As filed with the Securities and Exchange Commission on October 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. 14
[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 on October 30, 1998
pursuant to paragraph (b) 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 October 30, 1998
TABLE OF CONTENTS
Page
Cross-Reference Sheet
Cover Sheet
Summary of Fund Expenses 2
Prospectus Summary 4
Investment Objective and Policies 6
Basic Investment Techniques 7
Certain Investment Strategies and Special
Risk Considerations 9
Management 10
How to Purchase Shares 12
Distribution Plan and Service Fees 13
How to Redeem Shares 14
Retirement Plans 15
Dividends, Distributions and Taxes 16
General Information 17
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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.
-2-
<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 Not Applicable
4 General Description of Registrant Investment Objective and
Policies;
The Fund and Its Management;
Cover Page; Investment
Restrictions; Prospectus Summary
5 Management of the Fund Management; Back Cover;
Investment Objective and
Policies
6 Capital Stock and Other Securities Dividends, Distributions and
Taxes; General Information
7 Purchase of Securities Being Offered How to Purchase Shares
8 Redemption or Repurchase How to Redeem Shares
9 Pending Legal Proceedings Legal Proceedings
Part B
Statement of Additional Information Caption
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Management
13 Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions;
Portfolio Transactions and
Brokerage
14 Management of the Fund Management
15 Control Persons and Principal 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.
-3-
<PAGE>
DATED OCTOBER 30, 1998
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 "Fund") is an open-end,
nondiversified management investment company which seeks high current income and
capital appreciation. It seeks to meet its objective by investing the Fund's
assets in: U.S. Government securities including U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, the First and Second Unit Schemes (the "Schemes") of the
Trinidad and Tobago Unit Trust Corporation, certificates of deposit and money
market funds. The minimum initial investment is $250. Subsequent investments
will be a minimum of $100, and stockholders have the option of making subsequent
purchases through a continuing automatic transfer plan. (See "How to Purchase
Shares"). For further information, contact the Fund at the address or telephone
number shown above. There can be no assurance that the Fund's investment
objective will be achieved.
INVESCO CAPITAL MGMT. INC. (the "Investment Manager") serves as
Investment Manager to the Fund. The Investment Manager receives a management fee
from the Fund and may be reimbursed by the Fund for certain distribution
expenses in connection with a Rule 12b-1 distribution plan.
This prospectus concisely sets forth information a prospective investor
should know about the Fund before investing. A Statement of Additional
Information about the Fund and an Annual Report to Shareholders of the Fund has
been filed with the Securities and Exchange Commission and is available upon
request and without charge by calling or writing the Fund at the above address
or by contacting certain registered broker-dealers ("selected broker-dealers").
The "Statement of Additional Information" is dated October 31, 1998 and is
incorporated by reference into this Prospectus in its entirety.
---------------
Investors are advised to read this Prospectus and retain it for future
reference.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-4-
<PAGE>
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) None
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fees (as a percentage of amount redeemed) None
Exchange Fee None
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees(a) (variable-- as a percentage of average
daily net assets) 0.57%
12b-1 Fees 0.50%
Service Fees(b) 0.00%
Other Expenses 1.08%
Total Fund Operating Expenses(a)(b) 2.15%
(a)The management fee will vary depending upon the Fund's average daily
net assets and will be the greater of $50,000 or 0.75% of 1% on the first $10
million, 0.50% of 1% on the next $10 million and 0.25% of 1% over $20 million of
the Fund's average daily net assets. Total Fund operating expenses will vary
depending upon the management fee.
(b)The service fees are payments made by the Fund to registered
broker-dealers for personal service and/or the maintenance of shareholder
accounts. 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 Fund up to 0.25% of
1% of the Fund's net assets. The total Fund Operating Expense ratio is 2.15%
(annualized) as of June 30, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
------- ------- -------- -------- -------
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: $ 218 $ 673 $ 1,154 $ 2,483
======= ======== ======== =======
</TABLE>
The purpose of this table is to assist the investor in understanding
the various costs and expenses of an investment in the Fund. The example should
not be considered a representation of past or future expenses; actual expenses
may be greater or less than those shown.
-5-
<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 Fund's semi-annual report, as filed with
the Securities and Exchange Commission (the "SEC") on August 27, 1998. This
table should be read in conjunction with the financial statements and notes
thereto which are contained in such annual and semiannual reports.
<TABLE>
<CAPTION>
- ---------------------------------------------------- ---------------- ------------ ------------ ------------ ------------ ----------
FOR THE SIX 1997 1996 1995 1994 1993(1)
---------- ---------- ---------- ---------- ---------
MONTHS ENDED
JUNE 30, 1998
UNAUDITED
- ---------------------------------------------------- ---------------- ------------ ------------ ------------ ------------ ----------
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 dividends and 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%(3) 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 Fund commenced operations on May 11, 1993.
(2) Less than $.01 per share.
(3) Annualized.
-6-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus:
The Fund: The Fund is a Maryland corporation, incorporated on October
24, 1990, and registered as a open-ended, nondiversified, management investment
company under the Investment Company Act of 1940 ("1940 Act").
Investment Objective: The Fund's investment objective is to seek high
current income and capital appreciation. It seeks to meet its objective by
investing the Fund's assets in: U.S. Government securities including U.S.
Treasury obligations and obligations issued or guaranteed by U.S. Government
agencies or instrumentalities, investment grade corporate bonds, investment
grade foreign government bonds, equity securities of U.S., Canadian, British and
Trinidad and Tobago companies, American Depository Receipts ("ADRs"), the
Schemes of the Trinidad and Tobago Unit Trust Corporation, certificates of
deposit and money market funds. Under normal market conditions, the Fund will
maintain a level of at least 25% of its total assets invested in debt securities
and at least 25% of its total assets invested in equity securities. For purposes
of this investment policy, equity securities are defined as: common stocks,
preferred stocks, warrants, stock rights, convertible bonds and convertible
debentures.
There is no assurance that the Fund will achieve its investment
objective. The investment objective of the Fund and its investment restrictions
described in the Statement of Additional Information are fundamental and may not
be changed without stockholder approval. Its other investment policies may be
changed by the Board of Directors without stockholder approval.
Investment Risks: All investments, including mutual funds, have risks
and no investment is suitable for all investors. The Fund may invest in both
large and small companies. Investment in small companies involve greater risk
than is customarily associated with more established companies. The Fund may
invest in short, medium or long term interest bearing obligations which have the
risk of principal fluctuation due to changing interest rates and the ability of
the issuer to repay the obligation at maturity. The Fund may invest in
securities of companies and governments of foreign nations that involve certain
risks which are in addition to the usual risks inherent in U.S. investments.
Management and Fees: The Investment Manager is compensated for its
services and its related expenses at an annual rate of the greater of $50,000 or
0.75 of 1% on first $10 million, 0.50 of 1% on next $10 million and 0.25% of 1%
over $20 million of the Fund's average daily net assets. The Investment Manager
may receive 12b-1 fees as reimbursement for certain distribution expenses.
How to Purchase Shares: Shares of the Fund may be purchased through
selected broker-dealers and from American Data Services, Inc., Transfer Agent
for the Fund ("Transfer Agent"), at the public offering price per share next
determined after receipt of an order by either a registered broker-dealer or the
Fund's Transfer Agent, in proper form with accompanying check or other bank wire
payment arrangements satisfactory to the Fund. The minimum initial investment is
$250. Subsequent investments will be a minimum of $100. 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 Fund may be redeemed through selected
broker-dealers and the Transfer Agent by the stockholder at any time at the net
asset value per share next determined after the redemption request is received
by either a registered broker-dealer or the Transfer Agent in proper form. See
"How to Redeem Shares."
Dividends and Reinvestment: Each dividend and capital gains
distribution, if any, declared by the Fund on its outstanding shares will,
unless a stockholder elects otherwise, be paid on the payment date in additional
shares of the Fund having an aggregate net asset value as of the ex-dividend
date of such dividend or distribution equal to the cash amount of such
distribution. An election may be changed by notifying the Fund in writing at any
time prior to the record date for a particular dividend or distribution. There
are no sales or other charges in connection with the reinvestment of dividends
and capital gains distributions. There is no fixed dividend rate, and there can
be no assurance that the Fund will pay any dividends or realize any capital
gains. However, the Fund currently intends to pay dividends and capital gains
distributions, if any, on an annual basis. See "Dividends, Distributions and
Taxes."
-7-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current income and
capital appreciation. It seeks to meet its objective by investing the Fund's
assets in: U.S. Government securities including U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, ADRs, the Schemes of the Trinidad and Tobago Unit Trust
Corporation, certificates of deposit and money market funds. There can be no
assurance that the Fund will be able to achieve its objective.
The Fund intends to invest in the Schemes of the Trinidad and Tobago
Unit Trust Corporation only if the Fund determines that there are no adverse
restrictions to realizing an investment in the Schemes of the Trinidad and
Tobago Unit Trust Corporation and the Investment Manager believes the potential
rewards from the Schemes of the Trinidad and Tobago Unit Trust Corporation are
greater than the other investments described above.
The Fund's investment policy will emphasize debt instruments to achieve
the Fund's current income objective. Under normal market conditions, the Fund
will maintain a level of at least 25% of its total assets invested in debt
securities and at least 25% of its total assets invested in equity securities.
The investment in equity securities versus debt securities will depend upon the
Investment Manager's evaluation of the relative merits and risks of equity
securities versus bonds.
The attractiveness of nongovernment instruments will be judged based
upon their potential return enhancement and creditworthiness. Potential return
is determined by observing the existing yield spread differential within a
historical context and purchasing such instruments only when the differential is
at levels which are above a long-term mean. Within the investment credit
spectrum, to ensure protection of principal, additional credit analysis will be
undertaken in employing the Investment Manager's proprietary analytical
techniques and data bases to further reduce the risk.
