As filed with the Securities and Exchange Commission on November 30, 1998
Registration Nos. 33-37426 and 811-6194
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 15 [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.
The Hauppauge Corporate Center, 150 Motor Parkway, Suite 109,
Hauppauge, New York 11788
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 516-951-0500 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.
Foley & Lardner
777 East Wisconsin Avenue, Suite 3700, Milwaukee, WI 53202
414-297-5655
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 75 days after filing
pursuant to paragraph (a)(2) of Rule 485.
Registrant will file a Rule 24(f)-2 Notice within 90 days of the fiscal year
ended December 31.
<PAGE>
THE CHACONIA INCOME & GROWTH FUND, INC.
Prospectus February 15, 1999
TABLE OF CONTENTS
Page
Cross-Reference Sheet
Cover Sheet
Summary of Fund Expenses 2
Prospectus Summary 4
Investment Objective and Policies 5
Basic Investment Techniques 7
Certain Investment Strategies and Special
Risk Considerations 9
Management of the Funds 11
How to Purchase Shares 13
Distribution Plan and Service Fees 14
How to Redeem Shares 15
Retirement Plans 16
Dividends, Distributions and Taxes 16
General Information 17
- ----------
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.
-i-
<PAGE>
THE CHACONIA INCOME & GROWTH FUND, INC.
Cross-Reference Sheet
(as required by Rule 495)
Form N-1A Item
Part A Prospectus Caption
- ------ ------------------
1 Cover Page Cover Page
2 Synopsis Summary of Fund Expenses;
Prospectus Summary
3 Condensed Financial Information Financial Highlights
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
5A Management's Discussion of Fund Included in Annual Report to
Performance Shareholders
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 Directors and Officers
Holders
of Securities
16 Investment Advisory and Other Management
Services
17 Brokerage Allocation and Other Portfolio Transactions and
Practices Brokerage
18 Capital Stock and Other Securities Prospectus-General Information
19 Purchase, Redemption and Pricing of How to Purchase Shares; How to
Securities Being Offered 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
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.
-ii-
<PAGE>
DATED FEBRUARY 15, 1999
THE CHACONIA INCOME & GROWTH FUND, INC.
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Suite 109
Hauppauge, NY 11788
1-800-368-3322
The Chaconia Income & Growth Fund, Inc. (the "Corporation") is an
open-end, nondiversified management investment company consisting of two
separate portfolios, the Chaconia Income & Growth Fund (the "Chaconia I&G Fund")
and the Chaconia Association of Caribbean States I&G Fund (the "Chaconia ACS
Fund") (collectively, the "Funds").
Chaconia I&G Fund.
The investment objective of the Chaconia I&G Fund is to produce current
income and capital appreciation. The Chaconia I&G Fund seeks to achieve its
objective by investing principally 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.
Chaconia ACS Fund
The Chaconia ACS Fund seeks long-term capital appreciation by investing
primarily in a diversified portfolio of equity securities of non U.S. issuers
domiciled and/or operating in the member countries of the Association of
Caribbean States (the "ACS"). The Chaconia ACS Fund is not designed for
investors whose primary investment objective is income.
General
The minimum initial investment in each Fund is $250. Subsequent
investments will be a minimum of $100, and stockholders have the option of
making subsequent purchases through a continuing automatic transfer plan. (See
"How to Purchase Shares"). For further information, contact each Fund at the
address or telephone number shown above. There can be no assurance that each
Fund's investment objectives will be achieved.
INVESCO CAPITAL MGMT. INC. (the "Investment Manager") is the Investment
advisor for each of the Funds. The Investment Manager receives management fees
from the Funds and may be reimbursed by the Funds for certain distribution
expenses in connection with a Rule 12b-1 distribution plan. The Trinidad and
Tobago Unit Trust Corporation (the "UTC") serves as subadvisor of the Chaconia
ACS Fund. The Investment Manager makes the investment decision for the Funds.
This prospectus concisely sets forth information a prospective investor
should know about the Funds before investing. A Statement of Additional
Information about the Funds and a Semi-Annual Report to Shareholders of the
Chaconia I&G Fund has been filed with the Securities and Exchange Commission and
is available upon request and without charge by calling or writing the Funds at
the above address or by contacting certain registered broker-dealers ("selected
broker-dealers"). The "Statement of Additional Information" is dated February
15, 1999 and is incorporated by reference into this Prospectus in its entirety.
Investors are advised to read this Prospectus and retain it for future
reference.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The information in this prospectus (or Statement of Additional
Information) is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus (or Statement of Additional
Information) is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
<PAGE>
<TABLE>
SUMMARY OF FUND EXPENSES
<CAPTION>
Shareholder Transaction Expenses: I&G ACS
Fund Fund
---- ----
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) None 4.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of None None
offering price)
Deferred Sales Load (as a percentage of original purchase price or redemption None None
proceeds, as applicable)
Redemption Fees (as a percentage of amount redeemed) None None*
Exchange Fee None None*
Annual Fund Operating Expenses (as a percentage of average net
assets):
Management Fees (variable-- as a percentage of average daily net assets) 0.57%(1) 0.57%
12b-1 Fees 0.50% 0.50%
Service Fees %(2) %(2)
Other Expenses 1.08% 1.08%
Total Fund Operating Expenses(1)(2) 2.15% 2.15%
*An investor's broker may charge a fee for wire redemptions and/or exchanges.
</TABLE>
(1) The management fee will vary depending upon the Chaconia I&G 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 Chaconia I&G Fund's average daily net assets. Total Chaconia
I&G Fund operating expenses will vary depending upon the management fee.
(2) The service fees are payments made by the Chaconia I&G Fund to
registered broker-dealers for personal service and/or the maintenance of
shareholder accounts. As of June 30, 1998, no service fee payments had been
earned or paid to date, but service fees could be paid in the future by the
Funds up to 0.25% of 1% of the Fund's net assets. The total Chaconia I&G Fund
Operating Expense ratio is 2.15% (annualized) as of June 30, 1998. The Chaconia
ACS Fund did not commence operations until February 15, 1999. The total
operating expenses for the Chaconia ACS Fund are estimates.
<TABLE>
Example 1 year 3 years 5 years 10 years
------- ------ ------- ------- --------
<CAPTION>
You would pay the following expenses on a $10,000
investment, assuming (i) 5% annual return and
(ii)redemption at the end of each time period:
<S> <C> <C> <C> <C>
I&G Fund..................................... $218 $673 $1,154 $2,483
ACS Fund..................................... $218 $673 N/A N/A
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses of an investment in the Funds. The example should not
be considered a representation of past or future expenses; actual expenses may
be greater or less than those shown. Total Fund Operating Expenses and Other
Expenses for the Chaconia I&G Fund are based on the actual expenses for the six
month period ended June 30, 1998. The Total Fund Operating Expenses and Other
Expenses for the Chaconia ACS Fund are based on estimated amounts set forth
above. The example assumes a 5% annual rate of return pursuant to requirements
of the Securities and Exchange Commission. This hypothetical rate of return is
not intended to be representative of past or future performance of any of the
Funds.
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights for a share of beneficial interest
outstanding throughout the period shown has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose most recent report on
the financial statements appears in the Chaconia I&G Funds' semi-annual report
to shareholders, as filed with the Securities and Exchange Commission (the
"Commission") on March 2, 1998. The Chaconia ACS Fund commenced operations on
February 15, 1999. This table should be read in conjunction with the financial
statements and notes thereto which are contained in such annual and semiannual
reports. The Chaconia ACS Fund commenced operations on February 15, 1999.
<TABLE>
Chaconia I&G Fund
<CAPTION>
- ----------------------------------------- --------------- ------------ -------- -------- ----------- --------
FOR THE SIX For the
MONTHS ENDED For the Year ended December 31, Period
JUNE 30, 1998 ended
UNAUDITED December 31,
1997 1996 1995 1994 1993(1)
- ----------------------------------------- ---------- ----------------------------------------------- ----------
Per share operating performance:
- ----------------------------------------- ---------- ---------- -------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.47 $ 10.44 $ 12.13 $ 9.94 $ 10.20 $10.00
- ----------------------------------------- ---------- ---------- -------- ------ -------- ----------
Income from investment operations:
- ----------------------------------------- ---------- ---------- -------- ------ -------- ----------
Net investment income 0.07 0.08 0.13 0.24 0.13 0.03
- ----------------------------------------- ---------- ---------- -------- ------ -------- ----------
Net realized and unrealized gain
(loss) on investments 1.06 2.00 0.55 2.47 (0.13) 0.21
--------- --------- -------- ------ -------- --------
- ----------------------------------------- --------- ---------- -------- ------ -------- ----------
Total from investment operations 1.13 2.08 0.68 2.71 0.00 0.24
- ----------------------------------------- --------- ---------- -------- ------ -------- ----------
Less distributions:
- ----------------------------------------- --------- ---------- -------- ------ -------- ----------
Dividend from net investment income 0.00 (0.09) (0.17) (0.23) (0.13) (0.04)
- ----------------------------------------- --------- ---------- -------- ------ -------- ----------
Distribution in excess of net
investment income and realized gains 0.00 0.00 (0.01) 0.00(2) 0.00(2) 0.00(2)
- ----------------------------------------- ---------- ---------- -------- ------ ------- --------
Distribution from realized gains 0.00 (0.96) (2.15) (0.28) (0.13) 0.00(2)
- ----------------------------------------- ---------- ---------- -------- ------ ------- --------
Distribution in excess of net
realized gains on investments 0.00 0.00 (0.04) 0.00 (0.00) 0.00
- ----------------------------------------- ---------- ---------- -------- ------ ------- -------
Total distributions 0.00 (1.05) (2.37) (0.51) (0.26) (0.04)
---------- ---------- -------- ------ ------- --------
- ----------------------------------------- ---------- ---------- -------- ------ ------- --------
Net asset value, end of period $ 12.50 $ 11.47 $ 10.44 $ 12.13 $ 9.94 $ 10.20
========== ========= ======== ======= ======== =======
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Total return 20.66% 19.98% 5.61% 27.16% 0% 2.40%
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Ratios/supplemental data:
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Net assets, end of period (in
thousands) $28,549 $18,500 $10,132 $ 17,809 $12,315 $ 12,105
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Ratios to average net assets:
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Expenses 2.15%(3) 2.55% 2.84% 2.37% 2.87% 2.73%(3)
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Net investment income 1.08%(3) 0.98% 1.03% 2.09% 1.25% 0.53%(3)
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
Portfolio turnover rate 11.38% 35.04% 72.91% 26.23% 40.13% 0.55%
- ----------------------------------------- ---------- --------- -------- -------- -------- ---------
</TABLE>
- -----------------------
(1) The Chaconia I&G Fund commenced operations on May 11, 1993.
(2) Less than $0.01 per share.
(3) Annualized.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus:
The Corporation: The Corporation 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"). The Corporation consists of two funds: the Chaconia I&G
Fund and the Chaconia ACS Fund.
Investment Objective: The Chaconia I&G Fund's investment objective is
to seek high current income and capital appreciation. It seeks to meet its
objective by investing its 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 Chaconia I&G
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.
The Chaconia ACS Fund's investment objective is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of equity
securities of non U.S. issuers domiciled and/or operating in the member
countries of the ACS. Under normal circumstances the Chaconia ACS Fund intends
to invest at least 65% of its total assets in foreign common stocks and
equity-related securities, including preferred stocks, warrants, convertible
securities and other similar rights. The Chaconia ACS Fund may purchase
securities of foreign issuers directly or in the form of American Depository
Receipts (ADRs), European Depository Receipts (EDRs), Global Depository Receipts
(GDRs) or other securities representing shares of non-U.S. issuers domiciled or
operating in the ACS.
There is no assurance that the Funds will achieve their investment
objective. The investment objective of the Funds and their investment
restrictions described in the Statement of Additional Information are
fundamental and may not be changed without stockholder approval. Their 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 Chaconia I&G 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
Chaconia I&G 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 Chaconia I&G 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.
In addition to the risks of investing in stock of different-sized
companies, investors in the Chaconia ACS Fund face particular risks associated
with foreign investing. Foreign investment risks include currency, liquidity,
political, economic and market risks, as well as risks associated with
governmental regulation and nonuniform corporate disclosure standards. The
Chaconia ACS Fund may invest from 0% to 25% of its net assets in securities
traded in emerging markets, which may entail more risk than investing in
securities traded in mature markets. The greater the percentage of net assets
the Chaconia ACS Fund invests in emerging countries, the greater the investment
risks.
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 Chaconia I&G Fund or the Chaconia ACS Fund's average
daily net assets. The Investment Manager may receive 12b-1 fees as reimbursement
for certain distribution expenses related to the Chaconia I&G Fund or the
Chaconia ACS Fund.
How to Purchase Shares: Shares of the Funds may be purchased through
selected broker-dealers and from American Data Services, Inc., Transfer Agent
for the Funds ("Transfer Agent"), at the public offering price per share next
-4-
<PAGE>
determined after receipt of an order by either a registered broker-dealer or the
Transfer Agent, in proper form with accompanying check or other bank wire
payment arrangements satisfactory to the Funds. The minimum initial investment
is $250. Subsequent investments will be a minimum of $100. Stockholders may opt
to make subsequent investments 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 Funds 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."
Dividends and Reinvestment: Each dividend and capital gains
distribution, if any, declared by the Funds on their outstanding shares will,
unless a stockholder elects otherwise, be paid on the payment date in additional
shares of the Funds 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 Funds 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 Funds will pay any dividends or realize any
capital gains. However, the Funds currently intend to pay dividends and capital
gains distributions, if any, on an annual basis. See "Dividends, Distributions
and Taxes."
INVESTMENT OBJECTIVE AND POLICIES
Chaconia I&G Fund
The investment objective of the Chaconia I&G Fund is to seek high
current income and capital appreciation. It seeks to meet its objective by
investing the Chaconia I&G 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 Chaconia I&G Fund will be able to achieve its
objective.
The Chaconia I&G Fund intends to invest in the Schemes of the Trinidad
and Tobago Unit Trust Corporation only if the Chaconia I&G Fund determines that
there are no adverse restrictions to realizing an investment in the Schemes of
the Trinidad and Tobago Unit Trust Corporation .
The Chaconia I&G Fund's investment policy will emphasize debt
instruments to achieve the Chaconia I&G Fund's current income objective. Under
normal market conditions, the Chaconia I&G 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 Chaconia I&G
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. Debt securities are defined as: U.S. and foreign nonconvertible company
bonds, U.S. and foreign government securities and commercial paper.
-5-
<PAGE>
In determining what equity securities the Chaconia I&G 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 Chaconia I&G 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 securities as an inducement
to buy. The prices of warrants do not necessarily correlate with the prices of
the underlying securities. The Chaconia I&G Fund may not purchase options on
equity securities.
The Chaconia I&G 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 Chaconia I&G Fund's assets in high quality commercial paper
and short-term U.S. Government securities such as Treasury Bills and Treasury
Notes. The Chaconia I&G 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
Chaconia I&G Fund's portfolio is not expected to exceed ten years.
The Chaconia I&G 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 Chaconia I&G 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 Chaconia I&G 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.
