<PAGE> 1
SUPPLEMENT, DATED MAY 1, 1995 TO
PROSPECTUSES OF:
AMERICAN CAPITAL CORPORATE BOND FUND, INC.
AMERICAN CAPITAL EMERGING GROWTH FUND, INC.
AMERICAN CAPITAL GLOBAL EQUITY FUND
AMERICAN CAPITAL GLOBAL GOVERNMENT SECURITIES FUND
AMERICAN CAPITAL GROWTH AND INCOME FUND, INC.
AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC.
AMERICAN CAPITAL MUNICIPAL BOND FUND, INC.
AND
AMERICAN CAPITAL PACE FUND, INC.
1. Effective today, the Distributor has increased the ongoing payments to
broker-dealers and other Service Organizations with respect to Class C shares.
The Distributor will now pay broker-dealers and other Service Organizations
ongoing commissions and transaction fees of up to 0.75% of the average daily net
assets of the Fund's Class C shares for the second through tenth year after
purchase for Class C shares sold on or after May 1, 1995. Broker-dealers and
other Service Organizations will still be paid ongoing commissions and
transaction fees for the second through tenth year after purchase of up to 0.65%
for Class C shares sold before May 1, 1995.
2. The first two paragraphs of "Shareholder Services -- Shareholder Services
Applicable to all Classes -- Exchange Privilege" are amended to read in their
entirety as follows:
EXCHANGE PRIVILEGE. Shares of the Fund or of any Participating Fund
(listed herein under "Purchase of Shares -- Class A Shares -- Volume
Discounts") other than Government Target, may be exchanged for shares of the
same class of any other fund without sales charge, provided that shares of
Corporate Bond, Federal Mortgage, Global Managed, Government Trust, High
Yield, Municipal Bond, Real Estate, Tax-Exempt, Texas Municipal, Utilities,
and the American Capital Global Government Securities Fund of World
Portfolio are subject to a 30-day holding period requirement. Shares of
Government Target may be exchanged for Class A shares of the Fund without
sales charge. Class A shares of Reserve that were not acquired in exchange
for Class B or Class C shares of a Participating Fund may be exchanged for
Class A shares of the Fund upon payment of the excess, if any, of the sales
charge rate applicable to the shares being acquired over the sales charge
rate previously paid. Shares of Reserve acquired through an exchange of
Class B or Class C shares may be exchanged only for the same class of shares
of a Participating Fund without incurring a contingent deferred sales
charge. Shares of any Participating Fund or Reserve may be exchanged for
shares of
<PAGE> 2
any other Participating Fund if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares
of a Participating Fund may be available for sale only to existing
shareholders of the Participating Fund. Additional Funds may be added from
time to time as a Participating Fund.
Class B and Class C shareholders of the Fund have the ability to
exchange their shares ("original shares") for the same class of shares of
any other American Capital fund that offers such class of shares ("new
shares") in an amount equal to the aggregate net asset value of the original
shares, without the payment of any contingent deferred sales charge
otherwise due upon redemption of the original shares. For purposes of
computing the contingent deferred sales charge payable upon a disposition of
the new shares, the holding period for the original shares is added to the
holding period of the new shares. Class B and Class C shareholders would
remain subject to the contingent deferred sales charge imposed by the
original fund upon their redemption from the American Capital complex of
funds. The contingent deferred sales charge is based on the holding period
requirements of the original fund.
3. The following should be added under the section entitled "Purchase of
Shares -- General":
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by registered representatives and
members of their families to locations within or outside of the United
States for meetings or seminars of a business nature.
<PAGE> 3
SUPPLEMENT DATED FEBRUARY 6, 1995,
TO PROSPECTUSES OF:
AMERICAN CAPITAL COMSTOCK FUND, INC.
AMERICAN CAPITAL CORPORATE BOND FUND, INC.
AMERICAN CAPITAL EMERGING GROWTH FUND, INC.
AMERICAN CAPITAL ENTERPRISE FUND, INC.
AMERICAN CAPITAL EQUITY INCOME FUND, INC.
AMERICAN CAPITAL FEDERAL MORTGAGE TRUST
AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND, INC.
AMERICAN CAPITAL GOVERNMENT SECURITIES, INC.
AMERICAN CAPITAL GROWTH AND INCOME FUND, INC.
AMERICAN CAPITAL HARBOR FUND, INC.
AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC.