In determining the maturity of the debt securities the Fund invests in,
the Investment Manager will focus on whether the level of real yield, after
taking into account inflation, is adequate to compensate for the greater
volatility and risks associated with debt securities having a greater maturity.
Generally, the longer the maturity of a debt security, the greater its price
volatility. Conversely, the shorter the maturity, the lower its price
volatility. During a typical credit cycle, the average duration implied by this
discipline will likely average 5 years within a range normally of 2.5 to 8
years. 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 Fund will invest in, the
Investment Manager will focus on the actual earnings, return on equity and
dividend history of the company. The Investment Manager will seek to invest in
equity securities of companies whose shares are undervalued based on the current
price relative to the long-term record of the company. For purposes of this
investment policy, equity securities are defined as: U.S. and foreign common
stocks, ADRs, warrants, convertible bonds, convertible debentures, preferred
stock and stock rights. No more than 5% of the Fund's net assets may be used to
purchase warrants or stock rights. For purposes of this investment policy, a
warrant is defined as a certificate giving the holder the right to purchase
securities at a stipulated price within a specified time limit or perpetually.
Sometimes a warrant is offered with securities as an inducement to buy. The
prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Fund may not purchase options on equity securities.
The Fund intends to invest in a variety of securities, with differing
issuers, maturities and interest rates. If the Investment Manager believes that
stocks in general are overvalued, or that interest rates may rise substantially,
or that the general economic environment may be deteriorating, the Investment
Manager may assume a temporary defensive position and may invest up to 100% of
the Fund's assets in high quality commercial paper and short-term U.S.
Government securities such as Treasury Bills and Treasury Notes. The Fund
intends to operate as a "regulated investment company" under Subchapter M of the
Internal Revenue Code. See "Dividends, Distributions and Taxes." The average
U.S. dollar weighted duration of the Fund's portfolio is not expected to exceed
ten years.
The Fund does not expect to trade in securities for short-term gain. It
is anticipated that the annual portfolio turnover rate will not exceed 100%. The
portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude debt securities having a maturity at the date of purchase of one year or
less.
-8-
<PAGE>
Subject to its investment policy of normally investing at least 25% of
its total assets in U.S. Government securities, investment grade corporate bonds
and investment grade foreign government bonds, the Fund is permitted to invest
in (1) U.S. dollar denominated debt securities, similar in nature to those
described above, regardless of the domicile of the issuers and (2) income
producing equity securities of companies domiciled in the United States (some of
which may be denominated other than in U.S. dollars). Some of these securities
are issued in the Eurodollar market by multinational banks and companies which
may have operations in Trinidad and Tobago.
The Fund may not borrow money except for (1) short-term credits from
banks as may be necessary for the clearance of portfolio transactions, and (2)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, which would otherwise require the untimely disposition
of its portfolio securities. Borrowing for any purpose including redemptions may
not, in the aggregate, exceed 5% of total assets after giving effect to the
borrowing and borrowing for purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's total assets after giving effect to the
borrowing. The Investment Manager of the Fund will not purchase securities when
borrowings exceed 5% of total assets. The Fund may mortgage, pledge or
hypothecate assets to secure such borrowings.
BASIC INVESTMENT TECHNIQUES
Securities Subject to Reorganization
The Fund may invest in both debt and equity securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of the Investment Manager, there
is a reasonable prospect of capital appreciation significantly greater than the
brokerage and other transaction expenses involved.
The Fund may not invest more than 15% of its net assets in (1)
securities which are restricted or for which market quotations are not readily
available; (2) fixed time deposits subject to withdrawal penalties (other than
overnight deposits); (3) repurchase agreements having a maturity of more than
seven days; and (4) other illiquid securities. The Fund will also treat non-U.S.
Government interest-only or principal-only securities as illiquid securities so
long as the staff of the SEC maintains its position that such securities are
illiquid.
Nonconvertible Debt Securities
Under normal market conditions, the Fund will invest at least 25% of
its assets in nonconvertible debt securities. For purposes of this investment
policy, nonconvertible debt securities are defined as: (1) Rated corporate
bonds, as well as variable amount master demand notes; (2) Government securities
which include securities of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities; (3) Commercial paper which include commercial paper of
companies rated A-1 or A-2 by Standard & Poor's Corporation ("S&P") or rated P-1
or P-2 by Moody's Investors Service, Inc. ("Moody's"). Fixed income securities
rated, at the time of investment, less than BBB by S&P or Baa by Moody's or
which are unrated but of comparable quality as determined by the Investment
Manager, are not investment grade. These securities are viewed by the rating
agencies as being predominantly speculative in nature. They may be characterized
by substantial risk concerning payments of interest and principal, sensitivity
to economic conditions and changes in interest rates, as well as by market price
volatility and/or relative lack of secondary market trading, among other risks.
The Fund will not invest any of its assets in noninvestment grade debt
securities. The market values of fixed income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall.
U.S. Government Securities
The U.S. Government Securities in which the Fund may invest include
direct obligations of the U.S. Treasury, such as Treasury bills, notes and
bonds, and obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the United States, such as Government National Mortgage Association
("GNMA") certificates, securities that are supported by the right of the issuer
to borrow from the U.S. Treasury, such as securities of the Federal Home Loan
Banks, and securities supported solely by the creditworthiness of the issuer,
such as Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") securities. The Fund may invest in
mortgage-backed securities issued or guaranteed by GNMA, FNMA or FHLMC and
representing undivided ownership interests in pools of mortgages. The mortgages
backing these securities include, among others, conventional 30-year fixed-rate
-9-
<PAGE>
mortgages, 15-year fixed-rate mortgages, graduated payment mortgages and
adjustable rate mortgages. The U.S. Government or the issuing agency guarantees
the payment of the interest on and principal of these securities. The guarantees
do not extend to the securities' yield or value, however, which are likely to
vary inversely with fluctuations in interest rates, and, the guarantees do not
extend to the yield or value of the Fund's shares.
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
approximatley $400,763,053 (U.S. dollars) under management and approximately
206,672 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 Fund may purchase equity
securities of the Schemes of the Trinidad and Tobago Unit Trust Corporation or
any other investment companies. No more than 10% of the Fund's total assets may
be used to purchase any securities of investment companies. The Fund will not
purchase more than 3% of the total outstanding voting stock of an investment
company nor purchase securities of an investment company having an aggregate
value in excess of 5% of the value of the total assets of the investment
company. The Fund will pay an investment management fee when it invests in the
Schemes of the Trinidad and Tobago Unit Trust Corporation.
As of June 30, 1998, the Unit Trust Corporation beneficially owned
5.32% of the outstanding voting stock of the Fund.
CERTAIN INVESTMENT STRATEGIES AND SPECIAL RISK CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Fund is designed for long term
investors who can accept the fluctuations in portfolio value and other risks
associated with the primary objective of seeking current income and capital
appreciation through investment in securities. There can be no assurance that
the Fund will achieve its objective.
The Fund will not make significant investments in securities of any one
issuer to reduce risk. Although risk cannot be eliminated, this strategy reduces
the impact of any single investment. The Fund may invest in both large and small
companies. Investments in small companies involve greater risk than is
customarily associated with more established companies. Smaller companies often
have limited product lines, markets, management personnel, research and/or
financial resources. The securities of small companies, which may be thinly
capitalized, may have more limited marketability and be subject to more abrupt
or erratic market movements than securities of larger companies or the market
averages in general.
Any investment by the Fund in short, medium or long term
interest bearing obligations has the risk of principal fluctuation due to
changing interest rates and the ability of the issuer to repay the obligation at
maturity. Fixed income instrument prices are inversely related to interest rate
movements, but proportional to the maturity of the instruments. That is,
long-term
-10-
<PAGE>
instrument prices rise or fall more than short-term instruments for a given
change in interest rates. Certain risk factors are also associated with other
investment practices of the Fund (none of which is expected to involve more than
25% of the Fund's net assets), including investing in debt securities and
investing in foreign securities. Although the Fund does not purchase securities
with a view of rapid turnover, there are no limitations on the length of time
portfolio securities must be held. The Fund's portfolio turnover rate is not
expected to exceed 100%. A portfolio turnover exceeding 100% generally results
in increased transaction expenses and the realization of capital gains and
losses.
There are certain risks involved in investing in securities of
companies and governments of foreign nations that are in addition to the usual
risks inherent in U.S. investments. These risks include those resulting from
fluctuations in currency exchange rates, devaluation of currencies, future
adverse political and economic developments and the possible imposition of
currency exchange blockages or from other foreign governmental laws or
restrictions. Changes in foreign currency exchange rates may affect the value of
the Fund's assets, the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains to be
distributed to shareholders by the Fund. In addition, some of the securities
held by the Fund will not be registered with, nor the issuers thereof be subject
to reporting requirements of, 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 securities may be subject to foreign government taxes that
would reduce the net return on such securities and the Fund may be affected
unfavorably by exchange control regulations. Investment in foreign securities
will also result in higher expenses due to the cost of converting foreign
currency into U.S. dollars, the payment of fixed brokerage commissions on
foreign exchanges and the expense of maintaining securities with foreign
custodians.
MANAGEMENT
Board of Directors
The overall management of the business and affairs of the Fund is
vested with its Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to it, including the Fund's agreement with its Investment Manager, its
Custodian, its Transfer Agent, selected broker-dealers and its Administrator.
The day-to-day operations of the Fund are delegated to its officers, subject to
the investment objectives and policies of the Fund and to general supervision by
the Board of Directors.
The Board of Directors is presently comprised of five members, 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 Fund.
The Maryland General Corporation Law subjects all directors and
officers of the Fund to fiduciary duties for the lawful management of the Fund's
organization and operation, including federal and state securities laws.
Investors of the Fund may not be able to effect service of process within the
United States upon the Fund's nonresident directors and officers for the
enforcement of civil liabilities under federal and state securities laws. The
Fund has appointed an agent for service of process in the states where the Fund
has registered its securities for offer and sale.