Chaconia ACS Fund
The Chaconia ACS Fund's investment objective is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of equity
securities of non U.S. issuers domiciled and/or operating in the member
countries of the ACS. Under normal circumstances the Chaconia ACS Fund intends
to invest at least 65% of its total assets in foreign common stocks and
equity-related securities, including preferred stocks, warrants, convertible
securities and other similar rights. The Chaconia ACS Fund may purchase
securities of foreign issuers directly or in the form of American Depository
Receipts (ADRs), European Depository Receipts (EDRs), Global Depository Receipts
(GDRs) or other securities representing shares of non-U.S. issuers domiciled or
operating in the ACS.
The ACS facilitates consultation, co-operation and concerted action
among its Member States and Associate Members. It also aims to promote the
implementation of policies and programmes designed to: promote an enhanced
economic space for trade and investment with opportunities for co-operation and
concerted action, in order to increase the benefit which accrue to the peoples
of the Caribbean from their resources and assets, including the Caribbean Sea.
The ACS, which is headquartered in Port of Spain, Trinidad and Tobago, promotes
economic integration, including the liberalization of trade, investment,
transportation and other related areas among its members.
The Member States of the ACS are Antigua and Barbuda, The Bahamas,
Barbados, Belize, Colombia, Costa Rica, Cuba, Dominica, the Dominican Republic,
El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico,
Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Suriname, Trinidad and Tobago and Venezuela. Currently, France (in
respect of French Guiana, Guadeloupe and Martinique) is an Associate Member of
the ACS. During the Third Ordinary Meeting of the Ministerial Council in
Cartagena de Indias, Colombia in November 1997, the Netherlands Antilles signed
the Convention Establishing the ACS, to be admitted as an Associate Member.
Following ratification, an appropriate Co-operation Agreement will be
negotiated.
-6-
<PAGE>
The states, countries and territories eligible for Associate Membership
in the ACS are Aruba, Anguilla, Bermuda, the British Virgin Islands, the Cayman
Islands, Montserrat, Puerto Rico, Turks and Caicos Islands, and the United
States Virgin Islands. In addition, the following have been admitted as
Observers in the ACS: Argentina, Brazil, Canada, Chile, Ecuador, Egypt, India,
Italy, the Kingdom of the Netherlands (in respect of the Netherlands and Aruba),
Morocco, Peru, the Russian Federation and Spain.
The Chaconia ACS Fund intends to diversify its holdings among several
countries and to have, under normal market conditions, investments in the
securities markets of at least 5 countries outside the U.S. The Chaconia ACS
Fund does not have any limitations on the percentage of it assets that may be
invested in securities primarily traded in any one country. The Chaconia ACS
Fund may invest in securities traded in mature markets, such as Japan, Canada
and the United Kingdom; less developed markets and in emerging markets.
General
The Funds 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 each Fund's total assets after giving effect to the
borrowing. The Investment Manager will not purchase securities when borrowings
exceed 5% of total assets. The Funds may mortgage, pledge or hypothecate assets
to secure such borrowings.
BASIC INVESTMENT TECHNIQUES
Securities Subject to Reorganization
The Funds 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.
Illiquid and Restricted Securities
The Funds 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 Funds 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. Illiquid securities are securities a Fund believes
cannot be sold within seven days in the normal course of business at
approximately the amount at which a Fund has valued or priced the securities and
include securities a Fund may have acquired in private placements that have
restrictions on their resale ("restricted securities"). The Funds deem time
deposits and repurchase agreements maturing in more than seven days illiquid.
Because an active market may not exist for illiquid securities, the Funds may
experience delays and additional costs when trying to sell illiquid securities.
The Board of Directors will establish procedures for determining the liquidity
of securities and delegate the day-to-day liquidity determinations to the
Adviser.
Subject to the limitations for illiquid investments stated above, each
Fund may purchase liquid restricted securities eligible for resale under Rule
144A under the Securities Act of 1933 (the "Act"), without regard to the 15%
limitation. Rule 144A permits certain qualified institutional buyers to trade in
privately placed securities not registered under the Act. Institutional markets
for restricted securities have developed as a result of Rule 144A, providing
both readily ascertainable market values for 144A securities and the ability to
liquidate these investments to satisfy redemption orders. However, an
insufficient number of qualified institutional buyers interested in purchasing
certain Rule 144A securities held by a Fund could adversely affect their
marketability, causing a Fund to sell the securities at unfavorable prices.
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Nonconvertible Debt Securities
Under normal market conditions, the Chaconia I&G 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 Chaconia I&G 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.
U.S. Government Securities
The U.S. Government Securities in which the Funds 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 Funds 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 Funds' shares.
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.
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, 1998,
the Schemes of the Trinidad and Tobago Unit Trust Corporation had an aggregate
of approximately $400,763,053 (U.S. dollars) under management and approximately
226,672 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 Funds 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 each Fund's total assets may
be used
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to purchase any securities of investment companies. The Funds 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 Funds will
pay an investment management fee when it invests in the Schemes of the Trinidad
and Tobago Unit Trust Corporation.
As of June 30, 1998, the Unit Trust Corporation beneficially owned
5.32% of the outstanding voting stock of the Chaconia I&G Fund.
Temporary Defensive Purposes
The Chaconia ACS Fund may adopt a temporary defensive position policy
that allows it to invest up to 100% of its total assets in cash and money market
obligations, including money market mutual funds, short-term investment-grade
fixed-income securities, bankers' acceptances, commercial paper, commercial
paper master notes and repurchase agreements when significant adverse market,
economic, political or other circumstances require immediate action to avoid
losses.
During adverse market conditions, up to 100% of the Chaconia ACS Fund's
total assets may be invested in U.S. securities or in securities primarily
traded in one or more foreign countries, or in debt securities. To the extent
the Chaconia ACS Fund is invested in temporary defensive instruments, it will
not be pursuing its stated investment objective.
Portfolio Turnover
Although the Funds do not purchase securities with the intent of
turning them over rapidly, the Adviser, in pursuit of each Fund's investment
objective, will continuously monitor each Fund's investments and make changes
whenever changes in the markets, industry trends or the outlook for any
portfolio security indicates to them that the objective could be better achieved
by investment in another security, regardless of portfolio turnover. Each Fund's
turnover may increase as a result of large amounts of purchases and redemptions
of shares of a Fund due to economic, market or other factors that are not within
the control of the each Fund's management.
Each Fund's turnover will tend to rise during periods of economic
turbulence and decline during periods of stable growth. A higher turnover rate
(100% or more) increases transaction costs (e.g., brokerage commissions,
portfolio trading costs), which are paid by the Funds, and increases realized
gains and losses. Distributions to shareholders of realized gains, to the extent
they consist of net short-term capital gains, will be considered ordinary income
for federal tax purposes. It is expected that under normal market conditions,
the annual portfolio turnover rate for each of the Funds will not exceed 100%.
Warrants
Each of the Funds may purchase warrants and similar rights, which are
privileges issued by corporations enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The purchase of warrants involves the risk
that a Fund could lose the purchase value of a warrant if the right to subscribe
to additional shares if not exercised prior to the warrant's expiration. Also,
the purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. No more than 5% of each equity
Fund's net assets valued at the time of investment, will be invested in
warrants.
CERTAIN INVESTMENT STRATEGIES AND SPECIAL RISK CONSIDERATIONS
General
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Funds are 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 Funds will achieve their objective.
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<PAGE>
The Funds 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 Funds 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 Funds 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 Funds (none of which is expected to involve
more than 25% of each Fund's net assets), including investing in debt securities
and investing in foreign securities. Although the Funds do not purchase
securities with a view of rapid turnover, there are no limitations on the length
of time portfolio securities must be held. Each Funds' 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.
Currency Risk
Even though a Fund may hold securities denominated or traded in foreign
currencies, a Fund's performance is measured in terms of U.S. dollars, which may
subject a Fund to foreign currency risk. Foreign currency risk is the risk that
the U.S. dollar value of foreign securities (and any income generated therefrom)
held by a Fund may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations. Therefore, the net
asset value of a Fund may go up or down as the value of the dollar falls or
rises compared to a foreign currency. To manage this risk and facilitate the
purchase and sale of foreign securities for a Fund, the Adviser may engage in
foreign currency transactions involving (1) the purchase and sale of forward
foreign currency exchange contracts (agreements to exchange one currency for
another at a future date); (2) options on foreign currencies; (3) currency
futures contracts; or (4) options on currency futures contracts. Although the
Funds may use foreign currency transactions to protect against adverse currency
movements, foreign currency transactions involve the risk that the Adviser may
not accurately predict the currency movements, which could adversely affect a
Fund's total return.
Liquidity Risk
Foreign markets or exchanges tend to have less trading volume than the
New York Stock Exchange or other domestic stock exchanges or markets, meaning
the foreign market may have less liquidity. Lower liquidity in a foreign market
can affect the Chaconia ACS Fund's ability to purchase or sell blocks of
securities and obtain the best price in the foreign market. Foreign markets tend
to have greater spreads between bid and asked prices, trading interruptions or
suspensions and brokerage and other transaction costs. Settlement practices vary
from country to country and many foreign markets have longer settlement periods
for their securities in comparison to domestic securities. These differing
practices may cause the Chaconia ACS Fund to lose opportunities for favorable
purchases elsewhere as well as interest income. Also, foreign markets may trade
on days when the Funds do not value their portfolios. This means that a Fund's
Net Asset Value can change on days when an investor's account cannot be
accessed. The Funds may incur extra costs when involved in currency hedging.
Foreign Investment Expenses
Investing in foreign securities generally costs more than investing in
U.S. securities because of higher transaction costs, such as the commissions
paid per share. As a result, mutual funds that invest in foreign securities tend
to have higher expenses, particularly those that invest primarily in foreign
securities. In addition to higher commissions, they generally have higher
advisory and custodial fees. However, investors may find investing in a mutual
fund that purchases foreign securities a more efficient way to invest in foreign
securities than investing in individual foreign securities.
Political, Economic and Market Risks
The degree of political and economic stability varies from country to
country. If a country expropriates money from foreigners or nationalizes an
industry, a Fund may lose some or all of any particular investment in that
country. Individual
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foreign economies may vary favorably or unfavorably from the U.S. economy in
such areas as growth of gross national product, inflation rate, savings, balance
of payments and capital investment, which may affect the value of the Chaconia
ACS Fund's investment in any foreign country.
Governmental Regulation
Many foreign countries do not subject their markets to the same degree
and type of laws and regulations that cover the U.S. markets. Also, many foreign
governments impose restrictions on investments in their capital markets as well
as taxes or other restrictions on repatriation of investment income. The
regulatory differences in some foreign countries make investing or trading in
their markets more difficult and risky.
Lack of Uniform Corporate Disclosure Standards
Many countries have laws making information on publicly traded
companies, banks and governments more difficult to obtain, incomplete or
unavailable. The lack of uniform accounting standards and practices among
countries impairs, the ability of investors to compare common valuation
measures, such as price/earnings ratios, as applied to securities of different
countries.
INVESTMENT RESTRICTIONS
In addition to specific investment restrictions described in the
Statement of Additional Information, only a vote of the majority of the
outstanding shares can change:
- the policies on borrowing and lending securities; and
- the restriction on concentrating investments in a
single industry, which limits the Funds from
investing more than 25% of its total assets in any
single industry. This restriction does not apply to
securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
MANAGEMENT OF THE FUNDS
Board of Directors
The overall management of the business and affairs of the Funds are
vested with the Board of Directors of the Corporation. The Board of Directors
approves all significant agreements between the Funds and persons or companies
furnishing services to each Fund, including the agreements with their Investment
Manager, Sub-Advisor, Custodian, Transfer Agent, selected broker-dealers and
Administrator. The day-to-day operations of the Funds are delegated to the
officers of the Corporation, subject to the investment objectives and policies
of the Funds and to general supervision by the Board of Directors.
The Board of Directors of the Corporation are presently comprised of
five members, four of whom reside outside the United States. Directors Clarry
Benn, Judy Chang, Renrick Nickie and Roosevelt Williams are residents of the
Republic of Trinidad and Tobago. Judy Chang serves as Chair of the Board of
Directors. Clarry Benn and Renrick Nickie also serve as executive officers of
the Corporation.
The Maryland General Corporation Law subjects all directors and
officers of the Corporation to fiduciary duties for the lawful management of the
Corporation's organization and operation, including federal and state securities
laws. Investors of the Funds may not be able to effect service of process within
the United States upon the nonresident directors and officers of the Corporation
for the enforcement of civil liabilities under federal and state securities
laws. The Funds have appointed an agent for service of process in the states
where the Funds have registered their 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 Funds may not be able to enforce a
United States or Trinidad and Tobago court judgment against nonresident
directors and officers of the Corporation.
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The Investment Manager
The Investment Manager is subject to the control of the Board of
Directors of the Corporation. 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 partner. In December 1988, the two firms
completed a merger, creating the global investment organization of INVESCO, with
offices worldwide. In February 1997, a subsidiary of INVESCO PLC, ultimate
parent of the Investment Manager, merged with A I M Management Group, Inc., one
of the largest mutual fund managers in the United States, which resulted in a
new financial services company, well-equipped to provide the Funds and investors
with a competitive spectrum of investment management capabilities.
The Investment Manager manages over $40 billion in retirement fund
assets for over 350 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, joint- trustee funds, endowment and foundation
accounts. The Investment Manager has provided investment advisory services to
registered investment companies.
The Investment Manager is authorized to consider sales of shares of the
Funds 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 Agreements, between the Funds and the
Investment Manager, the Funds pay 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 each 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 Funds and the Investment Manager believe the fee is appropriate considering
the investment objectives of the Funds. The advisory fee paid by the Chaconia
I&G Fund for the fiscal year ended December 31, 1997 and the six months ended
June 30, 1998 were equal to 0.68% and 0.57% (annualized), respectively of the
Chaconia I&G Fund's average net assets.
Sub-Advisor
Certain security investments for the Chaconia ACS Fund may be made by
the UTC pursuant to a Sub-Advisory Agreement by and among the UTC and the
Corporation on behalf of the Chaconia ACS Fund.
Administrator
American Data Services, Inc. (the "Administrator"), located at The
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New York
11788, serves pursuant to agreements with the Funds (the "Administrative
Services Agreements"). Pursuant to the Administrative Services Agreements,
subject to the overall authority of the Board of Directors in accordance with
Maryland law, the Administrator will assist in the administration and operation
of the Funds, 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 operating
expense budget of the Funds. The administration fee paid by the Chaconia I&G
Fund for the fiscal year ended December 31, 1997 and the six months ended June
30, 1998 to the Administrator was equal to 0.38% and 0.30% (annualized),
respectively, of the Chaconia I&G Funds average net assets.
Fund Operating Expenses
In addition to the fees payable to the Investment Manager and the
Administrator, the Funds are 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 Funds and their 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 Funds in connection with the
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<PAGE>
Distribution Plan; (xii) service fees paid by the Funds in connection with the
personal service and/or maintenance of shareholder accounts; and (xiii) such
nonrecurring expenses as may arise, including litigation affecting the Funds and
the legal obligations with respect to which the Funds may have to indemnify its
officers and directors.
See the Statement of Additional Information for more information as to
the Board of Directors, Officers, the Investment Manager and operating expenses
of the Funds.
HOW TO PURCHASE SHARES
Opening an Account
In order to invest in the Funds, an investor must first complete and
sign an account application. Shares of the Funds may be purchased either by mail
or by telephone through selected broker-dealers who have a sales agreement with
the Funds 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 Funds.