AMERICAN CAPITAL MUNICIPAL BOND FUND, INC.
AMERICAN CAPITAL PACE FUND, INC.
AMERICAN CAPITAL REAL ESTATE SECURITIES FUND, INC.
AMERICAN CAPITAL TAX-EXEMPT TRUST
AMERICAN CAPITAL TEXAS MUNICIPAL SECURITIES, INC.
AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
AMERICAN CAPITAL UTILITIES INCOME FUND, INC.
AND
AMERICAN CAPITAL WORLD PORTFOLIO SERIES, INC.
The description of the classes of investors entitled to purchase shares at net
asset value contained under the Section entitled "Purchase of Shares -- Class A
Shares" are hereby replaced in their entirety as follows:
(1) Current or retired Trustees/Directors of funds advised by the Adviser, Van
Kampen American Capital Investment Advisory Corp. or John Govett & Co.
Limited and such persons' families and their beneficial accounts.
(2) Current or retired directors, officers and employees of VK/AC Holding,
Inc. and any of its subsidiaries, Clayton, Dubilier & Rice, Inc.,
employees of an investment subadviser to any such fund or an affiliate of
such subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and registered representatives of financial
institutions that have a selling group agreement with the Distributor and
their spouses and minor children when purchasing for any accounts they
beneficially own, or, in the case of any such financial institution, when
purchasing for retirement plans for such institution's employees.
(4) Registered investment advisers, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients provided that
the aggregate amount invested in the Fund alone, or in any combination of
shares of the Fund and shares of certain other participating American
Capital funds as described herein under "Purchase of Shares -- Class A
Shares -- Volume Discounts", during the 13 month period commencing with
the first investment pursuant hereto equals at least $1 million. The
Distributor may pay Service Organizations through which purchases are made
an amount up to 0.50% of the amount invested, over a twelve month period
following such transaction.
<PAGE> 4
(5) Trustees and other fiduciaries purchasing shares for retirement plans of
organizations with retirement plan assets of $10 million or more. The
Distributor may pay commissions of up to 1% for such purchases.
(6) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(7) Investors purchasing shares of the Fund with redemption proceeds from
other mutual fund complexes on which the investor has paid a front-end
sales charge or was subject to a deferred sales charge, whether or not
paid, if such redemption has occurred no more than 30 days prior to such
purchase.
(8) Full service participant directed profit sharing and money purchase plans,
full service 401(k) plans, or similar full service recordkeeping programs
made available through Van Kampen American Capital Trust Company with at
least 50 eligible employees or investing at least $250,000. For such
investments the Fund imposes a contingent deferred sales charge of 1% in
the event of redemptions within one year of the purchase. The contingent
deferred sales charge incurred upon redemption is paid to the Distributor
in reimbursement for distribution-related expenses. A commission will be
paid to dealers who initiate and are responsible for such purchases as
follows: 1% on sales to $5 million, plus 0.50% on the next $5 million,
plus 0.25% on the excess over $10 million.
The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.
999 STK-009
<PAGE> 5
SUPPLEMENT, DATED JANUARY 16, 1995 TO
PROSPECTUSES OF:
AMERICAN CAPITAL COMSTOCK FUND, INC.
AMERICAN CAPITAL EMERGING GROWTH FUND, INC.
AMERICAN CAPITAL ENTERPRISE FUND, INC.
AMERICAN CAPITAL EQUITY INCOME FUND, INC.
AMERICAN CAPITAL GLOBAL EQUITY FUND
AMERICAN CAPITAL GROWTH AND INCOME FUND, INC.
AMERICAN CAPITAL HARBOR FUND, INC.
AND
AMERICAN CAPITAL PACE FUND, INC.
1. Effective January 16, 1995, for full service participant directed profit
sharing and money purchase plans administered by Van Kampen/American Capital
Trust Company, no sales charge is payable at the time of purchase for plans with
at least 50 eligible employees or investing at least $250,000 in American
Capital funds, which includes Participating Funds as described in the Prospectus
under "Purchase of Shares -- Class A Shares -- Volume Discounts," and American
Capital Reserve Fund, Inc. For such investments the Fund imposes a contingent
deferred sales charge of 1% in the event of certain redemptions within one year
of the purchase.