The United States and the Republic of Trinidad and Tobago are not
parties to a convention governing the mutual recognition and enforcement of
foreign money judgments. Investors of the Fund may not be able to enforce a
United States or Trinidad and Tobago court judgment against nonresident
directors and officers of the Fund.
The Investment Manager
The Investment Manager is subject to the control of the Fund's Board of
Directors. The Investment Manager was incorporated as a registered investment
advisor in 1971. In November 1985, the Investment Manager entered into a limited
partnership with Britannia Arrow Holdings, PLC, a major U.K. financial services
company, to pursue global investment business. The Investment Manager was the
general 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
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<PAGE>
States, which resulted in a new financial services company, well-equipped to
provide the Fund 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, jointly-trusteed 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
Fund as a factor in the selection of brokers to execute brokerage and principal
transactions, subject to the requirements of "best execution," i.e., prompt and
efficient execution at the most favorable securities price.
Under the Investment Management Agreement, between the Fund and the
Investment Manager, the Fund pays the Investment Manager a fee, computed daily,
and payable monthly, at the annual rate of the greater of $50,000 or 0.75% of 1%
on first $10 million, 0.50% of 1% on next $10 million and 0.25% of 1% over $20
million of the Fund's average daily net assets. The minimum management fee of
$50,000 or 0.75% of 1% on the first $10 million is higher than most investment
companies are charged. The management fee charged on average daily net assets in
excess of $10 million is not higher than most investment companies are charged.
The Fund and the Investment Manager believe the fee is appropriate considering
the investment objective of the Fund. The advisory fee paid by the 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 Fund's average net
assets.
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 an agreement with the Fund (the "Administrative
Services Agreement"). Pursuant to the Administrative Services Agreement, subject
to the overall authority of the Fund's Board of Directors in accordance with
Maryland law, the Administrator will assist in the Fund's administration and
operation, including, but not limited to, the preparation of statistical and
research data, data processing services, preparation of management reports for
performance and compliance, as well as prepare and maintain the Fund's operating
expense budget. The administration fee paid by the 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
Fund's average net assets.
Fund Operating Expenses
In addition to the fees payable to the Investment Manager and the
Administrator, the Fund is responsible for its operating expenses, including:
(i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums;
(iv) compensation and expenses of, directors other than those affiliated with
the Investment Manager; (v) legal and audit expenses; (vi) fees and expenses of
the Custodian, shareholder service or Transfer Agent; (vii) fees and expenses
for registration or qualification of the Fund and its shares under federal or
state securities laws; (viii) expenses of preparing, printing and mailing
reports and notices and proxy material to stockholders; (ix) other expenses
incidental to holding any stockholder meetings; (x) dues or assessments of or
contributions to the Investment Company Institute or any successor; (xi) Rule
12b-1 fees paid by the Fund in connection with the Distribution Plan; (xii)
service fees paid by the Fund in connection with the personal service and/or
maintenance of shareholder accounts; and (xiii) such nonrecurring expenses as
may arise, including litigation affecting the Fund and the legal obligations
with respect to which the Fund may have to indemnify its officers and directors.
See the Statement of Additional Information for more information as to
the Fund's Board of Directors, Officers, the Investment Manager, the
Administrator and its operating expenses.
HOW TO PURCHASE SHARES
Opening an Account
In order to invest in the Fund, an investor must first complete and
sign an account application. Shares of the Fund may be purchased either by mail
or by telephone through selected broker-dealers who have a sales agreement with
the Fund or
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through the Transfer Agent, at the offering price next determined after receipt
of an order by selected broker-dealers or the Transfer Agent, in proper form.
The offering price is the net asset value per share of the Fund.
The Fund may from time to time pay a bonus or other incentive to the
selected dealers that employ a sales representative who sells a minimum dollar
amount of shares of the Fund. Such bonus or other incentives may take the form
of payment for travel expense including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or without the United States.
The minimum initial investment in the Fund including purchases
for an Individual Retirement Account is $250. See "Retirement Plans." Subsequent
investments are a minimum of $100. The Fund reserves the right to reject any
purchase order.
Automatic Investments
Shareholders in the 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 Fund's 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 Fund reserves 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 Fund share prices or during periods of rising prices. The Fund
reserves the right to suspend, modify or terminate the CAT program without
notice.
The Fund reserves the right to reject any order.
Purchase orders may either be placed with selected broker-dealers or
submitted to the Transfer Agent as follows:
Purchase Placed With Selected Broker-Dealers
Selected broker-dealers may place orders for shares of the Fund on
behalf of clients at the offering price next determined after receipt of the
client's order made by calling the Transfer Agent. If the order is placed by a
client with a selected dealer prior to 4 p.m. Eastern time on any day the New
York Stock Exchange is open for trading, and forwarded to the Transfer Agent
prior to 5 p.m. Eastern time on that day, it will be confirmed to the selected
dealer at the applicable offering price determined that day. The selected
broker-dealer is responsible for placing purchase orders promptly with the
Transfer Agent and for forwarding payment.
Purchase Placed With Transfer Agent
Investors may mail an application form, together with a check payable
to the Fund, directly to the Transfer Agent, at the following address:
American Data Services, Inc.
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 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.
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<PAGE>
The Fund offers additional services to investors, including plans for
the systematic investment and withdrawal of money as well as prototype
retirement programs. Information about these services is also available in the
Statement of Additional Information or from selected broker-dealers or the
Transfer Agent.
Net Asset Value
The Fund's net asset value per share is determined on each day that the
New York Stock Exchange (the "Exchange") is open for trading, as of the close of
the Exchange, currently 4 p.m., Eastern time. The net asset value per share is
the value of the Fund's assets, less its liabilities, divided by the number of
shares of the Fund outstanding. The value of the Fund's portfolio securities
will be the market value of such securities. See the Statement of Additional
Information for further information.
DISTRIBUTION PLAN AND SERVICE FEES
The Board of Directors has adopted a Distribution Plan applicable to
the Fund under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
Pursuant to the Plan, registered broker-dealers and others ("Qualified
Recipients") that have rendered distribution assistance (whether direct,
administrative or both) and that enter into written agreements with the Fund may
receive fees at rates determined by the Fund's Board of Directors. In addition,
the Fund will purchase advertising, sales literature, other promotional material
and marketing services. The Fund will reimburse the Investment Manager and
Qualified Recipients for these expenditures, including interest expenses and
other overhead items, during a fiscal year of the Fund, up to a limit of 0.50%
of 1% on an annual basis of the Fund's average daily net assets, subject to
compliance with guidelines adopted from time to time by the Board of Directors
of the Fund.
No reimbursements under the Plan will be made for expenditures or fees
for fiscal years prior to the fiscal year in question or in contemplation of
future fees or expenditures. In addition to payments received pursuant to the
Plan, Qualified Recipients which are selected dealers 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
Fund to the Qualified Recipient for the personal service and/or maintenance of
shareholder accounts; and the Qualified Recipient may receive commissions on
Fund portfolio transactions subject to the provisions of the Management
Agreement (see the Statement of Additional Information).
The enactment of the National Securities Markets Improvement Act in
October 1996 created an amendment to the 1940 Act. The changes in legislation
will enable the Fund to distribute its shares to a larger number of states. HOW
TO REDEEM SHARES
The Fund will redeem for cash all of its full and fractional shares at
the net asset value per share next determined after receipt by the Transfer
Agent of a redemption request in proper form, as described below. A stockholder
wishing to redeem shares may do so at any time by writing to the Fund in care of
its Transfer Agent at The Hauppauge Corporate Center, 150 Motor Parkway, Suite
109, Hauppauge, New York 11788. The instructions should specify the name of the
Fund, the number of shares to be redeemed and be signed by all registered owners
exactly as the account is registered. The redemption request will not be
accepted unless it contains all required documents in proper form, as described
below.
Proper Form
In addition to written instructions, if any shares being redeemed are
represented by stock certificates, the certificates must be surrendered. The
certificates must either be endorsed or accompanied by a stock power signed by
the registered owners, exactly as the certificates are registered. The
signatures on the certificates or stock powers, as well as the signatures on any
redemption request concerning shares not represented by certificates, must
conform to the requirements of the Transfer Agent. Additional documents may be
required from corporations or other organizations, fiduciaries or anyone other
than the stockholder of record. Any questions concerning documents needed should
be directed to the Transfer Agent.
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<PAGE>
Payments
Payment for shares tendered will be made within seven days after
receipt by the Transfer Agent of instructions, certificates, if any, and other
documents, all in proper form. Payment may be delayed under unusual
circumstances, as specified in the 1940 Act or as determined by the SEC. Payment
may also be delayed for any shares purchased by check until the Fund has
determined that the purchase check will be honored, which may take up to 15
calendar days.
Redemption in Kind
If the Fund's Board of Directors determines that it would be
detrimental to the best interests of the remaining stockholders of the Fund to
make payment wholly or partly in cash, the redemption value may be paid in whole
or in part by a distribution in kind of securities from the portfolio of the
Fund, in lieu of cash, in conformity with applicable rules of the SEC. The Fund,
however, has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which it is obligated to redeem shares of the Fund solely in cash up to the
lesser of $250,000 or one percent of the net asset value of the Fund during any
90-day period for any one stockholder. Should redemptions by any stockholder
exceed such limitation, the Fund will have the option of redeeming the excess in
cash or in kind. If shares are redeemed in kind, the redeeming stockholder would
incur brokerage costs in converting the assets into cash.
Reinvestment Privilege
A stockholder who has redeemed all or part of his or her shares of the
Fund may reinvest all or part of the redemption proceeds in shares of the Fund
at the net asset value next computed after receipt of the reinvestment order if
such reinvestment is effected within 30 days after the redemption. The privilege
may be exercised only once by a stockholder. However, a stockholder has not used
up this one-time privilege if the sole purpose of a prior redemption was to
invest the proceeds at net asset value in a qualified retirement plan. If the
stockholder has realized a gain on the redemption, the transaction is taxable
and reinvestment will not alter any capital gains tax payable. If there has been
a loss on the redemption, some or all of the loss may not be allowed as a tax
deduction depending on the amount reinvested.