The Funds 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 Funds. 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 each Fund including purchases for an
Individual Retirement Account is $250. See "Retirement Plans." Subsequent
investments are a minimum of $100. The Funds reserve the right to reject any
purchase order.
Automatic Investments
Shareholders in each Fund may elect to make subsequent investments
through a continuing automatic transfer ("CAT") program. To elect the CAT,
complete the CAT program section of the account application and include a voided
unsigned check from the bank account to be debited. You should consider your
financial ability to participate in the CAT program. The Funds reserve the right
to close your account under certain circumstances or you may find it necessary
to redeem your account, either of which may occur in periods of declining share
prices or during periods of rising prices. The Funds reserve the right to
suspend, modify or terminate the CAT program without notice.
The Funds reserve 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 each 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.
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<PAGE>
Purchase Placed With Transfer Agent
Investors may mail an application form, together with a check payable
to the Chaconia I&G Fund or the Chaconia ACS Fund, as the case may be, directly
to the Transfer Agent, at the following address:
American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Suite 109
Hauppauge, NY 11788
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 Chaconia I&G Fund or the Chaconia ACS 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.
Each 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
Each 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 Chaconia I&G Fund or the Chaconia ACS Fund under Section 12(b) of the 1940
Act and Rule 12b-1 thereunder.
Pursuant to each 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 a Fund may
receive fees at rates determined by the Board of Directors. In addition, each
Fund will purchase advertising, sales literature, other promotional material and
marketing services. The Funds will reimburse the Investment Manager and
Qualified Recipients for these expenditures, including interest expenses and
other overhead items, during a fiscal year of the Funds, 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 .
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 may 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
Funds to the Qualified Recipient for the personal service and/or maintenance of
shareholder accounts; and the Qualified Recipient may receive commissions on a
Fund's portfolio transactions subject to the provisions of the Management
Agreements (see the Statement of Additional Information).
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 Funds to distribute its shares to a larger number of states.
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<PAGE>
HOW TO REDEEM SHARES
The Funds 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 Funds in care
of its Transfer Agent at The Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788. The instructions should specify the name
of the Funds, 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 Funds have
determined that the purchase check will be honored, which may take up to 15
calendar days.
Redemption in Kind
If the Board of Directors determines that it would be detrimental to
the best interests of the remaining stockholders of a 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 a Fund, in lieu of
cash, in conformity with applicable rules of the SEC. The Funds, however, has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which they
are obligated to redeem shares solely in cash up to the lesser of $250,000 or
one percent of the net asset value of a Fund during any 90-day period for any
one stockholder. Should redemptions by any stockholder exceed such limitation,
the Funds 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.
Reinvestment Privilege
A stockholder who has redeemed all or part of his or her shares of a
Fund may reinvest all or part of the redemption proceeds in shares of a 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 Board of Directors may, in order to reduce the expenses of a 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, 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.
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<PAGE>
RETIREMENT PLANS
Individual shareholders may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Funds offer two types of IRAs that
can be adopted by executing the appropriate Internal Revenue Service ("IRS")
form. The minimum investment required to open an IRA for investment in shares of
each 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.
Traditional IRA
In a Traditional IRA, amounts contributed to the IRA may be tax
deductible at the time of contribution depending on whether the shareholder is
an "active participant" in an employer-sponsored retirement plan and the
shareholder's income. Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution represents a return of
the shareholder's own contributions for which the shareholder did not claim (or
was not eligible to claim) a deduction. Distributions must commence by April 1
following the calendar year in which the shareholder attains age 70- 1/2.
Failure to begin distributions by this date (or distributions that do not equal
certain minimum thresholds) may result in adverse tax consequences.
Roth IRA
In a Roth IRA, amounts contributed to the IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if the
shareholder has held the IRA for certain minimum periods of time (generally,
until age 59 1/2). Shareholders whose incomes exceed certain limits are
ineligible to contribute to a Roth IRA. Distributions that do not satisfy the
requirements for tax-free withdrawal are subject to income taxes (and possibly
penalty taxes) to the extent that the distribution exceeds the shareholder's
contributions to the IRA. The minimum distribution rules applicable to the
Traditional IRAs do not apply during the lifetime of the shareholder. Following
the death of the shareholder, certain minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the shareholder's
compensation (earned income). An individual may also contribute to a Traditional
IRA or Roth IRA on behalf of his or her spouse provided that the individual has
sufficient compensation (earned income). Contributions to a Traditional IRA
reduce the allowable contribution under a Roth IRA, and contributions to a Roth
IRA reduce the allowable contribution to a Traditional IRA.
Each Fund's shares may also be a suitable investment for other types of
qualified pension or profit sharing plans that 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions
Each dividend and capital gains distribution, if any, declared by the
Funds on their outstanding shares will, unless the stockholder elects otherwise,
be paid on the payment date fixed by the Board of Directors in additional shares
of the Funds 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
Funds 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 Funds will pay any
dividends or realize any capital gains. However, the Funds currently intend to
pay dividends and capital gains distributions, if any, on an annual basis.
Taxes
The Funds intend to qualify for tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as amended
(the "Code"). Such qualification generally will relieve the Funds of liability
for federal income taxes to the extent its earnings are distributed.
-16-
<PAGE>
The Funds contemplate declaring as dividends each year at least 90% of
its investment company income. An investor who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) treats the dividend, whether paid
in the form of cash or additional shares, as a receipt of ordinary income.
Any dividend or distribution of a Fund's excess of net long-term
capital gain over its net short-term capital loss will be taxable to a
shareholder as a long-term capital gain, regardless of how long the shareholder
has held shares of a Fund. Capital gain dividends that are payable to
individuals, estate or trusts for taxable years ending on or after May 7, 1997
will be designated as a 20% rate gain distribution, an unrecaptured section 1250
gain distribution or a 28% rate gain distribution depending upon a Fund's
holding period for the shares. Capital gain dividends that are payable to
corporations are taxable at a 28% rate if held for more than one year. The 70%
dividends-received deduction for corporations applies to dividends from the
Fund's net investment income, subject to proportionate reductions if aggregate
dividends received by the Funds from domestic corporations in any year are less
than 100% of the distribution of net investment company taxable income made by
the Funds.
The Transfer Agent is required to 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 Funds, 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 Corporation is a Maryland corporation, incorporated on October 24,
1990, and registered as an open-ended, nondiversified, management investment
company under the 1940 Act. The Corporation's capital stock consists of a single
class of common stock which is divisible into an unlimited number of series.
Each Fund represents a separate series of Common Stock. The authorized capital
stock consists of 10,000,000 shares of Common Stock, of which 8,000,000 are
allocated to the Chaconia I&G Fund and 2,000,000 are allocated to the Chaconia
ACS Fund. The Corporation'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 Corporation 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 Funds. 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 Corporation sends semiannual and annual reports to all of its
stockholders which include a list of portfolio securities and each Corporation's
financial statements which shall be audited annually.
The shares of each 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 Funds do not issue certificates
evidencing the Fund's 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 Corporation's outstanding
shares. The directors will promptly call a meeting of stockholders to
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<PAGE>
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 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 Corporation's organizing documents have been filed with the SEC as
exhibits to the Corporation's registration statement and can be found at the
SEC, at the Corporation's principal office or at the offices of the
Corporation's legal counsel.
Stockholder Approval
Other than the election of directors, which is by plurality, any matter
for which stockholder approval is required by (1) the Maryland General
Corporation Law, requires the affirmative vote of at least a majority of all
votes cast at a meeting at which a quorum is present and (2) 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 Corporation entitled to vote at
a meeting called for the purpose of considering such approval. Pursuant to the
Corporation's Articles of Incorporation, the presence in person or by proxy of
the holders of one-third of the outstanding voting securities entitled to vote
at a meeting of stockholders shall constitute a quorum for the transaction of
any business at all meetings of the stockholders except as otherwise provided by
law or in the Articles of Incorporation. The 1940 Act defines a majority as 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
Corporation or the Unit Trust Corporation.
Performance Information
Each 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 $10,000 invested at the
maximum public offering price for the one and five year periods and the life of
each 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. Each 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 a Fund's net asset value per share would be
reduced if a sales charge were taken into account.
Year 2000
The Corporation is aware of the "Year 2000" issue. The "Year 2000"
issue stems from the use of a two-digit format to define the year in certain
date-sensitive computer application systems rather than the use of a four-digit
format. As a result, date-sensitive software programs could recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
major systems or process failures or the generation of erroneous data, which
would lead to disruptions in the Corporation's business operations.
The Corporation has no application systems of its own and is
entirely dependent on its service providers' systems and software. The
Corporation is working with its service providers (including its investment
adviser, administrator, transfer agent and custodian) to identify and remedy any
Year 2000 issues. However, the Corporation cannot guarantee that all Year 2000
issues will be identified and remedied, and the failure to successfully identify
and remedy all Year 2000 issues could result in an adverse impact on the
corporation.
Custodian
Star Bank, N.A. is the custodian for the Fund's cash and securities.
<PAGE>
Independent Accountants
PricewaterhouseCoopers LLP has been appointed independent accountants
for the Funds.
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 516-951-0500 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 Funds may be obtained without charge from the Funds or
selected broker-dealers.
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<PAGE>
ACCOUNT APPLICATION
Mail to: American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway
Suite 109
Hauppauge, NY 11788 U.S.A.
800-368-3322 (U.S.)
For individual, custodial, trust, profit-sharing or pension plan accounts. Do
not use this form for IRAs. Please contact American Data Services, Inc. directly
for IRA information.
ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------
Name of Owner(s) (Individual, Joint, Custodian, Company or Trustee)
- --------------------------------------------------------------------------------
Mailing Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Daytime Telephone Number
- --------------------------------------------------------------------------------
Social Security Number or Taxpayer Identification Number
- --------------------------------------------------------------------------------
Date of Birth / /
- --------------------------------------------------------------------------------
Citizen of:
[ ] United States
[ ] Other (specify) _________________________
INVESTMENT
Please indicate the amount you wish to invest ($250.00 minimum).
Payment by ___ Check ___ Wire
[ ] Chaconia I&G Fund $
[ ] Chaconia ACS Fund $
Indicate date of wire _________________________
(please call 516-951-0500 or 800-368-3322 (U.S.) for wire instructions)
DISTRIBUTIONS
Distributions will be reinvested in additional shares unless one of the
following boxes is checked.
[ ] Send me a check for all dividends and distributions.
[ ] Send me a check for dividends, but reinvest capital gain distributions.
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<PAGE>
SIGNATURES AND CERTIFICATION
I (we) understand that certificates for the shares purchased hereby will be
issued only upon request. I represent that I am of legal age and have legal
capacity to make this purchase and have received and read a current prospectus
of the Funds. I certify under penalty of perjury that:
1. The social security or other tax identification number stated is correct.
2. I am not subject to backup withholding because*
[ ] A. The IRS has not informed me that I am subject to backup withholding.
[ ] B. The IRS has notified me that I am no longer subject to backup
withholding.
*Check the appropriate box. If this statement is not true and you are subject to
backup withholding, strike out section 2.
--------------------------------- ----------
Signature of Owner, Trustee or Date
Custodian
--------------------------------- ----------
Signature of Joint Owner Date
(Required if Joint Registration)
DEALER INFORMATION
- --------------------------------------------------------------------------------
Dealer Name
- --------------------------------------------------------------------------------
Representative's Name
- --------------------------------------------------------------------------------
Branch Address
- --------------------------------------------------------------------------------
Branch Number AE#
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City
- --------------------------------------------------------------------------------
State Zip
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<PAGE>
CAT PROGRAM
Continuing Automatic Transfer Program
How does it work?
You choose any amount you would like of $50.00 or more to invest each month.
Your transfer agent ("ADS") will establish a file with the applicable Fund's
custodian bank, Star Bank, N.A. (the "Custodian"), with the amount you have
chosen to invest. The Custodian then draws an automatic clearinghouse ("ACH")
debit electronically against your checking account each month. Shares of the
applicable Fund are purchased on the same day the Custodian draws the debit, a
confirmation of each purchase is sent to you by ADS, and your bank statement
will reflect the amount of each debit.
How do I set it up?
Existing Shareholders -- Complete this form following the instructions below. Be
sure to check the box below indicating that you already are a shareholder of the
applicable Fund and write your account number in the space provided. New
Shareholder -- You must first complete a regular account application, enclose a
check ($250.00 minimum) made payable to Chaconia I&G Fund or the Chaconia ACS
Fund to open your account and complete this form following the instructions
below. Be sure to check the box below indicating that you are a new shareholder
with the Chaconia I&G Fund or the Chaconia ACS Fund.
Mark one of your personal checks or savings account deposit slips "VOID" and
attach the voided check or savings deposit slip to this form. Mail this form,
with the voided check or savings deposit slip attached, to ADS, at the address
below. As soon as your bank accepts your authorization, monthly debits will be
generated and purchases of the applicable Fund shares will begin. Please note
that your bank must be able to accept ACH transactions and/or be a member of an
ACH association. Your bank manager should be able to tell you about your bank's
capabilities. The Fund cannot guarantee acceptance by your bank. Please allow
one month for processing of the CAT Application before the first monthly debit
occurs.
MAIL TO: The Chaconia Income & Growth Fund, Inc.
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
FOR ADDITIONAL
INFORMATION CALL:
800-368-3322 (U.S.)
[ ] YES, I authorize the Continuing Automatic Transfer Program ("CAT") be
established for my account with The Chaconia Income & Growth Fund, Inc.
Please begin CAT Investing for me and invest
(i) $ ____________ ($50 minimum) in shares of the Chaconia I&G Fund on the:
[ ] 1st
[ ] 15th of each month.
(ii) $ ___________ ($50 minimum) in shares of the Chaconia ACS Fund on the:
[ ] 1st
[ ] 15th of each month.
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<PAGE>
Check one:
[ ] I am in the process of opening an account with the Chaconia I&G Fund
or the Chaconia ACS Fund. Enclosed is my account application and check
($250 minimum) made payable to Chaconia I&G Fund, or the Chaconia ACS
Fund
[ ] I already have an existing account with the Chaconia I&G Fund or the
Chaconia ACS Fund; my account number is_______________________
- --------------------------------------------------------------------------------
Name of my bank
- --------------------------------------------------------------------------------
Address of my bank
I understand that my ACH debit for my CAT will be dated each month on the day
specified above. I agree that if such debit is not honored upon presentation,
ADS and the Custodian may discontinue this service, and any purchase of a Fund's
shares may be reversed. I further understand that the net asset value of shares
of the applicable Fund at the time of such reversal may be less than the net
asset value on the day of the original purchase. ADS and the Custodian are
authorized to redeem sufficient additional full and fractional shares from my
account to make up the deficiency. CAT Investing may be discontinued by ADS and
the Custodian upon 30 days' written notice or by the investor by written notice
to ADS (at the above address) provided the notice is received no later than 5
business days prior to the specified investment date.
- --------------------------------------------------------------------------------
Signature of depositor Date Signature of Co-Depositor Date
(required for joint accounts)
22
<PAGE>
DATED FEBRUARY 15, 1999
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 "Corporation") relating to two separate portfolios, the
Chaconia Income & Growth Fund (the "Chaconia I&G Fund") and the Chaconia
Association of Caribbean States Fund (the "Chaconia ACS Fund") (collectively,
the "Funds"). A copy of the Prospectus may be obtained from the Fund c/o
American Data Services, Inc., The Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788.
