
required beginning date, your beneficiary has the following options:
(1) FIVE YEAR OPTION. The beneficiary may withdraw the entire account
balance in any manner so that the IRA is depleted by December 31
of the fifth year following the year of death.
(2) LIFE EXPECTANCY OPTION. The beneficiary may withdraw the funds in
a series of payments over a period which does not exceed the
beneficiary's life expectancy. These payments must begin by
December 31 of the year following the year of death if the
beneficiary is not your spouse, or December 31 of the year you
would have been age 70 1/2 (if later), if the beneficiary is your
spouse.
(3) SPOUSE TREAT AS OWN OPTION. A spouse beneficiary may elect to
roll over a distribution into his/her own account or to treat
the IRA as his/her own.
If you die before your required beginning date, your spouse
beneficiary must make his/her election of payment by the earlier
of December 31 of the fifth year after the year of your death or
December 31 of the year you would have attained age 70 1/2. If
you die before your required beginning date, your nonspouse
beneficiary must make his/her election of payment no later than
December 31 of the year following the year of your death.
9. INCOME TAX STATUS OF DISTRIBUTIONS. IRA distributions are generally fully
taxable as ordinary income. IRAs are not eligible for the special tax treatment
(five and ten year tax averaging and capital gains treatment) available to
certain distributions from pension and profit sharing plans.
A. NONDEDUCTIBLE CONTRIBUTIONS. If you have made nondeductible
contributions to an IRA, a certain percentage of your distributions
will be nontaxable. The nontaxable portion of your distributions is
calculated as follows:
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<S> <C>
Total Nondeductible Contributions
Less Previous Nontaxable Distributions
Nontaxable Distributions = -------------------------------------- X Distributions During the Year
Total Account Balance of All IRAs
at Year End Plus Total Distributions During the Year
</TABLE>

B. ESTATE TAX STATUS OF DISTRIBUTIONS. All funds held within your IRA
will be included in your gross estate for estate tax purposes,
regardless of the named beneficiary or manner of distribution. There
is no specific estate tax exclusion for funds held within an IRA.
C. GIFT TAX STATUS OF IRA CONTRIBUTIONS AND DISTRIBUTIONS. For gift tax
purposes, irrevocable beneficiary designations will not be treated as
gifts.
10. FEDERAL PENALTIES. In addition to the taxes imposed on IRAs, distributions
from IRAs are also potentially subject to a wide variety of penalties (excise
taxes).
A. PENALTY FOR PREMATURE DISTRIBUTION. Generally, if you take a
distribution from your IRA before you reach the age 59 1/2 you will
owe, in addition to regular income taxes a 10% excise tax on the
taxable amount of the distribution. Exceptions to the 10% excise tax
exist in the case of disability, death, or if you agree to take a
series of substantially equal periodic payments made over your life
expectancy or the joint life expectancy of yourself and your
designated beneficiary.
B. PENALTY FOR EXCESS CONTRIBUTIONS. If you contribute more to your IRA
than allowed it is called an "excess contribution" and you may be
penalized. The government imposes a 6% penalty (excise tax) per year
for any excess amount you allow to remain in your IRA. You must pay
the penalty by filing a special IRS form along with your income tax
return. You can avoid the 6% penalty by removing your excess
contribution plus any earnings on the excess amount prior to the due
date for filing your Federal income tax return for the year, plus
extensions. You are not allowed to deduct an excess contribution and
would not be able to avoid the 6% excise tax if you took a deduction
for the contribution. Any earnings you receive along with a
distribution of the excess is taxable income in the tax year the
excess contribution was made.
The 6% excess contribution penalty may be eliminated for future tax
years by withdrawing the excess contribution from the IRA before the
end of the tax year or by under-contributing for that year by an
amount equal to the excess contribution. The excess contribution being
returned will not be subject to income tax nor will the 10% premature
withdrawal penalty as discussed below be assessed provided the
contribution for the year during which the excess contribution was
made did not exceed $2,250 (excluding rollover contributions) and no
deduction was allowed for the excess.
C. EXCESS DISTRIBUTION PENALTY. If you receive more than $150,000 subject
to cost-of-living adjustments you will be subject to a 15% tax on the
amount of the excess. Special rules may apply to you and you should
consult your tax adviser with questions concerning the excess
distribution penalty.
D. EXCESS ACCUMULATION PENALTY. An excess accumulation penalty may be
imposed on your estate if you die with an excess accumulation in your
IRA. You should consult with your tax adviser concerning excess
accumulation penalties.
E. PENALTY FOR INSUFFICIENT OR LATE DISTRIBUTION. You will owe a penalty
of 50% of the amount of any minimum distribution you fail to take. As
discussed above, minimum distributions are required when you reach
age 70 1/2 and beneficiaries may also be required to take minimum
distributions. You are responsible for paying this tax and reporting
it on your income tax return. This 50% penalty is in addition to the
regular income tax that may be payable on distributions from IRAs. The
tax imposed is equal to 50% of the amount by which the minimum
required distribution exceeds the amount distributed during the year.
F. PENALTY FOR PROHIBITED TRANSACTIONS. If you engage in a prohibited
transaction, the IRA loses its tax exemptions of the first day of the
year. You must include the Fair Market Value of the IRA in your gross
income for the year during which the prohibited transaction occurred
and pay all applicable taxes and penalties.
G. PENALTY FOR PLEDGING THE ACCOUNT AS SECURITY. If you pledge your IRA
as security for a loan, the portion pledged is treated as a
distribution to you in that year. The portion pledged is fully taxable
and subject to all penalties.
11. MISCELLANEOUS PROVISIONS.
A. YOUR CUSTODIAN. Your Custodian must be a bank, savings and loan
association, credit union, or other entity that is permitted to accept
IRA contributions.
B. CASH CONTRIBUTIONS. ALL CONTRIBUTIONS TO YOUR IRA MUST BE IN CASH
EXCEPT FOR ROLLOVER and transfer contributions.
C. CONTRIBUTION LIMITS. You are not allowed to contribute more than
$2,000 as a regular contribution and no more than $2,250 in the case
when you are making a contribution both to your IRA and to the IRA of
your spouse under the spousal IRA rules.
D. LIFE INSURANCE. You may not invest your IRA in life insurance
contracts.
E. NONFORFEITABLE. Your interest in your IRA balance is nonforfeitable.
F. NO COMMINGLING. The assets of the IRA will not be commingled with
other property except in a common trust or investment fund.
G. COLLECTIBLES. No part of the funds can be invested in collectibles,
including any work of art, rug or antique, metal or gem, stamp or
coin, alcoholic beverage, or any other tangible property specified by
the IRS. The acquisition of certain U.S. government-issued gold and
silver coins and certain state-issued coins are permitted as
investments in an IRA.
12. IRS APPROVAL OF FORMS. The Custodial Agreement used to establish this IRA
is the IRS Model Custodial Agreement (Form 5305-A). This agreement has been
approved as to form by the Internal Revenue Service. You are responsible to
ensure you follow the terms and conditions of this agreement. This approval
is not an endorsement of the investment instruments used by the Custodian.
13. PROVISIONS REGARDING AMENDMENTS TO THE PLAN. The Custodian of this IRA
may amend (change or terminate) the IRA at any time. The Custodian shall
furnish copies of any such amendments to the IRA Owner within 30 days of
the date the amendments are to become effective.
14. FEES. The Custodian may charge service fees for the administration of the
IRA. If a fee is charged at the time the IRA is first opened, the IRA Owner
will be notified of the amount charged, either on the IRA Application, or
otherwise. If fees will be charged in the future, the Custodian will
furnish the IRA Owner with a written notice stating the nature and amount
of such fees at least 30 days before charging any fees.
15. ANNUAL STATEMENTS. Each year the Custodian will furnish you and the IRS
with statements reflecting the activity in your IRA. You will receive an
annual report, the IRS Form 5498 or a substitute form, which will indicate
your Fair Market Value of the account as of the end of the previous
calendar year. This will give the amount of your contribution to the IRA
and will indicate any rollovers or transfers into the account. Another
statement, the IRS Form 1099-R, will reflect your distributions for the
year. The information is also sent by your Custodian to the IRS.
16. OTHER IRS FORMS. You may be required to file IRS Form 5329 with the IRS
for each taxable year in which you are assessed a Federal penalty as
discussed above. If you only owe the 10% premature distribution penalty,
you may be able to pay the penalty on your income tax return alone and no
Form 5329 would be required. You must also file IRS Form 8606
(Nondeductible IRA Contributions IRA Basis, and Nontaxable Distributions)
for each taxable year you make nondeductible contributions or receive
nontaxable distributions.