Redemption of Small Accounts
The Fund's Board of Directors may, in order to reduce the expenses of
the Fund, redeem all of the shares of any stockholder (other than a qualified
retirement plan) whose account has declined to a net asset value of less than
$100, as a result of a transfer or redemption, at the net asset value determined
as of the close of business on the business day preceding the sending of notice
of such redemption. Stockholders will be given 60 days' prior written notice in
which to purchase sufficient shares to avoid such redemption.
RETIREMENT PLANS
Individual shareholders may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Fund offers 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
the Fund is $250 for an individual except that both the individual and his or
her spouse would be able to establish separate IRAs if their combined investment
is $400.
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.
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<PAGE>
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.
Fund 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
Fund on its outstanding shares will, unless the stockholder elects otherwise, be
paid on the payment date fixed by the Fund's Board of Directors in additional
shares of the Fund having an aggregate net asset value as to the ex-dividend
date of such dividend or distribution equal to the cash amount of such
distribution. An election to receive dividends and distributions may be changed
by notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution. There are no sales or other charges in
connection with the reinvestment of dividends and capital gains distributions.
There is no fixed dividend rate, and there can be no assurance that the Fund
will pay any dividends or realize any capital gains. However, the Fund currently
intends to pay dividends and capital gains distributions, if any, on an annual
basis.
Taxes
The Fund intends to qualify for tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as amended
(the "Code"). Such qualification generally will relieve the Fund of liability
for federal income taxes to the extent its earnings are distributed.
The Fund contemplates 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 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 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 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 the
Fund's net investment income, subject to proportionate reductions if aggregate
dividends received by the Fund from domestic corporations in any year are less
than 100% of the distribution of net investment company taxable income made by
the 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
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stockholders during the preceding year. This statement should be kept as a
permanent record. A fee may be charged for any duplicate information requested.
Before investing in the Fund, individuals are advised to check the
consequences of local and state tax laws, and the consequences for any
retirement plan offering tax benefits.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
The Fund is a Maryland corporation, incorporated on October 24, 1990,
and registered as an open-ended, nondiversified, management investment company
under the 1940 Act. The authorized capital stock consists of 4,000,000 shares of
common stock having a par value of ($.01) per share. The Fund's Board of
Directors is authorized to divide the unissued shares into one or more classes
of common stock (which may be referred to as portfolios, funds or series), each
class representing a separate, additional Fund portfolio, and to fix the number
of shares in any such class.
Shares of all classes will have identical voting rights, except where
by law, certain matters must be approved by a majority of the shares of the
affected class. Each share of any class of shares when issued has equal
dividend, liquidation and voting rights within the class for which it was issued
and each fractional share has those rights in proportion to the percentage that
the fractional share represents of a whole share. Shares will be voted in the
aggregate.
There are no conversion or preemptive rights in connection with any
shares of the Fund. All shares, when issued in accordance with the terms of the
offering, will be fully paid and nonassessable. Shares will be redeemed at net
asset value, at the option of the stockholder.
The Fund sends semiannual and annual reports to all of its stockholders
which include a list of portfolio securities and the Fund's financial statements
which shall be audited annually.
The shares of the Fund have noncumulative voting rights which means
that the holders of more than 50% of the shares can elect 100% of the directors
if the holders choose to do so, and, in that event, the holders of the remaining
shares will not be able to elect any person or persons to the Board of
Directors. Unless specifically requested in writing to the Transfer Agent by an
investor who is a stockholder of record, the Fund does not issue certificates
evidencing Fund shares.
The Corporation will hold an annual stockholder meeting each year.
Special meetings of the stockholders will be held for the consideration of
proposals requiring stockholder approval by law, such as changing fundamental
policies or upon the written request of 25% of the Fund's outstanding shares.
The directors will promptly call a meeting of stockholders to consider the
removal of a director or directors when requested to do so by the holders of not
less than 10% of the outstanding shares and that stockholders will receive
communication assistance in connection with calling such a meeting. At any
meeting of stockholders duly called and at which a quorum is present, the
stockholders may, by the affirmative vote of the holders of at least two-thirds
of the votes entitled to be cast thereon, remove any director or directors from
office, with or without cause, and may elect a successor or successors to fill
any resulting vacancies for the unexpired term of the removed director.
The Fund's organizing documents have been filed with the SEC as
exhibits to the Fund's registration statement and can be found at the SEC, at
the Fund's principal office or at the offices of the Fund's legal counsel.
Stockholder Approval
Other than 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 Fund entitled to vote at a
meeting called for the purpose of considering such approval. Pursuant to the
Fund'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
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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
Fund or the Unit Trust Corporation.
Performance Information
The Fund may furnish data about its investment performance in
advertisements, sales literature and reports to stockholders. "Total return"
represents the annual percentage change in value of $10,000 invested at the
maximum public offering price for the one and five year periods and the life of
the Fund through the most recent calendar quarter, assuming reinvestment of all
dividends and distributions. Quotations of "yield" will be based on the
investment income per share earned during the particular 30-day period, less
expenses accrued during the period, with the remainder being divided by the
maximum offering price per share on the last day of the period. The Fund may
also furnish total return and yield calculations for other periods and/or based
on investments at various sales charge levels or net asset values. Any
performance data which is based on the Fund's net asset value per share would be
reduced if a sales charge were taken into account.
Custodian
Star Bank, N.A. is the custodian for the Fund's cash and securities.
Independent Accountants
PricewaterhouseCoopers LLP has been appointed independent accountants
for the Fund.
Information for Stockholders
All stockholder inquiries regarding administrative procedures including
the purchase and redemption of shares should be directed to the Transfer Agent.
For assistance, call 516-951-0500 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 Fund may be obtained without charge from the Fund or
selected broker-dealers.
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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
Citizen of:
[ ] United States
[ ] Other (specify) _________________________
INVESTMENT
Please indicate the amount you wish to invest ($250.00 minimum).
[ ] By check(s) made payable to
Chaconia Fund $
[ ] By wire (please call 516-951-0500
or 800-368-3322 (U.S.) for
instructions). $
Indicate date of wire _________________________
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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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 Fund. 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 Custodian Date
--------------------------------- ----------
Signature of Joint Owner (Required if Date
Joint Registration)
DEALER INFORMATION
- --------------------------------------------------------------------------------
Dealer Name
- --------------------------------------------------------------------------------
Representative's Name
- --------------------------------------------------------------------------------
Branch Address
- --------------------------------------------------------------------------------
Branch Number AE#
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City
- --------------------------------------------------------------------------------
State Zip
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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 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 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
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 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 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 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 $ ____________ ($50
minimum) in shares of the Fund on the:
[ ] 1st
[ ] 15th of each month.
Check one:
[ ] I am in the process of opening an account with the Fund. Enclosed
is my account application and check ($250 minimum) made payable to
Chaconia Fund, or
[ ] I already have an existing account with the Fund; my account number
is_______________________
- --------------------------------------------------------------------------------
Name of my bank
- --------------------------------------------------------------------------------
Address of my bank
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<PAGE>
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 Fund
shares may be reversed. I further understand that the net asset value of shares
of the 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)
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<PAGE>
DATED OCTOBER 30, 1998
THE CHACONIA INCOME & GROWTH FUND, INC.
Statement of Additional Information
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission (the "SEC"). These securities may not be sold
nor many any offers to buy be accepted prior to the time the registration
becomes effective.
This Statement of Additional Information is not a prospectus, and it
should be read in conjunction with the Prospectus of The Chaconia Income &
Growth Fund, Inc. (the "Fund"). A copy of the Prospectus may be obtained from
the Fund c/o American Data Services, Inc., The Hauppauge Corporate Center, 150
Motor Parkway, Suite 109, Hauppauge, New York 11788.
TABLE OF CONTENTS
Cross-Reference
to Page in the
Page Prospectus
Investment Objective and Policies 29 10
Basic Investment Techniques 30 11
U.S. Government Securities 32 12
Certain Investment Strategies and Special 33 14
Risk Considerations
Investment Restrictions 34 -
Management 35 15
Portfolio Transactions and Brokerage 38 -
Purchase and Redemption of Shares 39 17 & 19
Retirement Plans 40 20
Dividends, Distributions and Taxes 41 21
Investment Performance Information 44 -
General Information 45 22
Financial Statements 46 -
Appendix-Description of Ratings 47 -
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current income and
capital appreciation. It seeks to meet its objective by investing the Fund's
assets in: U.S. Government securities including U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, investment grade corporate bonds, investment grade foreign
government bonds, equity securities of U.S., Canadian, British and Trinidad and
Tobago companies, American Depository Receipts ("ADRs"), the First and Second
Unit Schemes (the "Schemes") of the Trinidad and Tobago Unit Trust Corporation,
certificates of deposit and money market funds. There can be no assurance that
the Fund will be able to achieve its objective.
The Fund intends to invest in the Schemes of the Trinidad and Tobago
Unit Trust Corporation only if the Fund determines that there are no adverse
restrictions to realizing an investment in the Schemes of the Trinidad and
Tobago Unit Trust Corporation and the Investment Manager believes the potential
rewards from the Schemes of the Trinidad and Tobago Unit Trust Corporation are
greater than the other investments described above.
The Fund's investment policy will emphasize debt instruments to achieve
the Fund's current income objective. The Fund will maintain a level of at least
25% of its total assets invested in debt securities and at least 25% of its
total assets invested in equity securities. The investment in equity securities
versus bonds will depend upon the Investment Manager's evaluation of the
relative merits and risks of equity securities versus bonds.