<PAGE>
TABLE OF CONTENTS
Cross-Reference
to Page in the
Page Prospectus
Investment Objective and Policies 1 5
Basic Investment Techniques 3 7
U.S. Government Securities 4 8
Certain Investment Strategies and Special 5 9
Risk Considerations
Investment Restrictions 6 -
Management 7 11
Portfolio Transactions and Brokerage 10 -
Purchase and Redemption of Shares 11 13 & 15
Retirement Plans 12 16
Dividends, Distributions and Taxes 13 16
Investment Performance Information 14 -
General Information 15 17
Financial Statements 16 -
Appendix-Description of Ratings 16 -
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Chaconia I&G Fund
The investment objective of the Chaconia I&G Fund is to seek high
current income and capital appreciation. It seeks to meet its objective by
investing the Chaconia I&G 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 Chaconia I&G Fund will be able to achieve its
objective.
The Chaconia I&G Fund intends to invest in the Schemes of the Trinidad
and Tobago Unit Trust Corporation only if the Chaconia I&G 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 Chaconia I&G Fund's investment policy will emphasize debt
instruments to achieve the Chaconia I&G Fund's current income objective. Under
normal market conditions, the Chaconia I&G 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 Chaconia I&G
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. Debt securities are defined as: U.S. and foreign nonconvertible company
bonds, U.S. and foreign government securities and commercial paper.
In determining what equity securities the Chaconia I&G 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 Chaconia I&G 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 securities as an inducement
to buy. The prices of warrants do not necessarily correlate with the prices of
the underlying securities. The Chaconia I&G Fund may not purchase options on
equity securities.
The Chaconia I&G 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 Chaconia I&G Fund's assets in high quality commercial paper
and short-term U.S. Government securities such as Treasury Bills and Treasury
Notes. The Chaconia I&G 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
Chaconia I&G Fund's portfolio is not expected to exceed ten years.
<PAGE>
The Chaconia I&G 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 Chaconia I&G 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 Chaconia I&G 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.
Chaconia ACS Fund
The Chaconia ACS Fund's investment objective is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of equity
securities of non U.S. issuers domiciled and/or operating in the member
countries of the ACS. Under normal circumstances the Chaconia ACS Fund intends
to invest at least 65% of its total assets in foreign common stocks and
equity-related securities, including preferred stocks, warrants, convertible
securities and other similar rights. The Chaconia ACS Fund may purchase
securities of foreign issuers directly or in the form of American Depository
Receipts (ADRs), European Depository Receipts (EDRs), Global Depository Receipts
(GDRs) or other securities representing shares of non-U.S. issuers domiciled or
operating in the ACS.
The ACS facilitates consultation, co-operation and concerted action
among its Member States and Associate Members. It also aims to promote the
implementation of policies and programmes designed to: promote an enhanced
economic space for trade and investment with opportunities for co-operation and
concerted action, in order to increase the benefit which accrue to the peoples
of the Caribbean from their resources and assets, including the Caribbean Sea.
The ACS, which is headquartered in Port of Spain, Trinidad and Tobago, promotes
economic integration, including the liberalization of trade, investment,
transportation and other related areas among its members.
The Member States of the ACS are Antigua and Barbuda, The Bahamas,
Barbados, Belize, Colombia, Costa Rica, Cuba, Dominica, the Dominican Republic,
El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico,
Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Suriname, Trinidad and Tobago and Venezuela. Currently, France (in
respect of French Guiana, Guadeloupe and Martinique) is an Associate Member of
the ACS. During the Third Ordinary Meeting of the Ministerial Council in
Cartagena de Indias, Colombia in November 1997, the Netherlands Antilles signed
the Convention Establishing the ACS, to be admitted as an Associate Member.
Following ratification, an appropriate Co-operation Agreement will be
negotiated.
The states, countries and territories eligible for Associate
Membership in the ACS are Aruba, Anguilla, Bermuda, the British Virgin Islands,
the Cayman Islands, Montserrat, Puerto Rico, Turks and Caicos Islands, and the
United States Virgin Islands. In addition, the following have been admitted as
Observers in the ACS: Argentina, Brazil, Canada, Chile, Ecuador, Egypt, India,
Italy, the Kingdom of the Netherlands (in respect of the Netherlands and Aruba),
Morocco, Peru, the Russian Federation and Spain.
The Chaconia ACS Fund intends to diversify its holdings among several
countries and to have, under normal market conditions, investments in the
securities markets of at least 5 countries outside the U.S. The Chaconia ACS
Fund does not have any limitations on the percentage of it assets that may be
invested in securities primarily traded in any one country. The Chaconia ACS
Fund may invest in securities traded in mature markets, such as Japan, Canada
and the United Kingdom; less developed markets in emerging markets.
General
The Funds 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
-2-
<PAGE>
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 each Fund's total assets after
giving effect to the borrowing. The Investment Manager will not purchase
securities when borrowings exceed 5% of total assets. The Funds may mortgage,
pledge or hypothecate assets to secure such borrowings.
BASIC INVESTMENT TECHNIQUES
Securities Subject to Reorganization
The Funds 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 Funds will not violate any of their 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 Funds, thereby increasing its brokerage and other
transaction expenses, as well as make it more difficult for the Funds 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
Under normal market conditions, the Chaconia I&G 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; unrated bonds
are more speculative in nature than rated bonds; (2) Government securities which
include securities of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities; and (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 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
Chaconia I&G 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 Chaconia I&G
Fund's assets in high quality commercial paper and short term U.S. Government
securities such as Treasury Bills and Treasury Notes.
<PAGE>
Warrants and Rights
Each of the Funds 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 Funds 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 Funds 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 Funds will only enter
into a forward commitment with the intention of actually acquiring the security,
the Funds may sell the security before the settlement date if it is deemed
advisable.
Borrowing
The Funds 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 each Fund's total assets after giving effect to the
borrowing. The Investment Manager of the Funds will not purchase securities when
borrowings exceed 5% of total assets. The Funds may mortgage, pledge or
hypothecate assets to secure such borrowings.
Loans of Portfolio Securities
To increase income, the Funds 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 Funds at any time, (3) the Funds receives
reasonable interest or fee payments on the loan, (4) the Funds are 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 each Fund's assets.
U.S. Government Securities
The U.S. Government securities in which the Funds 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 Funds 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 each 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
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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 Funds 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.
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.
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 June 30, 1998, the
Schemes of the Trinidad and Tobago Unit Trust Corporation had an aggregate of
approximately $400,763,053 (U.S. dollars) under management and approximately
226,672 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 Funds 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 each Fund's total assets may
be used to purchase any securities of investment companies. The Funds 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.
As of June 30, 1998, the Unit Trust Corporation beneficially owned
5.32% of the outstanding voting stock of the Chaconia I&G 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 Funds are 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 Funds will achieve their objective.
The Funds 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 Funds 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.
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<PAGE>
Any investment by the Funds 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 Funds (none of which is expected to involve
more than 25% of each Fund's net assets), including investing in debt securities
and investing in foreign securities. Although the Funds do not purchase
securities with a view of rapid turnover, there are no limitations on the length
of time portfolio securities must be held. Each 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.
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
each 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 each Fund. In addition, many of the securities
held by each 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 Funds, 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 Funds 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 Funds 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.
INVESTMENT RESTRICTIONS
The Funds have 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 each Fund's outstanding voting securities. Under the 1940 Act, the vote of
the holders of a majority of each Fund's outstanding voting securities means the
vote of the holders of the lesser of (i) 67% of the shares of each 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 Funds 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 Funds 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
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<PAGE>
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 each Fund's investment policies).
6. Make investments for the purpose of exercising control or
management.
7. Act as underwriter (except to the extent the Funds may be deemed to
be an underwriter in connection with the sale of securities in each Fund's
investment portfolios), exclusive of 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 each 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.
The Funds observe the following restrictions as a matter of operating
policy but not fundamental policy, pursuant to positions taken by federal and
state regulatory authorities:
The Funds may not:
1. 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.
2. Purchase any security if as a result the Funds 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.
3. Invest in securities of any issuer if, to the knowledge of the
Funds, any officer or director of the Funds 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.
4. 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 each Funds' net
assets, may be warrants which are not listed on the New York or American Stock
Exchange).
5. Invest in any security if as a result the Funds 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.
6. Invest in real estate limited partnerships, or oil, gas and other
mineral leases.
MANAGEMENT
Board of Directors
The overall management of the business and affairs of the Corporation
is vested with its Board of Directors. The Board of Directors approves all
significant agreements between the Funds and persons or companies furnishing
services to it, including each Fund's agreement with their Investment Manager,
their Custodian, their Transfer Agent, selected broker-dealers and their
Administrator. The day-to-day operations of the Corporation are delegated to its
officers, subject to the investment objectives and policies of the Corporation
and to general supervision by the Board of Directors.
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<PAGE>
The Board of Directors is presently comprised of five members, four of
whom reside outside the United States. Directors Clarry Benn, Judy Chang,
Renrick Nickie and Roosevelt Williams are residents of the Republic of Trinidad
and Tobago. Judy Chang serves as Chair of the Board of Directors. Clarry Benn
and Renrick Nickie also serve as executive officers of the Corporation.
The Maryland General Corporation Law subjects all directors and
officers of the Corporation to fiduciary duties for the lawful management of the
Corporation's organization and operation, including federal and state securities
laws. Investors of the Funds may not be able to effect service of process within
the United States upon the Corporation's nonresident directors and officers for
the enforcement of civil liabilities under federal and state securities laws.
The Corporation has appointed an agent for service of process in the states
where the Corporation 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 Funds may not be able to enforce a
United States or Trinidad and Tobago court judgment against nonresident
directors and officers of the Corporation.
The directors and officers of the Corporation, their business
addresses and principal occupations during the past five years are as follows.
Directors deemed to be "interested persons" of the Corporation for purposes of
the 1940 Act are indicated by an asterisk.
Position(s) Held Principal Occupation
Name and Address With Registrant During Last Five Years
- ---------------- ---------------------- ------------------------
*Judy Y. Chang Director and Chairman Chairman of Trinidad
Trinidad and Tobago and Tobago Unit
Unit Trust Corporation Trust Corporation, 8-97
74 Independence Square to Present; Consultant,
Port-of-Spain 7-97 to Present; Partner
Trinidad and Tobago, W.I. Price Waterhouse, 1-80
to 6-97.
*Clarry Benn Director and President Executive Director, 9-96
Trinidad and Tobago Unit to Present; Executive
Trust Corporation Manager, Investments and
74 Independence Square Financial Trust
Port-of-Spain Accounting, 8-92 to 8-96
Trinidad and Tobago, W.I.
*Renrick Nickie Director, Vice Executive Manager,
Trinidad and Tobago Unit President and Treasurer Marketing and
Trust Corporation Operations, 8-92 to
74 Independence Square Present.
Port-of-Spain
Trinidad and Tobago, W.I.
Dr. John A. Cole Director Visiting Professor of
2943 Landing Way Finance, 8-97 to Present
Orangeburg, SC 29115 University of North
Carolina at Charlotte;
Professor of Finance,
8-95 to Present, South
Carolina State
University; Associate
Professor of Finance,
8-89 to 7-95, Florida
A&M University.
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<PAGE>
Position(s) Held Principal Occupation
With Registrant During Last Five Years
Name and Address
Dr. Roosevelt J. Williams Director Director, Cipriani
Cipriani College of Labour and College of Labour and
Cooperative Studies Cooperative Studies,
Churchill Roosevelt Highway 8-97 to Present;
Valsayn, Trinidad and Tobago, W.I. Education Consultant,
1-96 to 7-97; Professor
of Howard University,
1989 to 12-95.
Ulice Payne, Jr. Secretary Attorney and Partner,
Foley & Lardner Foley & Lardner, 2-98 to
777 East Wisconsin Avenue Present; Attorney and
Suite 3700 Shareholder, Reinhart,
Milwaukee, WI 53202 Boerner, Van Deuren,
Norris & Rieselbach,
s.c., 2-90 to 2-98.
The Corporation pays directors who are not "interested persons" of the
Funds nor employees of the Investment Manager $500 per meeting of the board
attended by the director. Directors also are reimbursed by the Corporation for
any expenses incurred in attending meetings.
Ownership of Management and Principal Shareholders
As of September 30, 1998, all officers and directors of the
Corporation as a group (6 persons) beneficially owned 11,154 shares of the
Chaconia I&G Fund (which constituted 0.40% of its then outstanding shares). As
of such date, the sole beneficial holder of more than 5% of the Chaconia I&G
Fund's then outstanding shares was the Trinidad and Tobago Unit Trust
Corporation, 74 Independence Square, Port-of-Spain, Trinidad and Tobago, W.I.
which owned 161,945 shares of the Chaconia I&G Fund (constituting 5.82% of its
then outstanding shares).
The Investment Manager and the Management Agreement
Subject to supervision by the Board of Directors, investment
management and administration services will be provided to the Funds by INVESCO
CAPITAL MGMT. Inc. (the "Investment Manager") pursuant to an Investment
Management Agreements executed by the Chaconia I&G Fund on October 29, 1992 and
to be executed by the Chaconia ACS Fund upon effectiveness of the Registration
Statement ("Management Contracts"). Under the Management Contracts, the
Investment Manager will provide a continuous investment program for the Funds
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 Funds 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 each Fund's average daily net assets. This fee is greater than
that paid by most other funds. During the fiscal years ended December 31, 1997,
1996 and 1995, the Chaconia I&G Fund paid the Investment Manager advisory fees
of $93,537, $90,164 and $97,881, respectively. The Chaconia ACS Fund did not
commence operations until February 15, 1999 and, thus, had not paid any
management fees as of that date.
Under the Management Contracts, the Investment Manager will not be
liable to the Funds for any error of judgment by the Investment Manager or any
loss sustained by the Funds 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 Contracts were approved by the Board of Directors and
by a majority of the directors who neither are interested persons of the Funds
nor have any direct or indirect financial interest in the Management Contracts
or any agreement related thereto ("Independent Directors"). In February 1997, a
subsidiary of INVESCO PLC, ultimate parent of the Investment Manager, merged
with AIM Management Group, Inc., resulting in a new financial services company.
This transaction was deemed a change in control of the Investment Manager under
the 1940 Act. The Independent Directors and the Board of Directors unanimously
approved the Management Contract relating to the Chaconia I&G Fund in February
1997. The Management
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<PAGE>
Contract was approved by vote of a majority of the outstanding voting securities
of the Chaconia I&G Fund at a special shareholders' meeting in November 1997.
The Management Contracts will remain in effect until terminated by either party.
The Management Contracts 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 Funds. The
Management Contracts were submitted to the stockholders of each Fund for their
approval at the first meeting of stockholders following the offering of each
Fund's shares.
The Management Contracts are terminable by vote of the Board of
Directors or by the holders of a majority of the outstanding voting securities
of the Funds at any time without penalty, on 60 days' written notice to the
Investment Manager. The Management Contracts also may be terminated by the
Investment Manager on 60 days' written notice to the Funds. The Management
Contracts terminates automatically upon its assignment (as defined in the 1940
Act).