FURTHER INFORMATION REGARDING INDIVIDUAL RETIREMENT ACCOUNTS CAN BE OBTAINED
FROM ANY DISTRICT OFFICE OF THE IRS OR FROM IRS PUBLICATION 590.

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INSTRUCTIONS FOR OPENING YOUR FUND IRA

I. INCLUDED IN THIS BOOKLET IS:
1) The IRA Disclosure and Plan Agreement.

2) An IRA Application (mail to ).

3) A shareholder copy of the IRA Application (retain for our records).

4) A Transfer or Direct Rollover Request form. You may use this form to request your current custodian, trustee, or
employer to directly transfer your plan assets to your

5) A return envelope.

II. TO OPEN YOUR FUND IRA

STEP 1 Complete your IRA Application. See Designation of Beneficiary explanation below.

STEP 2 If you are requesting a transfer or direct rollover of current plan assets (held elsewhere) to your Fund
IRA, complete the Transfer or Direct Rollover Request form. You should complete this form IN ADDITION to the
IRA Application.

STEP 3 Separate the form(s) at the perforation and send it back to the Fund in the return envelope provided.

STEP 4 Include a check for the amount of your IRA contribution.

STEP 5 Retain the IRA Plan Agreement and Disclosure.

III. DESIGNATION OF BENEFICIARY

You may designate a beneficiary to receive the IRA funds upon your death. The space provided is to name primary and
contingent beneficiaries. If more space is needed, you may attach a supplementary sheet. If you wish a more complicated
type of designation of beneficiary, you should consult an attorney. Some state's laws require married individuals to name
their spouse as beneficiary. Married individuals should consult with their tax advisers prior to designating someone
other than their spouse. You may change your beneficiary at any time by writing to the Custodian. If any of your
beneficiaries die before you, the deceased beneficiary's share will be reallocated among the surviving beneficiaries on a
pro rata basis. If none of your beneficiaries survive you, or if the Custodian cannot locate your beneficiary after a
reasonable search, any balance in the IRA will be paid to your estate.

FEE INFORMATION

Annual Account Maintenance Fee: $ per account
Incoming Transfer Fee: $ per account
Distribution Fee: $ per account
Refund of Excess Contribution: $ per account
Outgoing Transfer Fee: $ per account
Automatic Periodic Distributions: $ per year, per account

REVOCATION INFORMATION

You have the right to revoke this Individual Retirement Account (IRA) within seven days of receiving your disclosure
statement. To revoke your IRA account, simply notify your:

Customer Service Representative
American Data Services
Second Floor
24 West Carver Street
Huntington, NY 11743
(888) 532-7862

You may notify American Data Services in person, in writing, or by telephone. Written notice must be sent by first-class mail at
the address listed above and will be accepted as of the date your notice is postmarked.
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