The attractiveness of nongovernment instruments will be judged based
upon their potential return enhancement and creditworthiness. Potential return
is determined by observing the existing yield spread differential within a
historical context and purchasing such instruments only when the differential is
at levels which are above a long-term mean. Within the investment credit
spectrum, to ensure protection of principal, additional credit analysis will be
undertaken in employing the Investment Manager's proprietary analytical
techniques and data bases to further reduce the risk.
In determining the maturity of the debt securities the Fund invests in,
the Investment Manager will focus on whether the level of real yield, after
taking into account inflation, is adequate to compensate for the greater
volatility and risks associated with debt securities having a greater maturity.
Generally, the longer the maturity of a debt security, the greater its price
volatility. Conversely, the shorter the maturity, the lower its price
volatility. During a typical credit cycle, the average duration implied by this
discipline will likely average 5 years within a range normally of 2.5 to 8
years.
In determining what equity securities the Fund will invest in, the
Investment Manager will focus on the price trend of the company's shares to
determine the volatility of the price trend and how it relates to the earnings,
return on equity and dividend history of the company. The Investment Manager
will seek to invest in equity securities of companies whose shares are
undervalued based on the inherent or long-term record of the company. For
purposes of this investment policy, equity securities are defined as: U.S. and
foreign common stocks, ADRs, warrants, convertible bonds, convertible
debentures, preferred stock and stock rights. No more than 5% of the Fund's net
assets may be used to purchase stock rights. The Fund may not purchase options
on equity securities. Debt securities are defined as: U.S. and foreign
nonconvertible company bonds, U.S. and foreign government securities and
commercial paper.
The Fund intends to invest in a variety of securities, with differing
issuers, maturities and interest rates. If the Investment Manager believes that
stocks in general are overvalued, or that interest rates may rise substantially,
or that the general economic environment may be deteriorating, the Investment
Manager may assume a temporary defensive position and may invest up to 100% of
the Fund's assets in high quality commercial paper and short-term U.S.
Government securities such as Treasury Bills and Treasury Notes. The Fund
intends to operate as a "regulated investment company" under Subchapter M of the
Internal Revenue Code. See "Dividends, Distributions and Taxes." The average
U.S. dollar weighted duration of the Fund's portfolio is not expected to exceed
ten years.
The Fund does not expect to trade in securities for short-term gain. It
is anticipated that the annual portfolio turnover rate will not exceed 100%. The
portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the average monthly value of the Fund's
portfolio securities. For purposes of this calculation, portfolio securities
exclude debt securities having a maturity at the date of purchase of one year or
less.
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<PAGE>
Subject to its investment policy of normally investing at least 25% of
its assets in U.S. Government securities, investment grade corporate bonds and
investment grade foreign government bonds, the Fund is permitted to invest in
(1) U.S. dollar denominated debt securities, similar in nature to those
described above, regardless of the domicile of the issuers and (2) income
producing equity securities of companies domiciled in the United States (some of
which may be denominated other than in U.S. dollars). Some of these securities
are issued in the Eurodollar market by multinational banks and companies which
may have operations in Trinidad and Tobago.
BASIC INVESTMENT TECHNIQUES
Securities Subject to Reorganization
The Fund may invest in both debt and equity securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of INVESCO CAPITAL MGMT., INC.
(the "Investment Manager"), there is a reasonable prospect of capital
appreciation significantly greater than the brokerage and other transaction
expenses involved.
In general, securities which are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior to
the announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by stockholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such consistencies requires unusually broad knowledge and experience on the
part of the Investment Manager which must appraise not only the value of the
issuer and its component businesses, as well as the assets or securities to be
received as a result of the contemplated transaction but also the financial
resources and business motivation of the offeror and the dynamics and business
climate when the offer or proposal is in process. In making these investments,
the Fund will not violate any of its investment restrictions including the
requirement that: (a) as to 75% of its total assets, it will not invest more
than 5% of its total assets in the securities of any one issuer, and (b) it will
not invest more than 25% of its total assets in any one industry. Since such
investments are ordinarily short-term in nature, they will tend to increase the
turnover ratio of the Fund, thereby increasing its brokerage and other
transaction expenses, as well as make it more difficult for the Fund to meet the
test for favorable tax treatment as a "Regulated Investment Company" under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") (see "Dividends,
Distributions and Taxes"). The Investment Manager intends to select investments
of the type described which, in its view, have a reasonable prospect of capital
appreciation which is significant in relation to both risk involved and the
potential of available alternative investments, as well as to monitor the effect
of such investments on the tax qualifications test of the Code.
Nonconvertible Debt Securities
Under normal market conditions, the Fund will invest at least 25% of
its assets in nonconvertible debt securities. For purposes of this investment
policy, nonconvertible debt securities are defined as: (1) Rated corporate
bonds, as well as variable amount master demand notes; 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 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
-25-
<PAGE>
defensive position and may invest up to 100% of the Fund's assets in high
quality commercial paper and short term U.S. Government securities such as
Treasury Bills and Treasury Notes.
Warrants and Rights
The Fund may invest up to 5% of its net assets in warrants or rights
(other than those acquired in units or attached to other securities) which
entitle the holder to buy equity securities at a specific price during or at the
end of a specific period of time. The Fund will not invest more than 2% of its
total assets in warrants or rights which are not listed on the New York or
American Stock Exchange. For purposes of this investment policy, a warrant is
defined as a certificate giving the holder the right to purchase securities at a
stipulated price within a specific time limit or perpetually. Sometimes a
warrant is offered with securities as an inducement to buy. The prices of
warrants do not necessarily correlate with the prices of the underlying
securities.
When Issued, Delayed Delivery Securities and Forward Commitments
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.
Borrowing
The Fund may not borrow money except for (1) short-term credits from
banks as may be necessary for the clearance of portfolio transactions, and (2)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, which would otherwise require the untimely disposition
of its portfolio securities. Borrowing for any purpose including redemptions may
not, in the aggregate, exceed 5% of total assets after giving effect to the
borrowing and borrowing for purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's total assets after giving effect to the
borrowing. The Investment Manager of the Fund will not purchase securities when
borrowings exceed 5% of total assets. The Fund may mortgage, pledge or
hypothecate assets to secure such borrowings.
Loans of Portfolio Securities
To increase income, the Fund may lend its portfolio securities to
securities broker-dealers or financial institutions if (1) the loan is
collateralized in accordance with applicable regulatory requirements (2) the
loan is subject to termination by the Fund at any time, (3) the Fund receives
reasonable interest or fee payments on the loan, (4) the Fund is able to
exercise all voting rights with respect to the loaned securities and (5) the
loan will not cause the value of all loaned securities to exceed 33% of the
value of the Fund's assets.
U.S. Government Securities
The U.S. Government securities in which the Fund may invest include
direct obligations of the U.S. Treasury, such as Treasury bills, notes and
bonds, and obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the United States, such as Government National Mortgage Association
("GNMA") certificates, securities that are supported by the right of the issuer
to borrow from the U.S. Treasury, such as securities of the Federal Home Loan
Banks, and securities supported solely by the creditworthiness of the issuer,
such as Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") securities.
The Fund may invest in mortgage-backed securities issued or guaranteed
by GNMA, FNMA or FHLMC and representing undivided ownership interests in pools
of mortgages. The mortgages backing these securities include, among others,
conventional 30-year fixed-rate mortgages, 15-year fixed-rate mortgages,
graduated payment mortgages and adjustable rate mortgages. The U.S. Government
or the issuing agency guarantees the payment of the interest on and principal of
these securities. The guarantees do not extend to the securities' yield or
value, however, which are likely to vary inversely with fluctuations in
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<PAGE>
interest rates, and, the guarantees do not extend to the yield or value of the
Fund's shares. These securities are in most cases "pass-through" instruments,
through which the holders receive a share of all interest and principal payments
from the mortgages underlying the securities, net of certain fees. The principal
amounts of such underlying mortgages generally may be prepaid in whole or in
part by the mortgagees at any time without penalty and the prepayment
characteristics of the underlying mortgages may vary. During periods of
declining interest rates, prepayment of mortgages underlying mortgage-backed
securities can be expected to accelerate. When the mortgage obligations are
prepaid, the Fund will reinvest the prepaid amounts in other income producing
securities, the yields of which will reflect interest rates prevailing at the
time. Accelerated prepayments adversely affect yields for pass-through
securities purchased at a premium and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-through securities purchased
at a discount.
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
approximatley $400,763,053 (U.S. dollars) under management and approximately
206,672 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 Fund may purchase equity
securities of the Schemes of the Trinidad and Tobago Unit Trust Corporation or
any other investment companies. No more than 10% of the Fund's total assets may
be used to purchase any securities of investment companies. The Fund will not
purchase more than 3% of the total outstanding voting stock of an investment
company nor purchase securities of an investment company having an aggregate
value in excess of 5% of the value of the total assets of the investment
company.
As of June 30, 1998, the Unit Trust Corporation beneficially owned
5.32% of the outstanding voting stock of the Fund.
CERTAIN INVESTMENT STRATEGIES AND SPECIAL RISK CONSIDERATIONS
All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. The Fund is designed for long term
investors who can accept the fluctuations in portfolio value and other risks
associated with the primary objective of seeking current income and capital
appreciation through investment in securities. There can be no assurance that
the Fund will achieve its objective.
The Fund will not make significant investments in securities of any one
issuer to reduce risk. Although risk cannot be eliminated, this strategy reduces
the impact of any single investment. The Fund may invest in both large and small
companies. Investments in small companies involve greater risk than is
customarily associated with more established companies. Smaller companies often
have limited product lines, markets, management personnel, research and/or
financial resources. The securities of
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<PAGE>
small companies, which may be thinly capitalized, may have more limited
marketability and be subject to more abrupt or erratic market movements than
securities of larger companies or the market averages in general.