Effective January 16, 1995, the Fund will also begin imposing a contingent
deferred sales charge of 1% in the event of certain redemptions within one year
of the purchase with respect to those qualified 401(k) retirement plans that are
administered under Van Kampen/American Capital Trust Company's (k) Advantage
Program, or similar recordkeeping programs made available through Van
Kampen/American Capital Trust Company purchasing shares of the Fund at net asset
value.
2. Effective January 16, 1995, the Distributor will no longer pay any
commission on accounts opened for shareholders where the amounts invested
represent the redemption proceeds from investment companies distributed by an
entity other than the Distributor.
<PAGE> 6
3. Effective January 16, 1995, the sales charge structure for Class A shares
has been modified as follows:
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
TO DEALERS
AS % OF NET AS % OF (AS A % OF
SIZE OF AMOUNT OFFERING OFFERING
INVESTMENT INVESTED PRICE PRICE)
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than $100,000 4.99% 4.75% 4.00%
$100,000 but less than
$250,000 3.90% 3.75% 3.00%
$250,000 but less than
$500,000 2.83% 2.75% 2.25%
$500,000 but less than
$1,000,000 2.04% 2.00% 1.75%
$1,000,000 and over (see herein) (see herein) (see herein)
- --------------------------------------------------------------------------
</TABLE>
No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1% in the event of certain redemptions within one year
of the purchase. The contingent deferred sales charge incurred upon redemption
is paid to the Distributor in reimbursement for distribution-related expenses. A
commission will be paid to dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1% on sales to $2 million, plus
0.80% on the next million, plus 0.20% on the next $2 million and 0.08% on the
excess over $5 million.
4. Effective January 16, 1995, the Fund may sell Class A shares of the Fund at
net asset value to Service Organizations for the benefit of their clients who
are participating in such Service Organizations' "wrap accounts." Service
Organizations must execute supplemental agreements to their existing selling
agreement with the Distributor in order to qualify for the program.
999 STK-007
<PAGE> 7
SUPPLEMENT, DATED DECEMBER 20, 1994 TO
PROSPECTUS OF:
AMERICAN CAPITAL GLOBAL EQUITY FUND
1. On December 20, 1994, The Van Kampen Merritt Companies, Inc. (the "Buyer")
acquired from The Travelers Inc. ("Travelers") 100% ownership (the
"Acquisition") of American Capital Management & Research, Inc. (the "Company"),
the parent corporation of American Capital Asset Management, Inc. (the
"Adviser"), the Fund's investment adviser, and American Capital Marketing, Inc.
(the "Distributor"), the Fund's distributor. The Company was merged with and
into the Buyer after the Acquisition. The combined parent company was renamed
Van Kampen/American Capital, Inc. ("VKAC"). The Adviser and the Distributor are
wholly owned subsidiaries of VKAC, which is a wholly owned subsidiary of VK/AC
Holding, Inc. Prior to the Acquisition, the Company was an indirect wholly owned
subsidiary of Travelers.
The Adviser was renamed Van Kampen/American Capital Asset Management, Inc. and
will continue to provide investment advisory services to the Fund. The
Distributor was renamed Van Kampen/American Capital Marketing, Inc. and will
continue to provide distribution services to the Fund until approximately
December 31, 1994 when the Buyer anticipates merging the Distributor into Van
Kampen/American Capital Distributors, Inc., a registered broker-dealer that
currently serves as distributor to the Van Kampen Merritt family of mutual
funds.
On December 16, 1994, in connection with the Acquisition, the shareholders of
the Fund approved a new investment advisory agreement with the Adviser providing
for the same terms and services as the investment advisory agreement between the
Fund and the Adviser that was in effect before the Acquisition.
The Buyer is a wholly owned subsidiary of VK/AC Holding, Inc., which is
controlled by The Clayton & Dubilier Private Equity Fund IV Limited Partnership,
("C&D L.P."). C&D L.P. is managed by Clayton, Dubilier & Rice, Inc., a private
investment firm. It is anticipated that members of senior management of the
Buyer who were members of senior management of the Company prior to the
Acquisition will acquire minority interests (totaling less than 5% in the
aggregate) in VK/AC Holding, Inc. As part of the Acquisition, Travelers also
acquired a minority non-voting interest (representing less than 5%) in VK/AC
Holding, Inc. and was granted an option entitling Travelers, upon the
satisfaction of certain conditions, to purchase from VK/AC Holding, Inc.
additional non-voting shares representing up to 5% of outstanding VK/AC Holding,
Inc. common shares. The General Partner of C&D L.P. is Clayton & Dubilier
Associates IV Limited Partnership ("C&D Associates L.P."). The general partners
of C&D Associates L.P. are Joseph L. Rice, III, B. Charles Ames, Alberto
Cribiore, Donald J. Gogel and Hubbard C. Howe, each of whom is a principal of
Clayton, Dubilier & Rice, Inc.