Administrator
American Data Services, Inc. (the "Administrator") is located at The
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New York
11788, and serves pursuant to agreements with the Funds (the "Administrative
Services Agreements"). Pursuant to the Administrative Services Agreements,
subject to the overall authority of the Board of Directors in accordance with
Maryland law, the Administrator will assist in each 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 each Fund's
operating expense budget. During the fiscal years ended December 31, 1997, 1996
and 1995, the Chaconia I&G Fund paid the Administrator $52,499, $50,677 and
$43,755, respectively, pursuant to its Administrative Services Agreement. The
Chaconia ACS Fund did not commence operations until February 15, 1999 and, thus,
had not paid any administrative fees as of that date.
Fund Operating Expenses
In addition to the fees payable to the Investment Manager and the
Administrator, the Funds are responsible for their 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 Funds and their 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 Funds in connection with the Distribution Plan;
(xii) service fees paid by the Funds in connection with the personal service
and/or maintenance of shareholder accounts; and (xiii) such nonrecurring
expenses as may arise, including litigation affecting the Funds and the legal
obligations with respect to which the Funds may have to indemnify their officers
and directors.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Management Contracts state that in connection with its duties to
arrange for the purchase and the sale of securities and futures held in the
portfolio of the Funds by placing purchase and sale orders for the Funds, 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 Contracts to
consider the reliability, integrity and financial condition of the brokers. The
Investment Manager also is authorized by the Management Contracts to consider
whether the brokers provide brokerage and/or research services to the Funds
and/or other accounts of the Investment Manager.
The Management Contracts state 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 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 Contracts provide that to demonstrate that such
determinations were in good faith, and to show the overall
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<PAGE>
reasonableness of commissions paid, the Investment Manager shall be prepared to
show that commission paid (i) were for purposes contemplated by the Management
Contracts; (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 Funds 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 Funds in the valuation of their
investments. The research which the Investment Manager receives for brokerage
commissions, whether or not useful to the Funds, 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 Funds.
The debt securities which will be the principal component of each
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 Funds 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 Funds 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 Funds 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 Funds reserve the right to pay other redemptions, either total
or partial, by a distribution in kind of readily marketable securities (instead
of cash) from each 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 each Fund's 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 each Fund's shares on the date
of cancellation is less than the original date of purchase. The investor is
responsible for such loss and the Funds 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.
Determination of Net Asset Value
The net asset value of each 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 each 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 each Fund's shares outstanding at such
time. Each Fund values its assets based on their current market value
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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 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 Funds
shall be determined in a manner which, in the discretion of the valuing agent of
the Funds, 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 each Fund's net asset value is
not calculated. Each Fund calculates its 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 each 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
Individual shareholders may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Funds offer two types of IRAs that
can be adopted by executing the appropriate Internal Revenue Service ("IRS")
form. The minimum investment required to open an IRA for investment in shares of
each 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.
Traditional IRA
In a Traditional IRA, amounts contributed to the IRA may be tax
deductible at the time of contribution depending on whether the shareholder is
an "active participant" in an employer-sponsored retirement plan and the
shareholder's income. Distributions from a Traditional IRA will be taxed at
distribution except to the extent that the distribution represents a return of
the shareholder's own contributions for which the shareholder did not claim (or
was not eligible to claim) a deduction. Distributions prior to age 59-1/2 may be
subject to an additional 10% tax applicable to certain premature distributions.
Distributions must commence by April 1 following the calendar year in which the
shareholder attains age 70-1/2. Failure to begin distributions by this date (or
distributions that do not equal certain minimum thresholds) may result in
adverse tax consequences.
Roth IRA
In a Roth IRA, amounts contributed to the IRA are taxed at the
time of contribution, but distributions from the IRA are not subject to tax if
the shareholder has held the IRA for certain minimum periods of time (generally,
until age 59-1/2). Shareholders whose incomes exceed certain limits are
ineligible to contribute to a Roth IRA. Distributions that do not satisfy the
requirements for tax-free withdrawal are subject to income taxes (and possibly
penalty taxes) to the extent that the distribution exceeds the shareholder's
contributions to the IRA. The minimum distribution rules applicable to the
Traditional IRAs do not apply during the lifetime of the shareholder. Following
the death of the shareholder, certain minimum distribution rules apply.
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For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the shareholder's
compensation (earned income). An individual may also contribute to a Traditional
IRA or Roth IRA on behalf of his or her spouse provided that the individual has
sufficient compensation (earned income). Contributions to a Traditional IRA
reduce the allowable contribution under a Roth IRA, and contributions to a Roth
IRA reduce the allowable contribution to a Traditional IRA.
Each Fund's 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Taxes
The Funds intend to qualify for tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as amended
(the "Code"). Such qualification generally will relieve the Funds of liability
for federal income taxes to the extent its earnings are distributed.
The Funds contemplate declaring as dividends each year at least 90% of
its investment company income. An investor who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) treats the dividend, whether paid
in the form of cash or additional shares, as a receipt of ordinary income.
Dividends derived from exempt-interest income generally may be treated by
shareholders as items of interest, excludable from their gross income under
section 103(a) of the Code, unless such exclusion from income would be
disallowed.
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 Funds 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 Funds in October,
November or December of the year, payable to stockholders of record on a date
during such month and paid by the Funds 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.
Dividends and Distributions
Any dividend or distribution of the Fund's excess of net long-term
capital gain over its net short-term capital loss will be taxable to a
shareholder as a long-term capital gain, regardless of how long the shareholder
has held shares of the Funds. Capital gain dividends that are payable to
individuals, estate or trusts for taxable years ending on or after May 7, 1997
will be designated as a 20% rate gain distribution, an unrecaptured section 1250
gain distribution or a 28% rate gain distribution depending upon the Fund's
holding period for the shares. Capital gain dividends that are payable to
corporations are taxable at a 28% rate if held for more than one year. The 70%
dividends-received deduction for corporations applies to dividends from each
Fund's net investment income, subject to proportionate reductions if aggregate
dividends received by each Fund from domestic corporations in any year are less
than 100% of the distribution of net investment company taxable income made by
each Fund.
The Transfer Agent is required to 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 Funds, individuals are advised to check the
consequences of local and state tax laws, and the consequences for any
retirement plan offering tax benefits. Stockholders are urged to consult their
attorneys or tax advisors regarding specific questions as to federal, state or
local taxes.
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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 Funds 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.
Backup Withholding
The Funds 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 Funds 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.
INVESTMENT PERFORMANCE INFORMATION
The Funds 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 $10,000 invested at the
maximum public offering price for the one year period and the life of the Funds
through the most recent calendar quarter, assuming reinvestment of all dividends
and distributions. The Funds may also furnish total return calculations for
these and other periods based on investments at various sales charge levels or
net asset value.
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:
6
2 [(a-b + 1) - 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 Funds during the particular time period shown.
Each Fund's total return and current yield may vary from time to time depending
on market conditions, the compositions of each Fund's portfolio and operating
expenses. These factors and possible differences in the methods used in
calculating yield should be considered when comparing each 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 each 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.
In connection with communicating its yield or total return to current
or prospective stockholders, the Funds 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.
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Quotations of each Fund's total return will represent the average
annual compounded rate of return of a hypothetical investment in the Funds over
periods of one, five and ten years (up to the life of the Funds), and are
calculated pursuant to the following formula:
P (1 + T)n = ERV
(where P = a hypothetical initial payment of $10,000, T = the average annual
total return, n = the number of years and ERV = the redeemable value at the end
of the period of a $10,000 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 Corporation, incorporated in the State of Maryland on October 24,
1990, is authorized to issue 10,000,000 shares of common stock, $.01 par value
(the "Common Stock"), of which 8,000,000 are allocated to the Chaconia I&G Fund
and 2,000,000 are allocated to the Chaconia ACS Fund. The Corporation's capital
stock consists of a single class of common stock, which is divisible into an
unlimited number of series. Each Fund represents a separate series of common
stock. Shares of the Corporation, when issued, are fully transferable and
redeemable at the option of the holder. Shares are also redeemable at the option
of the Corporation in certain circumstances as described in the Prospectus under
"How to Redeem Shares." All shares are equal as to earnings assets and voting
privileges. There are no conversion, preemption or other subscription rights.
Under the Corporation'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 outstanding share is entitled to share equally in dividends
and other distributions and in the net assets of the Funds on liquidation.
Accordingly, in the event of liquidation, each share of each Fund's common stock
is entitled to its portion of each Fund's assets after all debts and expenses
have been paid. The shares of the Funds do not have cumulative voting rights for
the election of directors.
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 each 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 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 Corporation's organizing documents have been filed with the SEC as
exhibits to the Corporation's registration statement and can be found at the SEC
or at the Corporation's principal office or at the offices of the Corporation's
legal counsel.
Other than the election of directors, which is by plurality, any
matter for which stockholder approval is required by (1) the Maryland General
Corporation Law, requires the affirmative vote of at least a majority of all
votes cast at a meeting at which a quorum is present and (2) 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 Funds entitled to vote at a
meeting called for the purpose of considering such approval. Pursuant to the
Corporation's Articles of Incorporation, the presence in person or by proxy of
the holders of one-third of the outstanding voting securities entitled to vote
at a meeting of stockholders shall constitute a quorum for the transaction of
any business at all meetings of the stockholders except as otherwise provided by
law or in the Articles of Incorporation. The 1940 Act defines a majority as 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.
CUSTODIAN
Star Bank, N.A., Star Bank Center, 425 Walnut Street, ML 6118,
Cincinnati, OH 45201, acts as custodian for the Funds. As such, Star Bank holds
all securities and cash of the Funds, delivers and receives payment for
securities sold, receives and pays for securities purchased, collects income
from investments and performs other duties, all as directed by officers
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of the Corporation. Star Bank does not exercise any supervisory function over
the management of the Funds, the purchase and sale of securities or the payment
of distributions to shareholders.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, New York, NY, serves as the independent
accountants for the Funds.
FINANCIAL STATEMENTS
The Chaconia I&G Fund's audited financial statements are incorporated
by reference to the Annual Report, dated December 31, 1997, as filed with the
SEC on March 2, 1998. The Chaconia I&G Fund's unaudited financial statements are
incorporated by reference to the Semi-Annual Report, dated June 30, 1998, as
filed with the SEC on August 27, 1998.
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
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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 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.
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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.
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PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Audited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference to Annual Report, dated December 31,
1997, as filed with the SEC on May 20, 1998).
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
(b) Unaudited Financial Statements (Financial Highlights included in
Part A and all incorporated by reference to the Semi-Annual Report, dated June
30, 1998, as filed with the SEC on August 27, 1998).
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
c. (c) Exhibits:
(1) Articles of Incorporation, as amended
(2) By-Laws, as amended(2)
(3) Not Applicable
(4) Specimen Stock Certificate(1)
(5.1) Investment Management Agreement between the Chaconia
I&G Fund and INVESCO Capital Management, Inc.(1)
(5.2) Investment Management Agreement between the Chaconia
ACS Fund and INVESCO Capital Management, Inc.
(6) Distribution Agreement(1)
(7) Not Applicable
(8.1) Custody Agreement between the Chaconia I&G Fund and
Star Bank, N.A.(3)
(8.2) Custody Agreement between the Chaconia ACS Fund and
Star Bank, N.A.
(9.1) Fund Accounting Service Agreement between the
Chaconia I&G Fund and American Data Services, Inc.(1)
(9.2) Shareholder Servicing Agent Agreement between the
Chaconia I&G Fund and American Data Services, Inc.(1)
(9.3) Administrative Services Agreement between the
Chaconia I&G Fund and American Data Services, Inc.(1)
(9.4) Fund Accounting Service Agreement between the
Chaconia ACS Fund and American Data Services, Inc.
(9.5) Transfer Agency and Service Agreement between the
Chaconia ACS Fund and American Data Services, Inc.
(9.6) Administrative Services Agreement between the
Chaconia ACS Fund and American Data Services, Inc.
(10) Opinion and Consent of Counsel
(11) Consent of Independant Accountants
(12) Not Applicable
(13) Subscription Agreement(1)
(14) IRA Disclosure Documents(3)
S-1
<PAGE>
(15) Distribution Plan(2)
(16) Not Applicable
Item 25. Persons Controlled by or under Common Control with Registrant.
See "Management" in Part A of this Registration Statement.
1. Previously filed as an exhibit to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A and incorporated by
reference thereto. Pre-Effective Amendment No. 2 was filed with the SEC on
October 30, 1992 and its File No. is 33-37426.
2. Previously filed as an exhibit to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N-1A and incorporated by
reference thereto. Amendment No. 5 was filed with the SEC on January 17,
1995 and its File Nos. are 33-37426 and 811-6194.
3. Previously filed as an exhibit to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A and incorporated by
reference thereto. Amendment No. 9 was filed with the SEC on December 26,
1996 and its File Nos. are 33-37426 and 811-6194.
As of June 30, 1998, the approximate number of holders were:
(1) (2)
Number of
Title of Class Record Holders
Chaconia I&G Fund Common 4,503
Chaconia ACS Fund Common N/A
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.
S-2
<PAGE>
Item 29. Principal Underwriters.
The Funds have no principal underwriters and have adopted Distribution
Plans 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.
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.
S-3
<PAGE>
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
____ day of November, 1998.
THE CHACONIA INCOME & GROWTH FUND, INC.
BY /s/ Clarry Benn
Clarry Benn, President
On behalf of the Board of Directors pursuant to Power of Attorney granted
in Post-Effective Amendment No. 11
BY /s/ Clarry Benn
*Attorney-in-Fact
Board of Directors:
Clarry Benn*
John A. Cole*
Roosevelt Williams *
Renrick Nickie*
Judy Y. Chang*
S-4
<PAGE>
Conforming Changes
Exhibit Index
Pursuant to Securities Act Rule 483
Exhibit 1 Articles of Incorporation, as amended
Exhibit 2 By-Laws, as amended*
Exhibit 3 Not Applicable
Exhibit 4 Specimen Stock Certificate*
Exhibit 5.1 Investment Management Agreement between the Chaconia I&G Fund
and INVESCO Capital Management, Inc.*
Exhibit 5.2 Investment Management Agreement between the Chaconia ACS Fund
and INVESCO Capital Management, Inc.
Exhibit 6 Distribution Agreement*
Exhibit 7 Not Applicable*
Exhibit 8.1 Custody Agreement between the Chaconia I&G Fund and Star Bank,
N.A.*
Exhibit 8.2 Custody Agreement between the Chaconia ACS Fund and Star Bank,
N.A.
Exhibit 9.1 Fund Accounting Service Agreement between the Chaconia I&G
Fund and American Data Services, Inc.*
Exhibit 9.2 Shareholder Servicing Agreement Agent Agreement between the
Chaconia I&G Fund and American Data Services, Inc.*
Exhibit 9.3 Administrative Services Agreement between the Chaconia I&G
Fund and American Data Services, Inc.*
Exhibit 9.4 Fund Accounting Service Agreement between the Chaconia ACS
Fund and American Data Services, Inc.
Exhibit 9.5 Transfer Agency and Service Agreement between the Chaconia ACS
Fund and American Data Services, Inc.
Exhibit 9.6 Administrative Services Agreement between the Chaconia ACS
Fund and American Data Services, Inc.