Any investment by the Fund in short, medium or long term interest
bearing obligations has the risk of principal fluctuation due to changing
interest rates and the ability of the issuer to repay the obligation at
maturity. Fixed income instrument prices are inversely related to interest rate
movements, but proportional to the maturity of the instruments. That is,
long-term instrument prices rise or fall more than short-term instruments for a
given change in interest rates. Certain risk factors are also associated with
other investment practices of the Fund (none of which is expected to involve
more than 25% of the Fund's net assets), including investing in debt securities
and investing in foreign securities. Although the Fund does not purchase
securities with a view of rapid turnover, there are no limitations on the length
of time portfolio securities must be held. The Fund's portfolio turnover rate is
not expected to exceed 100%. A portfolio turnover exceeding 100% generally
results in increased transaction expenses and the realization of capital gains
and losses.
There are certain risks involved in investing in securities of
companies and governments of foreign nations that are in addition to the usual
risks inherent in U.S. investments. These risks include those resulting from
fluctuations in currency exchange rates, devaluation of currencies, future
adverse political and economic developments and the possible imposition of
currency exchange blockages or from other foreign governmental laws or
restrictions. Changes in foreign currency exchange rates may affect the value of
the Fund's assets, the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains to be
distributed to stockholders by the Fund. In addition, many of the securities
held by the Fund will not be registered with, nor the issuers thereof be subject
to reporting requirements of, the Securities and Exchange Commission (the
"SEC"). Accordingly, there may be less publicly available information about the
securities and about the foreign company or government issuing them than is
available about a U.S. company or U.S. Government entity. Foreign issuers are
not subject to uniform financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. Furthermore, with respect to
some foreign countries, there is the possibility of expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, including the withholding of dividends, political or
social instability or domestic developments that could affect U.S. investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital investment, resource
self-sufficiency and balance of payments positions. The Fund may invest in
securities of foreign governments (or agencies or instrumentalities thereof) and
many, if not all, of the foregoing considerations apply to such investments as
well. Finally, securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies, and
certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold.
Foreign securities may be subject to foreign government taxes that
would reduce the net return on such securities and the Fund may be affected
unfavorably by exchange control regulations. Investment in foreign securities
will also result in higher expenses due to the cost of converting foreign
currency into U.S. dollars, the payment of fixed brokerage commissions on
foreign exchanges and the expense of maintaining securities with foreign
custodians.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental
policies, which may not be changed without the favorable vote of the holders of
a "majority," as defined in the Investment Company Act of 1940 (the "1940 Act"),
of the Fund's outstanding voting securities. Under the 1940 Act, the vote of the
holders of a majority of a Fund's outstanding voting securities means the vote
of the holders of the lesser of (i) 67% of the shares of the Fund represented at
a meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares.
The Fund may not:
1. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions.
2. Make short sales of securities or maintain a short position and may
not purchase or write options on securities, indices, foreign currencies or
futures.
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<PAGE>
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
5% of its total assets (not including the amount borrowed) and will not purchase
securities while borrowings in excess of 5% of the value of the Fund's total
assets are outstanding.
4. Buy or sell commodities or commodity contracts including futures
contracts or buy or sell real estate or interests in real estate (although it
may purchase and sell securities which are secured by real estate and securities
of companies which invest or deal in real estate).
5. Make loans (except for purchases of publicly-traded debt securities
consistent with the Fund's investment policies).
6. Make investments for the purpose of exercising control or
management.
7. Act as underwriter (except to the extent the Fund may be deemed to
be an underwriter in connection with the sale of securities in the Fund's
investment portfolio), exclusive of Fund purchases of restricted securities
(i.e., securities that must be registered under the Securities Act of 1933
before they may be offered or sold to the public) if such purchases at the time
thereof would not cause more than 15% of the value of the Fund's net assets to
be invested in all such restricted or illiquid assets.
8. Invest 25% or more of its total assets at the time of purchase in
any securities of issuers in one industry. U.S. Government securities are
excluded from this restriction.
The Fund observes the following restrictions as a matter of operating
policy but not fundamental policy, pursuant to positions taken by federal and
state regulatory authorities:
The Fund may not:
9. Invest more than 15% of its net assets in (i) securities which are
restricted or for which market quotations are not readily available; (ii) fixed
time deposits subject to withdrawal penalties (other than overnight deposits);
and (iii) repurchase agreements having a maturity of more than seven days.
10. Purchase any security if as a result the Fund would then hold more
than 10% of any class of securities of an issuer (taking all common stock issues
as a single class, all preferred stock issues as a single class, and all debt
issues as a single class) or more than 10% of the outstanding voting securities
of an issuer.
11. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or of the Investment Manager owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such directors
who own more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.
12. Invest more than 5% of the value of its net assets in warrants
(included, in that amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or American Stock
Exchange).
13. Invest in any security if as a result the Fund would have more than
5% of its total assets invested in securities of companies which together with
any predecessor have been in continuous operation for fewer than three years.
14. Invest in real estate limited partnerships, or oil, gas and other
mineral leases.
MANAGEMENT
Board of Directors
The overall management of the business and affairs of the Fund is
vested with its Board of Directors. The Board of Directors approves all
significant agreements between the Fund and persons or companies furnishing
services to it, including the Fund's agreement with its Investment Manager, its
Custodian, its Transfer Agent, selected broker-dealers and its Administrator.
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<PAGE>
The day-to-day operations of the Fund are delegated to its officers, subject to
the investment objectives and policies of the Fund and to general supervision by
the Board of Directors.
The Board of Directors is presently comprised of five members, 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 Fund.
The Maryland General Corporation Law subjects all directors and
officers of the Fund to fiduciary duties for the lawful management of the Fund's
organization and operation, including federal and state securities laws.
Investors of the Fund may not be able to effect service of process within the
United States upon the Fund's nonresident directors and officers for the
enforcement of civil liabilities under federal and state securities laws. The
Fund has appointed an agent for service of process in the states where the Fund
has registered its securities for offer and sale.
The United States and the Republic of Trinidad and Tobago are not
parties to a convention governing the mutual recognition and enforcement of
foreign money judgments. Investors of the Fund may not be able to enforce a
United States or Trinidad and Tobago court judgment against nonresident
directors and officers of the Fund.
The directors and officers of the Fund, their business addresses and
principal occupations during the past five years are as follows. Directors
deemed to be "interested persons" of the Fund for purposes of the 1940 Act are
indicated by an asterisk.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
With Registrant During Last Five Years
Name and Address
<S> <C> <C>
*Judy Y. Chang Director and Chairman Chairman of Trinidad and Tobago Unit
Trinidad and Tobago Unit Trust Trust Corporation, 8-97 to Present;
Corporation Consultant, 7-97 to Present; Partner,
74 Independence Square Price Waterhouse, 1-80 to 6-97.
Port-of-Spain
Trinidad and Tobago, W.I.
*Clarry Benn Director and President Executive Director, 9-96 to Present;
Trinidad and Tobago Unit Trust Executive Manager, Investments and
Corporation Financial Trust Accounting, 8-92 to 8-96.
74 Independence Square
Port-of-Spain
Trinidad and Tobago, W.I.
*Renrick Nickie Director, Vice President Executive Manager, Marketing and
Trinidad and Tobago Unit Trust and Treasurer Operations, 8-92 to Present.
Corporation
74 Independence Square
Port-of-Spain
Trinidad and Tobago, W.I.
Dr. John A. Cole Director Visiting Professor of Finance, 8-97 to
2943 Landing Way Present, University of North Carolina at
Orangeburg, SC 29115 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.
</TABLE>
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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
With Registrant During Last Five Years
Name and Address
<S> <C> <C>
Dr. Roosevelt J. Williams Director Director, Cipriani College of Labour and
Cipriani College of Labour and Cooperative Studies, 8-97 to Present;
Cooperative Studies Education Consultant, 1-96 to 7-97;
Churchill Roosevelt Highway Professor of Howard University, 1989 to
Valsayn, Trinidad and Tobago, W.I. 12-95.
Ulice Payne, Jr. Secretary Attorney and Partner, Foley &
Foley & Lardner Lardner, 2-98 to Present; Attorney
777 East Wisconsin Avenue and Shareholder, Reinhart,
Suite 3700 Boerner, Van Deuren, Norris &
Milwaukee, WI 53202 Rieselbach, s.c., 2-90 to 2-98.
</TABLE>
The Fund pays directors who are not "interested persons" of the Fund
nor employees of the Investment Manager $500 per meeting of the board attended
by the director. Directors also are reimbursed by the Fund 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 Fund (which
constituted 0.40% of its then outstanding shares). As of such date, the sole
beneficial holder of more than 5% of the 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 Fund
(constituting 5.82% of its then outstanding shares).
The Investment Manager and the Management Agreement
Subject to supervision by the Fund's Board of Directors, investment
management and administration services will be provided to the Fund by INVESCO
CAPITAL MGMT. Inc. (the "Investment Manager") pursuant to an Investment
Management Agreement dated October 29, 1992 ("Management Contract"). Under the
Management Contract, the Investment Manager will provide a continuous investment
program for the Fund and make decisions and place orders to buy, sell or hold
particular securities and futures. The Investment Manager also will supervise
all matters relating to the operation of the Fund and will obtain clerical
staff, office space, equipment and services. As compensation for its services,
the Investment Manager will receive a monthly fee at an annual rate of the
greater of $50,000 or 0.75% of 1% on first $10 million, 0.50% of 1% on next $10
million and 0.25% of 1% over $20 million of the Fund's average daily net assets.
This fee is greater than that paid by most other funds. During the fiscal years
ended December 31, 1997, 1996 and 1995, the Fund paid the Investment Manager
advisory fees of $93,537, $90,164 and $97,881, respectively.