<PAGE> 8
As of September 30, 1994, subsidiaries of VKAC on a pro forma basis would have
managed or supervised $51.8 billion of assets, including assets of 66 open-end
investment companies and 38 closed-end investment companies having aggregate
total assets of $32.4 billion.
2. On December 16, 1994, the shareholders of the Fund approved a new investment
subadvisory agreement between the Adviser and John Govett & Co. Limited ("John
Govett") which will take effect on December 21, 1994. John Govett is a United
Kingdom based investment management company whose investment activities
originated in the 1920s. John Govett is primarily responsible for recommending
the allocation of investments among various international markets and
currencies; recommendation and selection of particular securities in the
international markets; an trading in foreign markets. The investment subadvisory
fee as reflected in the Prospectus remains the same with John Govett.
3. The following replaces the last paragraph under the section entitled "The
Company and Its Management":
John Reynoldson is primarily responsible for the day-to-day management
of the Fund's investment portfolio with respect to investments in the United
States. Mr. Reynoldson is Vice President of the Fund and has been Senior
Investment Vice President of the Adviser since July 1991. He was previously
an investment vice president with the Adviser. Mr. Reynoldson has been
primarily responsible for managing the Fund's investment portfolio with
respect to investments in the United States since its inception. John Govett
(the "Subadviser") has employed Alan Doyle since April 1994 as an
international manager specializing in emerging markets. He is primarily
responsible for allocating the Fund's investments between United States and
non-United States debt obligations and the day-to-day management of the
Fund's investments in countries other than the United States. Mr. Doyle will
begin managing the Fund's investment portfolio effective December 21, 1994.
Mr. Doyle was previously an economist in the fixed income department of
World Invest Ltd. in London.
4. Effective December 20, 1994, shares of the Fund will no longer be offered at
net asset value to accounts opened for shareholders by dealers where the amounts
invested represent the redemption proceeds from investment companies distributed
by either the Distributor or Van Kampen/American Capital Distributors, Inc. This
change does not affect any exchange or reinstatement privilege described in the
Fund's Prospectus.
5. Other agreements entered into in connection with the Acquisition provide,
among other things and subject to certain conditions, for certain favorable
distribution arrangements for shares of the Fund with subsidiaries of Travelers.
<PAGE> 9
6. The Distributor is sponsoring a sales incentive program for A.G. Edwards &
Sons, Inc. ("A.G. Edwards"). The Distributor will reallow its portion of the
Fund's sales concession to A.G. Edwards on sales of Class A Shares of the Fund
relating to the "rollover" of any savings into an Individual Retirement Account
("IRA"), the transfer of assets into an IRA and contributions to an IRA,
commencing on January 1, 1995 and terminating on April 15, 1995.
7. The description in the Prospectus found at Purchase of Shares -- Class A
Shares regarding the purchase of Class A shares at net asset value by directors
of the Fund and employees and officers of the Adviser and certain affiliates of
the Adviser and certain of their family members is replaced by the following:
Class A Shares of the Fund may be purchased at net asset value, upon written
assurance that the purchase is made for investment purposes and that the
shares will not be resold except through redemption by the Fund, by (a)
current or retired Directors of the Fund; current or retired employees of
VK/AC Holding, Inc. or any of its subsidiaries; spouses, minor children and
grandchildren of the above persons; and parents of employees and parents of
spouses of employees of VK/AC Holding, Inc. and any of its subsidiaries;
trustees, directors and employees of Clayton, Dubilier & Rice, Inc.
8. The Distributor may from time to time implement programs under which a
broker, dealer or financial intermediary's sales force may be eligible to win
nominal awards for certain sales efforts or under which the Distributor will
reallow to any broker, dealer or financial intermediary that sponsors sales
contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on sales generated by
the broker or dealer during such programs. Also, the Distributor in its
discretion may from time to time, pursuant to objective criteria established by
it, pay fees to, and sponsor business seminars for, qualifying brokers, dealers
or financial intermediaries for certain services or activities which are
primarily intended to result in sales of shares of the Fund. Such fees paid for
such services and activities with respect to the Fund will not exceed in the
aggregate 1.25% of the average total daily net assets of the Fund on an annual
basis.