Exhibit 10 Opinion and Consent of Counsel
Exhibit 11 Consent of Independant Accountants
Exhibit 12 Not Applicable
Exhibit 13 Subscription Agreement*
Exhibit 14 IRA Disclosure Documents*
Exhibit 15 Distribution Plan*
Exhibit 16 Not Applicable*
S-5
<PAGE>
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.
- ----------------
* Incorporated by reference.
<PAGE>
EXHIBIT 11
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 15 to the Registration Statement of The Chaconia Income & Growth Fund, Inc.,
on Form N-1A (File Nos. 33-37426 and 811-6194) of our report dated February 26,
1998, on our audit of the financial statements and financial highlights of The
Chaconia Income & Growth Fund, Inc., which report is included in the Annual
Report to Shareholders for the year ended December 31, 1997, which is also
incorporated by reference in this Post-Effective Amendment to the Registration
Statement.
We also consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Accountants". In the Prospectus and under the
caption "Independant Accountants" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
----------------------------
PricewaterhouseCoopers LLP
New York, New York
November 30, 1998
EXHIBIT 1
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
CHACONIA INCOME & GROWTH FUND, INC.
The undersigned officer of Chaconia Income & Growth Fund, Inc., a
Maryland corporation (the "Company"), does hereby certify:
FIRST: That Article Fifth of the Company's Amended and Restated
Articles of Incorporation is hereby amended to provide as follows:
ARTICLE FIFTH, Capital Stock
Section 1. The total number of shares of all classes of stock which the
Company has authority to issue is 10,000,000 shares of capital stock ("Shares")
of the par value of $.01 each, having an aggregate par value of $100,000 (and
class(es) of Shares from time to time created by the Board of Directors being
herein referred to individually as a "Class" and collectively as "Classes" which
may be referred to in other documents as "Portfolios" or "Funds" or "Series").
Of the 10,000,000 Shares, 8,000,000 Shares shall be collectively designated
"Series A," and 2,000,000 Shares shall be collectively designated "Series B."
The Board of Directors of the Company shall have the power and authority to
further classify or reclassify any unissued Shares from time to time by setting
or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemptions of such unissued Shares, including, without
limitation, the power to reclassify unissued Shares of any Class as authorized
Shares of any other Class.
SECOND: That the remaining provisions of Article Fifth of the Company's
Amended and Restated Articles of Incorporation remain unaffected by the
Amendment and are in full force and effect.
THIRD: That the Amendment was adopted by the Company's Board of
Directors on _____________ in accordance with the Company's Amended and Restated
Articles of Incorporation and By-Laws, and Section 2-602 of the Maryland
Corporations and Associations Code.
Executed on behalf of the Company as of this ___ day of ___________,
1998.
CHACONIA INCOME &
GROWTH FUND, INC.
By:
Its:
- ------------
This document was drafted by, and after filing should be returned to, Lafayette
L. Crump, Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202.
EXHIBIT 5.2
INVESTMENT MANAGEMENT AGREEMENT
with
INVESCO Capital Management, Inc.
THIS AGREEMENT (the "Agreement"), made on this ___ day of ___________________,
19___, by and between the Chaconia Caribbean States Growth Fund, (the "Client"),
and INVESCO Capital Management, Inc. ("INVESCO").
W I T N E S S E T H :
WHEREAS, the Client is the owner or custodian of, or otherwise has
investment authority with respect to, securities, cash and other property (such
securities, cash and other property collectively herein referred to as the
"Fund") held in one or more accounts (the "Account"); and
WHEREAS, the Client desires to appoint INVESCO to serve as investment
manager with respect to the Account (in such capacity, INVESCO being referred to
hereinafter as "Investment Manager"); and
WHEREAS, INVESCO is a "registered investment adviser" under the
Investment Advisers Act of 1940;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
I. APPOINTMENT. INVESCO is hereby appointed to serve as Investment
Manager with respect to the Account. INVESCO hereby accepts its appointment
subject to the terms and conditions of this Agreement.
II. DUTIES AND POWERS OF INVESTMENT MANAGER
A. Duties
1. Subject to any restrictions and/or guidelines contained in
Exhibit "A" attached hereto and by this reference incorporated herein, and any
additional restrictions and/or guidelines as may from time to time be
communicated in writing by the Client, INVESCO shall from time to time invest
and reinvest the Fund and keep the same invested, in its sole discretion,
without distinction between principal and income, in any property, real,
personal or mixed, or share or part thereof, or part interest thereof, or part
interest therein, wherever situated, and whether or not productive of income,
including but not limited to: capital, common and preferred stock, mutual funds,
personal, corporate and governmental obligations, secured or unsecured;
mortgages, leaseholds, fees and other interests in realty; oil, gas or mineral
properties, rights, royalties, payments and other interests in such properties;
contracts, conditional sales agreements, choses in action, trust and
participation certificates, and other evidences of ownership, part ownership,
interest or part interest.
2. INVESCO shall discharge its duties with the care, skill,
prudence and diligence under the circumstances then prevailing that a
responsible fiduciary acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims, and by diversifying the investments under management so as to minimize the
risk of large losses, unless under the circumstances it is clearly prudent not
to do so. It is agreed that the standard set forth in the foregoing sentence
constitutes the sole standard of care imposed upon INVESCO by this Agreement.
<PAGE>
2
3. In the performance of its duties hereunder, INVESCO shall act
in accordance with the investment guidelines which the Client may, from time to
time, have furnished to INVESCO in writing subject only to such limitations as
the Client may impose, or as may otherwise be imposed by law.
4. INVESCO will provide Client with such periodic reports as
Client and INVESCO may mutually agree; provided however, that reports as to the
status and investments in the Account shall be provided no less frequently than
quarterly.
B. Powers. The Client hereby appoints INVESCO its agent and
attorney-in-fact with respect to, and hereby confers, and INVESCO hereby
acknowledges, the following powers in the performance of its duties as
Investment Manager under this Agreement:
1. To direct the purchase or subscription for any securities or
property;
2. To direct the sale, exchange, conveyance, transfer or other
disposition of any stocks, bonds or other securities held in the Account or
comprising the Fund, by private contract or at public auction, with or without
advertising;
3. To vote any stocks, bonds, or other securities; to give general
or special proxies or powers of attorney with or without power of substitution;
to exercise any conversion privileges, subscription rights or other options, and
to make any payments incidental thereto; to oppose or to consent to, or
otherwise participate in, corporate reorganizations or other changes affecting
corporate securities, and to delegate discretionary powers, and to pay any
assessments or charges in connection therewith, and generally to exercise any of
the powers of an owner with respect to stocks, bonds, or other securities of the
Fund; provided, that all such powers shall be exercised by INVESCO in its sole
and absolute discretion subject only to its general fiduciary obligations to the
Client as set forth in Section IIA(2) above;
4. To direct the writing of covered call options and the purchase
or sale of put options and financial futures contracts;
5. In the performance of its duties hereunder, INVESCO may, with
prior notice to the Client, provide services to Client through any or all of its
affiliates including, without limitation, INVESCO Funds Group, Inc., INVESCO
Trust Company, INVESCO Management & Research, Inc., INVESCO Realty Advisors,
Inc., PRIMCO Capital Management, Inc., or AIM Management Group Inc.
6. To make, execute, acknowledge and deliver any and all documents
that may be necessary to carry out the powers of INVESCO, as Investment Manager;
7. To carry out the duties set forth in Subsection IIA of this
Agreement;
<PAGE>
3
8. To direct the placement of brokerage orders with respect to
assets comprising the Fund with such broker or brokers as INVESCO shall select;
and
9. Generally, to do all such acts and to execute and deliver all
such instruments as in the judgment of INVESCO may be necessary or desirable to
carry out any powers or authority of INVESCO under this Agreement, without
advertisement and without order of court, and without having to post bond or
make any returns or report of its doings to any court.
C. Investment Decisions. INVESCO shall have full power to make and act
upon all investment decisions with respect to the Fund, in its sole discretion,
subject only to the terms of this Agreement, as amended from time to time.
D. Compensation. The compensation of INVESCO as Investment Manager
shall be such as is set forth in INVESCO's separate published fee schedule in
effect from time to time, a current copy of which is attached hereto as Exhibit
"B", except that no increase in fees shall be effective until 90 days after
notice thereof to the Client. Unless otherwise provided in Exhibit "B", payment
to INVESCO shall be made quarterly, based on a calendar year, and the fee shall
be due and payable within 15 days after the end of each quarterly period. If
this Agreement commences at any time other than at the beginning of a quarterly
period, the first quarterly fee shall be prorated to the end of such first
quarterly period. At no time will INVESCO be compensated on the basis of a share
of capital gains or capital appreciation of the Fund except as based upon the
total value of the Fund in accordance with INVESCO's aforementioned fee
schedule. If this Agreement is terminated all fees due to INVESCO shall be
prorated to the date of termination.
III. TRANSACTION PROCEDURES. All transactions will be consummated by
payment to, or delivery by, Client, or such other party as Client may designate
in writing (the "Custodian"), of all cash and/or securities due to or from the
Account. INVESCO shall not act as custodian for the Account, but may issue such
instructions to the Custodian as may be appropriate in connection with the
settlement of transactions initiated by INVESCO pursuant to the terms of this
Agreement. Instructions of INVESCO to Client and/or the Custodian shall be made
in writing sent by first-class mail or, at the option of INVESCO, orally and
confirmed in writing as soon as practical thereafter, and INVESCO shall instruct
all brokers and dealers executing orders on behalf of the Account to forward to
Client and/or the Custodian copies of all confirmations promptly after execution
of transactions. INVESCO shall not be responsible for any loss incurred by
reason of any act or omission of any broker or dealer or the Custodian;
provided, however, that INVESCO will make reasonable efforts to require that
brokers and dealers selected by INVESCO perform their obligations with respect
to the Account.
IV. ALLOCATION OF BROKERAGE. Where INVESCO places orders for the execution
of portfolio transactions for the Account, INVESCO may allocate such
transactions to such brokers and dealers for execution on such markets, at such
prices and at such commission rates as in the good faith judgment of INVESCO
will be in the best interest of the Account, taking into consideration in the
selection of such brokers and dealers not only the available prices and rates of
brokerage commissions, but also other relevant factors (such as, without
limitation, execution capabilities, research and other services provided by such
brokers or dealers which are expected to enhance the general portfolio
management capabilities of INVESCO, and the value of an ongoing relationship of
INVESCO with such brokers and dealers) without having to demonstrate that such
factors are of a direct benefit to the Account. Client may direct INVESCO to
utilize specific brokers or dealers. Client represents that such direction shall
be for the exclusive purpose of providing benefits to participants and
beneficiaries of the Account and shall not constitute, or cause the Account to
be engaged in any violation of federal or state law with regard to "prohibited
transactions" or "parties-in-interest".
<PAGE>
4
V. SERVICES TO OTHER CLIENTS OF INVESCO. INVESCO may perform investment
advisory services for various clients other than the Client and for accounts
other than the Account. INVESCO may give advice and take action with respect to
other clients that differs from advice given or action taken with respect to the
Fund, so long as INVESCO attempts in good faith reasonably to allocate
investment opportunities to the Client and the Account over a period of time on
a fair and equitable basis compared to investment opportunities extended to
other clients. INVESCO is not obligated to initiate the purchase or sale for the
Client, or the Account, of any security that INVESCO, its principals, affiliates
or employees may purchase or sell for its or their own accounts or for the
account of any other client, if in the reasonable opinion of INVESCO, such
transaction or investment appears unsuitable or undesirable for the Client or
the Account.
VI. CONFIDENTIAL RELATIONSHIP. Except as otherwise provided in this
Section, all information and advice furnished by the Client or INVESCO to the
other, with respect to the Account, the Fund or other matters pertaining to this
Agreement, shall be treated as confidential and shall not be disclosed to third
parties except as required by law or as necessary to carry out responsibilities
set forth in this Agreement.
VII. AUTHORITY AND STATUS OF INVESCO AS INVESTMENT MANAGER. INVESCO
represents and warrants (i) that it is a registered investment adviser under the
Investment Advisers Act of 1940, (ii) that it has full power and authority to
enter into this Agreement, and (iii) that this Agreement has been duly
authorized and when executed and delivered will be binding upon INVESCO. INVESCO
acknowledges that as Investment Manager it is a fiduciary with respect to the
Fund; provided, however, that INVESCO shall not be considered a fiduciary to the
extent that it does not have investment discretion under this Agreement as a
result of the restrictions, if any, contained in Exhibit "A".
VIII. AUTHORITY OF THE CLIENT. The Client represents and warrants (i) that
the Client has full power and authority to enter into this Agreement, and (ii)
that this Agreement has been duly authorized and when executed and delivered
will be binding upon the Client, the Account and the Fund.
IX. DURATION OF AGREEMENT; ENTIRE AGREEMENT. This Agreement will remain in
effect until terminated by either party hereto in accordance with Section X
hereof. This Agreement constitutes the entire agreement between INVESCO and
Client, and supersedes any prior agreements or understanding with respect to the
subject matter hereof.
X. TERMINATION; PROHIBITION AGAINST ASSIGNMENT.
A. A party to this Agreement may terminate this Agreement at any time
upon notice by registered or certified mail to the other parties in accordance
with Section XI hereof, which notice shall be given at least thirty (30) days
prior to the effective date of termination. Upon receiving or giving notice of
termination, and (if termination occurs by notice from the Client) upon receipt
by INVESCO of all fees payable to INVESCO pursuant to this Agreement which are
accrued but unpaid as of the date of such termination, INVESCO shall, if so
directed by the Client, make a full accounting to the Client with respect to all
assets managed by it since its appointment as Investment Manager.
<PAGE>
5
B. No assignment (as that term is defined in the Investment Advisers
Act of 1940) of this Agreement shall be made by either party without the consent
of the other party.
XI. NOTICES.
A. All notices, requests and demands after the date of this Agreement,
and any other communications hereunder shall be deemed to have been duly given
if in writing and if delivered or sent by certified or registered mail, return
receipt requested, to the appropriate address indicated below or such other
address as may be given in a notice sent to the other parties hereto in
accordance with this Section XI. Such communication shall be effectively
delivered or received on the date on which delivered or on the date acknowledged
to have been received in return receipt.
B. Client hereby acknowledges receipt of INVESCO's Form ADV, Part II
pursuant to Rule 204-3 under the Investment Advisers Act of 1940. INVESCO
annually shall deliver, or offer in writing to deliver, upon written request of
the Client and without charge, Form ADV, Part II.
XII. INDEMNIFICATION. The Client shall indemnify and hold harmless INVESCO
as Investment Manager, from and against any and all claims, losses, costs,
expenses (including, without limitation, attorneys' fees and court costs),
damages, actions or causes of action arising from, on account of or in
connection with the performance by INVESCO of its duties as Investment Manager
hereunder, on account of taking, or in good faith failing to take, any actions
in accordance with any instructions communicated to the Investment Manager.
INVESCO shall not be held responsible for breach of duty other than such of the
foregoing arising from, on account of or in connection with the bad faith,
negligence, malfeasance, or breach of trust of INVESCO. The federal and state
securities laws impose liabilities under certain circumstances on persons who
act in good faith; nothing in this Agreement shall constitute a waiver or
limitation of any rights which the Client may have under applicable federal and
state securities laws.