Under the Management Contract, the Investment Manager will not be
liable to the Fund for any error of judgment by the Investment Manager or any
loss sustained by the Fund except in the case of a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages will be limited as provided in the 1940 Act) or of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
The Management Contract was approved by the Board of Directors and by a
majority of the directors who neither are interested persons of the Fund nor
have any direct or indirect financial interest in the Management Contract or any
agreement related thereto ("Independent Directors"), and by the Fund's initial
shareholder on September 25, 1992. 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 in February 1997. The Management Contract was approved by
vote of a majority of the outstanding voting securities of the Fund at a special
shareholders' meeting in November 1997. The Management Contract will remain in
effect until terminated by either party. The Management
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Contract shall be specifically approved at least annually (i) by a majority vote
of the Independent Directors cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund. The Management
Contract was submitted to the stockholders of the Fund for their approval at the
first meeting of stockholders following the offering of the Fund's shares.
The Management Contract is terminable by vote of the Board of Directors
or by the holders of a majority of the outstanding voting securities of the Fund
at any time without penalty, on 60 days' written notice to the Investment
Manager. The Management Contract also may be terminated by the Investment
Manager on 60 days' written notice to the Fund. The Management Contract
terminates automatically upon its assignment (as defined in the 1940 Act).
Administrator
American Data Services, Inc. (the "Administrator") is located at The
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, New York
11788, and serves pursuant to an agreement with the Fund (the "Administrative
Services Agreement"). Pursuant to the Administrative Services Agreement, subject
to the overall authority of the Fund's Board of Directors in accordance with
Maryland law, the Administrator will assist in the Fund's administration and
operation, including, but not limited to, the preparation of statistical and
research data, data processing services, preparation of management reports for
performance and compliance, as well as prepare and maintain the Fund's operating
expense budget. During the fiscal years ended December 31, 1997, 1996 and 1995,
the Fund paid the Administrator $52,499, $50,677 and $43,755, respectively,
pursuant to the Administrative Services Agreement.
Fund Operating Expenses
In addition to the fees payable to the Investment Manager and the
Administrator, the Fund is responsible for its operating expenses, including:
(i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums;
(iv) compensation and expenses of, directors other than those affiliated with
the Investment Manager; (v) legal and audit expenses; (vi) fees and expenses of
the Custodian, shareholder service or Transfer Agent; (vii) fees and expenses
for registration or qualification of the Fund and its shares under federal or
state securities laws; (viii) expenses of preparing, printing and mailing
reports and notices and proxy material to stockholders; (ix) other expenses
incidental to holding any stockholder meetings; (x) dues or assessments of or
contributions to the Investment Company Institute or any successor; (xi) Rule
12b-1 fees paid by the Fund in connection with the Distribution Plan; (xii)
service fees paid by the Fund in connection with the personal service and/or
maintenance of shareholder accounts; and (xiii) such nonrecurring expenses as
may arise, including litigation affecting the Fund and the legal obligations
with respect to which the Fund may have to indemnify its officers and directors.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Management Contract states that in connection with its duties to
arrange for the purchase and the sale of securities and futures held in the
portfolio of the Fund by placing purchase and sale orders for the Fund, the
Investment Manager shall select such registered broker-dealers ("brokers") as
shall, in its judgment, achieve the policy of "best execution," i.e., prompt and
efficient execution at the most favorable securities price. In making such
selection, the Investment Manager is authorized in the Management Contract to
consider the reliability, integrity and financial condition of the brokers. The
Investment Manager also is authorized by the Management Contract to consider
whether the brokers provide brokerage and/or research services to the Fund
and/or other accounts of the Investment Manager.
The Management Contract states that the commissions paid to brokers may
be higher than other brokers would have charged if a good faith determination is
made by the Investment Manager that the commission is reasonable in relation to
the services provided, viewed in terms of either that particular transaction on
the Investment Manager's overall responsibilities as to the accounts as to which
it exercises investment discretion and that the Investment Manager shall use its
judgment in determining that the amount of commissions paid are reasonable in
relation to the value of brokerage and research services provided and need not
place or attempt to place a specific dollar value on such services or on the
portion of commission rates reflecting such services. The Management Contract
provides that to demonstrate that such determinations were in good faith, and to
show the overall reasonableness of commissions paid, the Investment Manager
shall be prepared to show that commission paid (i) were for purposes
contemplated by the Management Contract; (ii) were for products or services
which provide lawful and appropriate assistance to its decision making process;
and (iii) were within a reasonable range as compared to the rates charged by
brokers to other institutional
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<PAGE>
investors as such rates may become known from available information. The
Investment Manager also is authorized to consider sales of shares of the Fund
and/or of any other investment companies for which the Investment Manager acts
as Investment Manager or advisor as a factor in the selection of brokers to
execute brokerage and principal transactions, subject to the requirements of
"best execution," as defined above.
The research services discussed above may be in written form or through
direct contact with individuals and may include information as to particular
companies and securities as well as market, economic or institutional areas and,
information assisting the Fund in the valuation of the Fund's investments. The
research which the Investment Manager receives for the Fund's brokerage
commissions, whether or not useful to the Fund, may be useful to it in managing
the accounts of its other advisory clients. Similarly, the research received for
the commissions of such accounts may be useful to the Fund.
The debt securities which will be the principal component of the Fund's
portfolio are generally traded on a "net" basis with dealers acting as principal
for their own accounts without a stated commission although the price of the
security usually includes a profit to the dealer. Money market instruments
usually trade on a "net" basis as well. On occasion, certain money market
instruments may be purchased by the Fund directly from an issuer in which case
no commissions or discounts are paid. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
Brokerage commissions in Trinidad and Tobago, as in the U.S., are
negotiable. Trinidad and Tobago brokers, which act as agent, and dealers, which
act as principal, are subject to government regulation if they deal with public
investors.
PURCHASE AND REDEMPTION OF SHARES
The procedures for purchasing shares of the Fund are summarized in the
prospectus under "How to Purchase Shares" and the procedures for redemption of
shares are summarized in the prospectus under "How to Redeem Shares." Investors
may now elect to purchase shares through the continuing automatic transfer plan
as described in the prospectus.
The Fund will redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value during any 90-day period for any one stockholder.
The Fund reserves the right to pay other redemptions, either total or partial,
by a distribution in kind of readily marketable securities (instead of cash)
from the Fund's portfolio. The securities distributed in such a distribution
would be valued at the same amount as that assigned to them in calculating the
net asset value for the shares being redeemed. If a stockholder receives a
distribution in kind, he or she should expect to incur transaction costs when he
or she converts the securities to cash.
Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) cause a loss to be
incurred when the net asset value of the Fund shares on the date of cancellation
is less than the original date of purchase. The investor is responsible for such
loss and the Fund may reimburse itself or selected broker-dealers for such loss
by automatically redeeming shares from any account registered in that
stockholder's name, or by seeking other redress.
Determination of Net Asset Value
The net asset value of the Fund's shares will fluctuate and is
determined as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4 p.m. Eastern time) each business day. The Exchange
annually announces the days on which it will not be open for trading. The most
recent announcement indicates that it will not be, open on the following days:
New Years Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. However, the Exchange may close
on days not included in that announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding at such time.
The Fund values its assets based on their current market value when market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors.
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<PAGE>
Securities for which market quotations are not readily available are
valued at fair market value as determined in good faith under procedures
established by the Fund's Board of Directors. Short-term debt securities which
mature in more than 60 days are valued at current market quotations. Short-term
debt securities which mature in 60 days or less are valued at amortized cost if
their term to maturity from the date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if their term to
maturity from the date of purchase exceeded 60 days, unless the Board of
Directors determines that such valuation does not represent fair value.
Following the calculation of security values in terms of currency in
which the market quotation used is expressed ("local currency"), the valuing
agent shall calculate these values in terms of United States dollars on the
basis of the conversion of the local currencies (if other than U.S.) into United
States dollars at the rates of exchange prevailing at the value time as
determined by the valuing agent. The value of other property owned by the Fund
shall be determined in a manner which, in the discretion of the valuing agent of
the Fund, most fairly reflects fair market value of the property on such date.
Trading in securities on European securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York (i.e., a day on which the New York Stock
Exchange is open). In addition, European securities trading generally or in a
particular country or countries may not take place on all business days in New
York. Furthermore, trading takes place in various foreign markets on days which
are not business days in New York and on which the Fund's net asset value is not
calculated. The Fund calculates net asset value per share and, therefore,
effects sales, redemptions and repurchases of its shares, as of the close of the
New York Stock Exchange once on each day on which the New York Stock Exchange is
open. Such calculation does not take place contemporaneously with the
determination of the prices of the majority of the portfolio securities used in
such calculation. If events materially affecting the value of such securities
occur between the time when their price is determined and the time when the
Fund's net asset value is calculated, such securities will be valued at fair
value as determined in good faith by the Board of Directors.
RETIREMENT PLANS
Individual shareholders may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Fund offers 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
the Fund is $250 for an individual except that both the individual and his or
her spouse would be able to establish separate IRAs if their combined investment
is $400.
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.
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
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<PAGE>
IRA reduce the allowable contribution under a Roth IRA, and contributions to a
Roth IRA reduce the allowable contribution to a Traditional IRA.
Fund shares may also be a suitable investment for other types of
qualified pension or profit sharing plans which are employer-sponsored,
including deferred compensation or salary reduction plans known as 401(k) plans
which give participants the right to defer portions of their compensation for
investment on a tax deferred basis until distributions are made from the plans.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Taxes
The Fund intends 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 Fund of liability
for federal income taxes to the extent its earnings are distributed.
The Fund contemplates 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 Fund must distribute, during each calendar year, an
amount equal to, at the minimum, the sum of (1) 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year; (2) 98%
of its capital gains in excess of its capital losses for the 12-month period
ending on October 31 of the calendar year; and (3) all ordinary income and net
capital gains for previous years that were not previously distributed. A
distribution will be treated as paid during the calendar year if it is paid
during the calendar year or declared by the Fund in October, November or
December of the year, payable to stockholders of record on a date during such
month and paid by the Fund during January of the following year. Any such
distributions paid during January of the following year will be deemed to be
received on December 31 of the year the distributions are declared, rather than
when the distributions are received.