XIII. GOVERNING LAW. The validity, construction and operation of this
Agreement shall be governed by the laws of the State of Georgia, except where
preempted by the provisions of federal law.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their officers or agents thereunto duly authorized as of
the day and year first above written.
CLIENT:
ATTEST: By:
Title:
Title
(SEAL) Address
INVESCO Capital Management, Inc.
ATTEST: By:
Title:
Title 1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
(SEAL) Address
<PAGE>
7
EXHIBIT A
DESCRIPTION OF ANY RESTRICTION TO SECTION II(A)(1)
None
Initials
-----------
-----------
Date: ____________
<PAGE>
8
EXHIBIT B
COMPENSATION
In accordance with Section II (D) the fee to be paid to INVESCO shall be
computed as follows:
The greater of $50,000 or the published standard fee schedule shown below:
.75 of 1% on the first $10,000,000
.50 of 1% on the next $10,000,000
.20 of 1% thereafter
The fee provided above is the annual fee charged by INVESCO Capital Management
for investment management services. Fees are based on the market value of the
assets under management at the end of each calendar or fiscal quarter and are
charged in arrears. The quarterly fee is calculated by applying the annual rate
above to the total market value of the assets and then taking one-quarter of the
total as the quarterly fee. The fee payable to INVESCO may be revised from time
to time but no increase in fees shall be effective until 90 days after notice to
the Client.
Initials
-----------
-----------
Date: ____________
EXHIBIT 9.4
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made the ______ day of _________ 1998, by and between the Chaconia
Association of Caribbean States Fund (the "Fund"), and American Data Services,
Inc., a New York corporation having its principal office and place of business
at the Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New
York 11788 ("ADS")
BACKGROUND
WHEREAS, the Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services to
mutual funds and possesses facilities sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.
ADS will provide the Fund with the necessary office space, communication
facilities and personnel to perform the following services for the Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net asset
value and communicate such value to the Fund and its transfer agent;
(b) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any
successor rule may be amended from time to time ("Rule 31a-1"), that
are applicable to the fulfillment of ADS's duties hereunder, as well
as any other documents necessary or advisable for compliance with
applicable regulations as may be mutually agreed to between the Fund
and ADS. Without limiting the generality of the foregoing, ADS will
prepare and maintain the following records upon receipt of information
in proper form from the Fund or its authorized agents:
o Cash receipts journal
o Cash disbursements journal
o Dividend record
o Purchase and sales - portfolio securities journals
o Subscription and redemption journals
o Security ledgers
<PAGE>
o Broker ledger
o General ledger
o Daily expense accruals
o Daily income accruals
o Securities and monies borrowed or loaned and collateral
therefore
o Foreign currency journals
o Trial balances
(c) Provide the Fund and its investment adviser with daily portfolio
valuation, net asset value calculation and other standard operational
reports as requested from time to time.
(d) Provide all raw data available from our fund accounting system (PAIRS)
for management's or the administrators preparation of the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1a;
5. Annual proxy statement.
(e) Provide facilities to accommodate annual audit and any audits or
examinations conducted by the Securities and Exchange Commission or any
other governmental or quasi-governmental entities with jurisdiction.
ADS shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein, ADS shall be entitled to receive compensation and reimbursement for all
reasonable out-of-pocket expenses. The Fund agrees to pay ADS the fees and
reimbursement of out-of-pocket expenses as set forth in the fee schedule
attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
(a) ADS shall be held to the exercise of reasonable care in carrying out
the provisions of the Agreement, but shall be without liability to the Fund for
any action taken or omitted by it in good faith without gross negligence, bad
faith, willful misconduct or reckless disregard of its duties hereunder. It
shall be entitled to rely upon and may act upon the accounting records and
reports generated by the Fund, advice of the Fund, or of counsel for the Fund
and upon statements of the Fund's independent accountants, and shall be without
liability for any action reasonably taken or omitted pursuant to such records
and reports or advice, provided that such action is not, to the knowledge of
ADS, in violation of applicable federal or state laws or regulations, and
provided further that such action is taken without gross negligence, bad faith,
willful misconduct or reckless disregard of its duties.
(b) Nothing herein contained shall be construed to protect ADS against any
liability to the Fund or its security holders to which ADS shall otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence in the
performance of its duties on behalf of the Fund, reckless disregard of ADS'
obligations and duties under this Agreement or the willful violation of any
applicable law.
<PAGE>
(c) Except as may otherwise be provided by applicable law, neither ADS nor
its stockholders, officers, directors, employees or agents shall be subject to,
and the Fund shall indemnify and hold such persons harmless from and against,
any liability for and any damages, expenses or losses incurred by reason of the
inaccuracy of information furnished to ADS by the Fund or its authorized agents.
4. REPORTS.
(a) The Fund shall provide to ADS on a quarterly basis a report of a duly
authorized officer of the Fund representing that all information furnished to
ADS during the preceding quarter was true, complete and correct in all material
respects. ADS shall not be responsible for the accuracy of any information
furnished to it by the Fund or its authorized agents, and the Fund shall hold
ADS harmless in regard to any liability incurred by reason of the inaccuracy of
such information.
(b) Whenever, in the course of performing its duties under this Agreement,
ADS determines, on the basis of information supplied to ADS by the Fund or its
authorized agents, that a violation of applicable law has occurred or that, to
its knowledge, a possible violation of applicable law may have occurred or, with
the passage of time, would occur, ADS shall promptly notify the Fund and its
counsel of such violation.
5. ACTIVITIES OF ADS.
The services of ADS under this Agreement are not to be deemed exclusive,
and ADS shall be free to render similar services to others so long as its
services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of the
Fund, and shall be surrendered to the Fund, at the expense of the Fund, promptly
upon request by the Fund, provided that all service fees and expenses charged by
ADS in the performance of its duties hereunder have been fully paid to the
satisfaction of ADS, in the form in which such accounts and records have been
maintained or preserved. ADS agrees to maintain a back-up set of accounts and
records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. ADS shall assist the Fund's independent auditors, or, upon approval of
the Fund, any regulatory body, in any requested review of the Fund's accounts
and records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all other
information germane thereto, as confidential and not to be disclosed to any
person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
<PAGE>
Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the Fund.
Additionally, ADS reserves the right to charge for any other reasonable expenses
associated with such termination.
9. ASSIGNMENT.
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 without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such amendment
is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing, shall
be deemed to have been given when received or when sent by telex or facsimile,
and shall be given to the following addresses (or such other addresses as to
which notice is given):
To the Fund: To ADS:
Michael Miola
President
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
AMERICAN DATA SERVICES, INC.
<PAGE>
By:____________________________ By:__________________________
Michael Miola, President
SCHEDULE A
(a) FUND ACCOUNTING SERVICE FEE:
For the services rendered by ADS in its capacity as fund accounting agent,
as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS, within ten
(10) days after receipt of an invoice from ADS at the beginning of each month, a
fee equal to the greater of:
1. $2,300 (minimum fee for portfolios containing non U.S. dollar denominated
securities),
OR,
2. Based upon total assets in the portfolio:
1/12 of 0.10% (10 basis points) of the first $75 million of average total net
assets for the month, plus; 1/12 of 0.05% (5 basis points) of the next $100
million of average total net assets for the month, plus; 1/12 of 0.03% (3
basis points) all average total net assets for the month in excess of $175
million.
Calculated Fee Will Be Based Upon Prior Month Average Net Assets:
(No prorating partial months)
MULTI-CLASS PROCESSING CHARGE
$300 per month will be charged for each additional class of stock per
portfolio.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated
above will be increased by the change in the Consumer Price Index for the
Northeast region (CPI) for the twelve month period ending with the month
preceding such annual anniversary date.
(b) EXPENSES.
The Fund shall reimburse ADS for any out-of-pocket expenses , exclusive of
salaries, advanced by ADS in connection with but not limited to the printing or
filing of documents for the Fund, travel, telephone, quotation services
(currently (1) $0.12 per equity valuation, $0.60 per bond valuation, and 1.50
for each foreign quotation or manual quote insertion), facsimile transmissions,
stationery and supplies, record storage, NASDAQ insertion fee ($22 (1) per
month), prorata portion of annual SAS 70 review, postage, telex, and courier
charges, incurred in connection with the performance of its duties hereunder.
<PAGE>
ADS shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
(1) Rate subject to change on 30 days notice.
(c) SPECIAL REPORTS.
All reports and /or analyses requested by the Fund, its auditors, legal
counsel, portfolio manager, or any regulatory agency having jurisdiction over
the Fund, that are not in the normal course of fund accounting activities as
specified in Section 1 of this Agreement shall be subject to an additional
charge, agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(d) SERVICE DEPOSIT.
The Fund will remit to ADS upon execution of this Agreement a service
deposit equal to one (1) month's minimum fee under this Agreement. The Fund will
have the option to have the service deposit applied to the last month's service
fee, or applied to any new contract between the Fund and ADS.
However, if the Fund elects or is forced to terminate this Agreement for any
reason what-so-ever other than a material breach by ADS (including, but not
limited to, the voluntary or involuntary termination of the Fund, liquidation of
the Fund's assets, the sale or merger of the Fund or it's assets to any
successor entity) prior to the termination date of this Agreement as specified
in Paragraph 8 of this Agreement, the Fund will forfeit the Service Deposit paid
to ADS upon execution of this Agreement.
(e) CONVERSION CHARGE.
NOTE: FOR EXISTING FUNDS ONLY (new funds please ignore):
There will be a charge to convert the Fund's portfolio accounting records
on to the ADS fund accounting system (PAIRS). In addition, ADS will be
reimbursed for all out-of-pocket expenses, enumerated in paragraph (b) above,
incurred during the conversion process.
The conversion charge will be estimated and agreed upon in advance by the
Fund and ADS. The charge will be based upon the quantity of records to be
converted and the condition of the previous service agents records.
EXHIBIT 9.5
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made the ______ day of _________ 1998, by and between the Chaconia
Association of Caribbean States Fund (the "Fund"), and American Data Services,
Inc., a New York corporation having its principal office and place of business
at the Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New
York 11788 ("ADS")
WHEREAS, the Fund desires to appoint ADS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement,
the Fund hereby employs and appoints ADS to act as, and ADS agrees to act as its
transfer agent for the Fund's authorized and issued shares of its common stock,
("Shares"), dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
fund ("Shareholders") set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and ADS, ADS shall:
I. Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefore to the Custodian
of the Fund authorized by the Board of Directors of the Fund (the
"Custodian");
II. Pursuant to purchase orders, issue the appropriate number of Shares and
hold such Shares in the appropriate Shareholder account;
III. Receive for acceptance redemption requests and redemption directions and
deliver the appropriate documentation therefore to the Custodian;
IV. At the appropriate time as and when it receives monies paid to it by the
Custodian with respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
V. Effect transfers of Shares by the registered owners thereof upon receipt
of appropriate instructions;
VI. Prepare and transmit payments for dividends and distributions declared by
the Fund;
VII. Maintain records of account for and advise the Fund and its Shareholders
as to the foregoing; and
VIII. Record the issuance of shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of shares of the Fund which
are authorized, based upon data provided to it by the
<PAGE>
Fund, and issued and outstanding. ADS shall also provide the Fund on a
regular basis with the total number of shares which are authorized and
issued and outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such shares, which
functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), ADS shall:
I. Perform all of the customary services of a transfer agent, dividend
disbursing agent, including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing Shareholder reports and
prospectuses to current Shareholders, withholding taxes on U.S. resident
and non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases redemption's of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder account
information and (ii) provide a system and reports which will enable the
Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to ADS in writing
those transactions and shares to be treated as exempt from
blue sky reporting for each State and (ii) verify the
establishment of such transactions for each state on the
system prior to activation and thereafter monitor the daily
activity for each State as provided by ADS. The responsibility
of ADS for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting
of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Fund agrees
to pay ADS an annual maintenance fee for each Shareholder account and
transaction fees for each portfolio or class of shares serviced under this
Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such
fees and out-of pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by ADS at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to ADS by the Fund at least seven (7)
days prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
<PAGE>
3.01 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.02 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.03 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.04 ADS is duly registered as a transfer agent under the Securities
Act of 1934 and shall continue to be registered throughout the remainder of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that;
4.01 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws / Declaration of Trust to enter into and perform this
Agreement.
4.02 All proceedings required by said Articles of Incorporation and
By-Laws / Declaration of Trust have been taken to authorize it to enter into and
perform this Agreement.
4.03 It is an open-end management investment company registered under
the Investment Company Act of 1940.
4.04 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Fund shall indemnify and
hold ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS or its agents or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken in
good faith and without gross negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack good faith, gross
negligence or willful misconduct or which arise out of the breach of
any representation or warranty of the Fund hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors of
information, records and documents which (i) are received by ADS or its
agents or subcontractors and furnished to it by or on behalf of the
Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund.
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
such Shares in such state.
5.02 ADS shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by ADS as a result of ADS's lack of good faith, gross negligence
or willful misconduct.
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by ADS under this
Agreement, and ADS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ADS, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided ADS or its agents
or subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. ADS, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. COVENANTS OF THE FUND AND ADS
6.01 The Fund shall promptly furnish to ADS a certified copy of the
resolution of the Board of Directors of the Fund authorizing the appointment of
ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
<PAGE>
6.03 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, ADS agrees that all such records prepared or maintained by
ADS relating to the services to be performed by ADS hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. ADS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Fund of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Fund.
7. TERMINATION OF AGREEMENT
7.01 This Agreement shall become effective as of the date hereof and
shall remain in force for a period of three (3) years, provided however, that
both parties to this Agreement have the option to terminate the Agreement upon
ninety (90) days prior written notice.
7.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, ADS reserves the right to charge for any other
reasonable expenses associated with such termination.
8. ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9. AMENDMENT
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors / Trustees of the Fund.
10. NEW YORK LAWS TO APPLY
10.01 The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To
<PAGE>
the extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
11. MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
12. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To ADS:
Michael Miola
President
American Data Services, Inc.
150 Motor Parkway, Suite 900
Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
AMERICAN DATA SERVICES, INC.
By:____________________________ By:__________________________
Michael Miola, President
<PAGE>
FEE SCHEDULE
For the services rendered by ADS in its capacity as transfer agent, the
Fund shall pay ADS, within ten (10) days after receipt of an invoice from ADS at
the beginning of each month, a fee, calculated as a combination of account
maintenance charges plus transaction charges as follows:
(a) ACCOUNT MAINTENANCE CHARGE:
The Greater of (No prorating for partial months):
(1) Minimum maintenance charge per portfolio/class $900.00/ month
OR,
(2) Based upon the total of all open/closed accounts (1) per
portfolio/class upon the following annual rates (billed monthly):
Fund Type:
Dividend calculated and
paid annually, semi-annually, quarterly.................. $ 9.00 per account
Dividend calculated and paid monthly...................... $10.50 per account
Dividend accrued daily and paid monthly .................. $14.00 per account
Closed accounts ................. $ 2.00 per account (2)
(1) All accounts closed during a month will be considered as open accounts
for billing purposes in the month the account is closed.
(2) Closed accounts remain on the shareholder files until all 1099's and
5498's have been distributed to the shareholders and send via mag-media
to the IRS.