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 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 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 the
Fund's net investment income, subject to proportionate reductions if aggregate
dividends received by the Fund from domestic corporations in any year are less
than 100% of the distribution of net investment company taxable income made by
the 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 Fund, 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.
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
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<PAGE>
underwriters and accountants and on any proposed material amendment to the
Corporation's Certificate of Incorporation. For federal tax purposes, each
"fund" of a series is treated as a separate corporation.
Upon liquidation of the Fund or any series, stockholders of the
affected series would be entitled to share pro rata in the net assets of their
respective series available for distribution to such stockholders.
Backup Withholding
The Fund may be required to withhold federal income tax at the rate of
31% of all taxable distributions payable to stockholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a stockholder's federal income
tax liability.
INVESTMENT PERFORMANCE INFORMATION
The Fund may furnish data about its investment performance in advertisements,
sales literature and reports to stockholders. "Total return" represents the
annual percentage change in value of $10,000 invested at the maximum public
offering price for the one year period and the life of the Fund through the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions. The Fund 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:
2 [(a-b + 1) 6 - 1]
YIELD = cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends and d =
the maximum offering price per share on the last day of the period.
Quotations of total return will reflect only the performance of a
hypothetical investment in the Fund during the particular time period shown. The
Fund's total return and current yield may vary from time to time depending on
market conditions, the compositions of the Fund's portfolio and operating
expenses. These factors and possible differences in the methods used in
calculating yield should be considered when comparing the Fund's current yield
to yields published for other investment companies and other investment
vehicles. Total return and yield should also be considered relative to changes
in the value of the Fund's shares and the risks associated with the Fund's
investment objectives and policies. At any time in the future, total returns and
yields may be higher or lower than past total returns and yields and there can
be no assurance that any historical return or yield will continue.
In connection with communicating its yield or total return to current
or prospective stockholders, the Fund may also compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Quotations of the Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of one, five and ten years (up to the life of the Fund), and are calculated
pursuant to the following formula:
P (1 + T)n = ERV
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(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 Fund, incorporated in the State of Maryland on October 24, 1990, is
authorized to issue 4,000,000 shares of common stock, $.01 par value (the
"Common Stock"). Shares of the Fund, when issued, are fully transferable and
redeemable at the option of the holder. Shares are also redeemable at the option
of the Fund in certain circumstances as described in the Fund's Prospectus under
"How to Redeem Shares." All Fund shares are equal as to earnings assets and
voting privileges. There are no conversion, preemption or other subscription
rights. Under the Fund's Certificate of Incorporation, the Board of Directors
may authorize the creation of additional series of common stock, with such
preferences, privileges, limitations and voting and dividend rights as the board
may determine. Each share of the Fund outstanding is entitled to share equally
in dividends and other distributions and in the net assets of the Fund on
liquidation. Accordingly, in the event of liquidation, each share of the Fund's
common stock is entitled to its portion of all the Fund's assets after all debts
and expenses have been paid. The shares of the Fund do not have cumulative
voting rights for the election of directors.
The Corporation will hold an annual stockholder meeting each year.
Special meetings of the stockholders will be held for the consideration of
proposals requiring stockholder approval by law, such as changing fundamental
policies or upon the written request of 25% of the Fund's outstanding shares.
The directors will promptly call a meeting of stockholders to consider the
removal of a director or directors when requested to do so by the holders of not
less than 10% of the outstanding shares and that stockholders will receive
communication assistance in connection with calling such a meeting. At any
meeting of stockholders duly called and at which a quorum is present, the
stockholders may, by the affirmative vote of the holders of at least two-thirds
of the votes entitled to be cast thereon, remove any director or directors from
office, with or without cause, and may elect a successor or successors to fill
any resulting vacancies for the unexpired term of the removed director.
The Fund's organizing documents have been filed with the SEC as
exhibits to the Fund's registration statement and can be found at the SEC or at
the Fund's principal office or at the offices of the Fund'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 Fund entitled to vote at a
meeting called for the purpose of considering such approval. Pursuant to the
Fund'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 Fund. As such, Star Bank holds
all securities and cash of the Fund, 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 of the
Corporation. Star Bank does not exercise any supervisory function over the
management of the Fund, 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 Fund.
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FINANCIAL STATEMENTS
The 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 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 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
-38-
<PAGE>
the date due even if the applicable grace period has not expired, unless S&P's
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
Description of Moody's Preferred Stock Ratings
aaa: An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks. aa: An issue
which is rated aa is considered a high-grade preferred stock. This rating
indicates that there is reasonable assurance that earnings and asset protection
will remain relatively well maintained in the foreseeable future. a: An issue
which is rated a is considered to be an upper medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classifications, earnings and asset protection are nevertheless expected to be
maintained at adequate levels. baa: An issue which is rated baa is considered to
be medium grade, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present, but may be questionable over great length
of time. ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class. b: An
issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small. caa: An issue which is rated
caa is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payment. ca: An issue which is
rated ca is speculative in a high degree and is likely to be in arrears on
dividends with the little likelihood of eventual payment. c: This is the lowest
rated class of preferred or preference stock. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of S&P's Preferred Stock Ratings
AAA: This is the highest rating that may be assigned by S&P's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations. AA: A preferred stock issue rated AA also qualifies
as a high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
AAA. A: An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions. BBB: An issue rated
BBB is regarded as backed by an adequate capacity to pay the preferred stock
obligations. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make payments for a preferred stock in this category than
for issues in the A category. BB, B, CCC: Preferred stock rated BB, B and CCC
are regarded on balance as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
issues will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock in arrears on dividends or
sinking Equity Fund payments but that is a nonpaying issue with the issuer in
default on debt instruments.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
-39-
<PAGE>
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).
Statements of Net Assets
Statements 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).
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(c) Exhibits:
(1) Articles of Incorporation, as amended (1)
(2) By-Laws, as amended(2)
(3) Not Applicable
(4) Specimen Stock Certificate(1)
(5) Management Agreement(1)
(6) Distribution Agreement(1)
(7) Not Applicable
(8) Custodial Services Agreement(3)
(9) Fund Accounting Service Agreement(1), Shareholder
Servicing Agent Agreement(1), and Administration
Services Agreement (4)
(10) Opinion and Consent of Counsel
(11) Consent of Accountants
(12) Not Applicable
(13) Subscription Agreement(1)
(14) IRA Disclosure Documents(3)
(15) Distribution Plan(2)
(16) Not Applicable
(17) Financial Data Schedule
(18) 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 toRegistrant'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.
-40-
<PAGE>
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.
4. Previously filed as an exhibit to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A and incorporated by reference
thereto. Amendment No. 3 was filed with the SEC on January 24, 1994 and its File
Nos. are 33-37426 and 811-6194.
Item 26. Number of Holders of Securities.
As of June 30, 1998, the approximate number of holders was:
(1) (2)
Number of
Title of Class Record Holders
Common 4,503
Item 27. Indemnification.
The basic effect of the respective indemnification provisions of the
Registrant's Articles of Incorporation and By-Laws and section 2-418 of the
Maryland General Corporation Law is to indemnify each officer and director of
both the Registrant, the Investment Manager and selected broker-dealers, to the
full extent permitted under the General Laws of the State of Maryland, except
that such indemnity shall not protect any such person against any liability to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant, Investment Manager and selected broker-dealers pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1940 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, office or controlling person of the Registrant and the
principal underwriter in connection with the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person or the Investment Manager and selected broker-dealers in
connection with the shares being registered, the Registrant will, unless, in the
opinion of its counsel, the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1940 Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor.
Reference is made to Part A of this Registration Statement and to Form
ADV filed under the Investment Advisers Act of 1940 by the Investment Manager.
Item 29. Principal Underwriters.
The Fund has no principal underwriters and has adopted a Distribution
Plan pursuant to section 12 of the Investment Company Act of 1940 and Rule 12b-1
thereunder.
-41-
<PAGE>
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.
-42-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Port-of-Spain, Country of Trinidad and Tobago,
on the 30 day of October, 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*
-43-
<PAGE>
Exhibit Index
Pursuant to Securities Act Rule 483
Exhibit 1 Articles of Incorporation , as amended*
Exhibit 2 By-Laws, as amended*
Exhibit 4 Specimen Stock Certificate*
Exhibit 5 Management Agreement*
Exhibit 6 Distribution Agreement*
Exhibit 8 Custodial Services Agreement*
Exhibit 9 Fund Accounting Service Agreement, Shareholder Servicing Agent
Agreement, Administrative Services
Agreement and Related Agreement*
Exhibit 10 Opinion and Consent of Counsel
Exhibit 11 Consent of Accountants
Exhibit 13 Subscription Agreement*
Exhibit 14 IRA Disclosure Documents*
Exhibit 15 Distribution Plan, as amended*
Exhibit 16 Not Applicable
Exhibit 17 Financial Data Schedule
Exhibit 18 Not Applicable
- ----------
* Incorporated by reference.
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.
-44-
EXHIBIT 10
October 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 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 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
[ PRICEWATERHOUSECOOPERS LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 14 to the Registration Statement of The Chaconia Income & Growth Fund, Inc.,
on Form N-1A (File No. 33-37426) 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 caption "Independent
Accountants".
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
October 30, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE CHACONIA INCOME & GROWTH FUND, INC. ASOF 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.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 24191106
<INVESTMENTS-AT-VALUE> 28329873
<RECEIVABLES> 606844
<ASSETS-OTHER> 2701
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<TOTAL-ASSETS> 2893418
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<REALIZED-GAINS-CURRENT> 21264
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<NET-CHANGE-FROM-OPS> 2143261
<EQUALIZATION> 0
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