PLUS,
(b) TRANSACTION FEES:
Trade Entry (purchase/liquidation) and maintenance transactions .. $ 1.50 each
New account set-up ............................................... $ 3.00 each
Customer service calls ......................................... $ 1.25 each
Correspondence/ information requests .......................... $ 1.75 each (2)
Check preparation ............................................. $ .50 each
Liquidation's paid by wire transfer ....................... $ 3.00 each
ACH charge ............................................... $ .45 each
SWP ...................................................... $ 1.00 each
<PAGE>
(c) 24 HOUR AUTOMATED VOICE RESPONSE:
Initial set-up (one-time) charge per portfolio - $750.00
Monthly maintenance charge per portfolio - $50.00
All calls processed through automated voice response will be billed as a
customer service call listed above.
(d) Fund/SERV
All portfolios processed through Fund/SERV will be subject to an additional
monthly charge of $250.00
All transactions processed through Fund/SERV will be billed at the transaction
fee rates listed in (b) above.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
will be increased by the change in the Consumer Price Index for the Northeast
region (CPI) for the twelve month period ending with the month preceding such
annual anniversary date.
(e) IRA PLAN FEES:
The following fees will be charged directly to the shareholder account:
Annual maintenance fee .............................. $15.00 /account *
Incoming transfer from prior custodian .............. $12.00
Distribution to a participant ....................... $15.00
Refund of excess contribution ....................... $15.00
Transfer to successor custodian ..................... $15.00
Automatic periodic distributions ................... $15.00/year per account
* Includes $8.00 Bank Custody Fee.
<PAGE>
(f) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive
of salaries, advanced by ADS in connection with but not limited to the costs for
printing fund documents, (i.e. printing of confirmation forms, shareholder
statements, redemption/dividend checks, envelopes, financial statements, proxy
statement, fund prospectus, etc.) proxy solicitation and mailing expenses,
travel requested by the Fund, telephone toll charges, 800-line costs and fees,
facsimile and data transmission costs, stationery and supplies (related to Fund
records), record storage, postage (plus a $0.085 service charge for all
mailings), pro-rata portion of annual SAS-70 audit letter, telex and courier
charges incurred in connection with the performance of its duties hereunder. ADS
shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
(g) SPECIAL REPORTS:
All reports and/or analyses requested by the Fund that are not included
in the fee schedule, shall be subject to an additional charge, agreed upon in
advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(h) SERVICE DEPOSIT:
The Fund will remit to ADS upon execution of this Agreement a security
deposit of equal to one (1) month's shareholder service fee. The service deposit
computation will be based either on the total number of shareholder accounts
(open and closed) of each portfolio to be serviced or the minimum fee, whichever
is greater, as of the execution date of this Agreement. The Fund will have the
option to have the security deposit applied to the last month's service fee, or
applied to any new contract between the Fund and ADS.
However, if the Fund elects or is forced to terminate this Agreement for any
reason what-so-ever other than a material breach by ADS (including, but not
limited to, the voluntary or involuntary termination of the Fund, liquidation of
the Fund's assets, the sale or merger of the Fund or it's assets to any
successor entity) prior to the termination date of this Agreement as specified
in Paragraph 7 of this Agreement, the Fund will forfeit the Security Deposit
paid to ADS upon execution of this Agreement
(i) CONVERSION CHARGE: (existing funds only, new funds please ignore)
There will be a charge to convert the Fund's shareholder accounting
records on to the ADS stock transfer system. In addition, ADS will be reimbursed
for all out-of-pocket expenses, enumerated in paragraph (b) above and data media
conversion costs, incurred during the conversion process.
<PAGE>
The conversion charge will be estimated and agreed upon in advance by
the Fund and ADS. The charge will be based upon the quantity of records to be
converted and the condition of the previous service agents records.
<PAGE>
SCHEDULE A
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
EXHIBIT 9.6
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the ______ day of _________ 1998, by and between the Chaconia
Association of Caribbean States Fund (the "Fund"), and American Data Services,
Inc., a New York corporation having its principal office and place of business
at the Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New
York 11788 (the "Administrator").
BACKGROUND
WHEREAS, the Fund is a diversified open-end management investment
company registered with the United States Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator is a corporation experienced in providing
administrative services to mutual funds and possesses facilities sufficient to
provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance
and facilities of the Administrator and to have the Administrator perform for
the Fund certain services appropriate to the operations of the Fund and the
Administrator is willing to furnish such services in accordance with the terms
hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and the Administrator hereby agree to the
following:
1. DUTIES OF THE ADMINISTRATOR.
The Administrator will provide the Fund with the necessary office
space, communication facilities and personnel to perform the following services
for the Fund:
(a) Monitor all regulatory (1940 Act and IRS) and prospectus
restrictions for compliance;
(b) Prepare and coordinate the printing of semi-annual and annual
financial statements;
(c) Prepare selected management reports for performance and
compliance analyses as agreed upon by the Fund and Administrator
from time to time;
(d) Prepare selected financial data required for directors' meetings
as agreed upon by the Fund and the Administrator from time to
time and coordinate directors meeting agendas with outside legal
counsel to the Fund;
(e) Determine income and capital gains available for distribution and
calculate distributions required to meet regulatory, income, and
excise tax requirements, to be reviewed by the Fund's independent
public accountants;
(f) Prepare the Fund's federal, state, and local tax returns to be
reviewed by the Fund's independent public accountants;
<PAGE>
(g) Prepare and maintain the Fund's operating expense budget to
determine proper expense accruals to be charged to the Fund in
order to calculate it's daily net asset value;
(h) 1940 ACT filings -
In conjunction with the Fund's outside legal counsel the
Administrator will:
Prepare the Fund's Form N-SAR reports;
Update all financial sections of the Fund's Statement of
Additional Information and coordinate its completion;
Update all financial sections of the Fund's prospectus and
coordinate its completion;
Update all financial sections of the Fund's proxy statement and
coordinate its comple- tion;
Prepare an annual update to Fund's 24f-2 filing (if applicable);
(i) Monitor services provided by the Fund's custodian bank as well as
any other service providers to the Fund;
(j) Provide appropriate financial schedules (as requested by the
Fund's independent public accountants or SEC examiners),
coordinate the Fund's annual or SEC audit, and provide office
facilities as may be required;
(k) Attend management and board of directors meetings as requested;
(l) The preparation and filing (filing fee to be paid by the Fund) of
applications and reports as necessary to register or maintain the
Funds registration under the securities or "Blue Sky" laws of the
various states selected by the Fund or its Distributor.
The Administrator shall, for all purposes herein, be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. COMPENSATION OF THE ADMINISTRATOR.
In consideration of the services to be performed by the Administrator
as set forth herein, the Administrator shall be entitled to receive compensation
and reimbursement for all reasonable out-of-pocket expenses. The Fund agrees to
pay the Administrator the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
3. RESPONSIBILITY AND INDEMNIFICATION.
(a) The Administrator shall be held to the exercise of reasonable care
in carrying out the provisions of the Agreement, but shall be without liability
to the Fund for any action taken or omitted by it in good faith without gross
negligence, bad faith, willful misconduct or reckless disregard of its duties
hereunder. It shall be entitled to rely upon and may act upon the accounting
records and reports generated by the Fund, advice of the Fund, or of counsel for
the Fund and upon statements of the Fund's independent accountants, and shall be
without liability for any action reasonably taken or omitted pursuant to such
records and reports or advice, provided that such action is not, to the
knowledge of the Administrator, in violation of applicable federal or state laws
or regulations, and provided further that such action is taken without gross
negligence, bad faith, willful misconduct or reckless disregard of its duties.
(b) The Administrator shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss arising out of any act or omission by
the Administrator in the performance of its duties
<PAGE>
hereunder except as hereinafter set forth. Nothing herein contained shall be
construed to protect the Administrator against any liability to the Fund or its
security holders to which the Administrator shall otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence in the performance of its
duties on behalf of the Fund, reckless disregard of the Administrator's
obligations and duties under this Agreement or the willful violation of any
applicable law.
(c) Except as may otherwise be provided by applicable law, neither the
Administrator nor its stockholders, officers, directors, employees or agents
shall be subject to, and the Fund shall indemnify and hold such persons harmless
from and against, any liability for and any damages, expenses or losses incurred
by reason of the inaccuracy of information furnished to the Administrator by the
Fund or its authorized agents or in connection with any error in judgment or
mistake of law or any act or omission in the course of, connected with or
arising out of any services to be rendered hereunder, except by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, by reason of reckless disregard of the Administrator's obligations and
duties under this Agreement or the willful violation of any applicable law.
4. REPORTS.
(a) The Fund shall provide to the Administrator on a quarterly basis a
report of a duly authorized officer of the Fund representing that all
information furnished to the Administrator during the preceding quarter was
true, complete and correct to the best of its knowledge. The Administrator shall
not be responsible for the accuracy of any information furnished to it by the
Fund, and the Fund shall hold the Administrator harmless in regard to any
liability incurred by reason of the inaccuracy of such information.
(b) The Administrator shall provide to the Board of Directors of the
Fund, on a quarterly basis, a report, in such a form as the Administrator and
the Fund shall from time to time agree, representing that, to its knowledge, the
Fund was in compliance with all requirements of applicable federal and state
law, including without limitation, the rules and regulations of the Securities
and Exchange Commission and the Internal Revenue Service, or specifying any
instances in which the Fund was not so in compliance. Whenever, in the course of
performing its duties under this Agreement, the Administrator determines, on the
basis of information supplied to the Administrator by the Fund, that a violation
of applicable law has occurred, or that, to its knowledge, a possible violation
of applicable law may have occurred or, with the passage of time, could occur,
the Administrator shall promptly notify the Fund and its counsel of such
violation.
5. ACTIVITIES OF THE ADMINISTRATOR.
The Administrator shall be free to render similar services to others so
long as its services hereinunder are not impaired thereby.
6. RECORDS.
The records maintained by the Administrator shall be the property of
the Fund, and shall be surrendered to the Fund, at the expense of the Fund,
promptly upon request by the Fund, provided that all service fees and expenses
charged by the Administrator in the performance of its duties hereunder have
been fully paid to the satisfaction of the Administrator, in the form in which
such accounts and records have been maintained or preserved. The Administrator
agrees to maintain a back-up set of accounts and records of the Fund (which
back-up set shall be updated on at least a weekly basis) at a location other
than that where the original accounts and records are stored. The Administrator
shall assist the Fund's independent auditors, or, upon approval of the Fund, any
regulatory body, in any requested review of the Fund's accounts and records. The
Administrator shall preserve the accounts and records as they are required to be
maintained and preserved by Rule 31a-1.
<PAGE>
7. CONFIDENTIALITY.
The Administrator agrees that it will, on behalf of itself and its
officers and employees, treat all transactions contemplated by this Agreement,
and all other information germane thereto, as confidential and such information
shall not be disclosed to any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, upon
ninety (90) days prior written notice.
Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, the Administrator reserves the right to charge for any
other reasonable expenses associated with such termination.
9. ASSIGNMENT.
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 without the prior written consent
of the Administrator, or by the Administrator without the prior written consent
of the Fund.
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when delivered in person or by certified
mail, return receipt requested, and shall be given to the following addresses
(or such other addresses as to which notice is given):
To the Fund: To the Administrator:
Michael Miola
<PAGE>
President
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
AMERICAN DATA SERVICES, INC.
By:____________________________ By:__________________________
Michael Miola, President
<PAGE>
SCHEDULE A
(a) ADMINISTRATIVE SERVICE FEE:
For the services rendered by the Administrator in its capacity as
administrator, as specified in Paragraph 1. DUTIES OF THE ADMINISTRATOR., the
Fund shall pay the Administrator within ten (10) days after receipt of an
invoice from the Administrator at the beginning of each month, a fee equal to
the greater of:
1. $4,500 (minimum fee),
OR,
2. Based upon total assets in the portfolio:
1/12 of 0.10% (10 basis points) of the first $75 million of average total
net assets for the month, plus; 1/12 of 0.05% (5 basis points) of the next
$100 million of average total net assets for the month, plus; 1/12 of 0.03%
(3 basis points) all average total net assets for the month in excess of
$175 million.
FEE INCREASES
On each annual anniversary date of this Agreement, the fees enumerated above
will be increased by the change in the Consumer Price Index for the Northeast
region (CPI) for the twelve-month period ending with the month preceding such
annual anniversary date.
(b) EXPENSES.
The Fund shall reimburse the Administrator for any out-of-pocket
expenses , exclusive of salaries, advanced by the Administrator in connection
with but not limited to the printing or filing of documents for the Fund,
travel, telephone, quotation services, facsimile transmissions, stationery and
supplies, record storage, postage, telex, and courier charges, incurred in
connection with the performance of its duties hereunder. The Administrator shall
provide the Fund with a monthly invoice of such expenses and the Fund shall
reimburse the Administrator within fifteen (15) days after receipt thereof.
(c) STATE REGISTRATION (BLUE SKY) SURCHARGE:
The fees enumerated in paragraph (a) above include the initial state
registration, renewal and maintenance of registrations (as detailed in Paragraph
1(l) DUTIES OF THE ADMINISTRATOR) for three (3) states. Each additional state
registration requested will be subject to the following fees:
Initial registration ........... $295.00
Registration renewal ........... $150.00
Sales reports (if required) ... $ 25.00
<PAGE>
(d) SPECIAL REPORTS.
All reports and /or analyses requested by the Fund, its auditors, legal
counsel, portfolio manager, or any regulatory agency having jurisdiction over
the Fund, that are not in the normal course of fund administrative activities as
specified in Section 1 of this Agreement shall be subject to an additional
charge, agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(e) SERVICE DEPOSIT.
The Fund will remit to the Administrator upon execution of this
Agreement a service deposit equal to one (1) month's minimum fee under this
Agreement. The Fund will have the option to have the service deposit applied to
the last month's service fee, or applied to any new contract between the Fund
and the Administrator.
However, if the Fund elects or is forced to terminate this Agreement for any
reason what-so-ever (including, but not limited to, the voluntary or involuntary
termination of the Fund, liquidation of the Fund's assets, the sale or merger of
the Fund or it's assets to any successor entity) prior to the termination date
of this Agreement as specified in Paragraph 8 of this Agreement, the Fund will
forfeit the Service Deposit paid to the Administrator upon execution of this
Agreement
EXHIBIT 10
November 30, 1998
Chaconia Income & Growth Fund, Inc.
c/o American Data Services, Inc.
The Hauppauge Corporate Center
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
Gentlemen:
We have acted as counsel for you in connection with the preparation of
an Amended Registration Statement on Form N-1A relating to the sale by you of an
indefinite amount of the Chaconia Income & Growth Fund, Inc. Common Stock, $.01
par value (such Common Stock being hereinafter referred to as the "Stock") in
the manner set forth in the Registration Statement to which reference is made.
In this connection we have examined: (a) the Amended Registration Statement on
Form N-1A; (b) your Amended and Restated Articles of Incorporation and By-Laws,
as amended to date; (c) corporate proceedings relative to the authorization for
issuance of the Stock; and (d) such other proceedings, documents and records as
we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Stock when sold as contemplated in the Amended Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the
Amended Registration Statement on Form N-1A. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons whose consent is required
by Section 7 of said Act.
Very truly yours,
/s/ Foley & Lardner
FOLEY & LARDNER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE CHACONIA INCOME & GROWTH FUND, INC. AS OF AND FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRERTY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000869273
<NAME> THE CHACONIA INCOME & GROWTH FUND, INC.
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