<PAGE> 10
- ------------------------------------------------------------------------------
AMERICAN CAPITAL GLOBAL EQUITY FUND
- ------------------------------------------------------------------------------
2800 Post Oak Boulevard, Houston, Texas 77056, (800) 421-5666
September 29, 1994
American Capital Global Equity Fund (the "Fund") is a professionally managed
mutual fund organized as a diversified open-end series of American Capital World
Portfolio Series, Inc. (the "Company"). The Fund seeks long-term growth of
capital through investments in an internationally diversified portfolio of
equity securities of companies of any nation including the United States.
There is no assurance that the Fund will achieve its investment objective.
This Prospectus tells investors briefly the information they should know
before investing. Investors should read and retain this Prospectus for future
reference.
A Statement of Additional Information dated the same date as this Prospectus
has been filed with the Securities and Exchange Commission ("SEC") and contains
further information about the Company. A copy of the Statement of Additional
Information may be obtained without charge by calling or writing the Company at
the telephone number and address printed above. The Statement of Additional
Information is incorporated by reference into this Prospectus.
THE SHARES OF THIS FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 11
- ------------------------------------------------------------------------------
AMERICAN CAPITAL GLOBAL EQUITY FUND
- ------------------------------------------------------------------------------
CUSTODIAN:
State Street Bank and
Trust Company
225 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER SERVICE AGENT:
American Capital Companies
Shareholder Services, Inc.
P.O. Box 418256
Kansas City, Missouri 64141-9256
INVESTMENT ADVISER:
American Capital
Asset Management, Inc.
2800 Post Oak Boulevard
Houston, Texas 77056
INVESTMENT SUBADVISER:
Lombard Odier International
Portfolio Management Limited
Norfolk House
13 Southampton Place
London WC1A 2AJ
England
DISTRIBUTOR:
American Capital
Marketing, Inc.
2800 Post Oak Boulevard
Houston, Texas 77056
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Prospectus Summary.......... 3
Expense Synopsis............ 5
Financial Highlights........ 7
Multiple Pricing System..... 8
Investment Objective and
Policies.................. 11
Investment Practices and
Restrictions.............. 15
The Company and Its
Management................ 20
Purchase of Shares.......... 22
Distribution Plans.......... 30
Shareholder Services........ 32
Redemption of Shares........ 36
Dividends, Distributions and
Federal Taxes............. 39
Prior Performance
Information............... 41
Additional Information...... 43
Investment Holdings......... 45
</TABLE>
***************************************************************************
* *
* No dealer, salesperson, or other person has been authorized to give *
* any information or to make any representations other than those *
* contained in this Prospectus or in the Statement of Additional *
* Information, and, if given or made, such other information or *
* representations must not be relied upon as having been authorized by *
* the Company or by the Distributor. This Prospectus does not *
* constitute an offering by the Distributor in any jurisdiction in *
* which such offering may not lawfully be made. *
* *
***************************************************************************
2
<PAGE> 12
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
SHARES OFFERED. Common Stock.
MINIMUM PURCHASE. $500 minimum initial investment and $25 minimum for each
subsequent investment (or less as described under "Purchase of Shares").
TYPE OF COMPANY. Diversified, open-end management investment company. The Fund
is a diversified portfolio of the Company and is one of two series of shares
which the Company is currently authorized to issue.
INVESTMENT OBJECTIVE. The Fund seeks long-term growth of capital.
INVESTMENT POLICY. Invests in an internationally diversified portfolio of
equity securities of companies of any nation including the United States. See
"Investment Objective and Policies." Use of options, futures contracts and
related options may include additional risks. See "Investment Practices and
Restrictions -- Using Options, Futures Contracts and Related Options."
INVESTMENT RESULTS. The investment results of the Fund since its inception are
shown in the "Financial Highlights" table.
RISK FACTORS. Investing in common stocks of foreign issuers may subject the
Fund to risks of foreign political, economic and legal conditions and
developments. See "Investment Objective and Policies -- Risk Factors."
INVESTMENT ADVISER. American Capital Asset Management, Inc. (the "Adviser")
serves as investment adviser to the Fund. The Adviser provides investment advice
to 45 investment company portfolios. Lombard Odier International Portfolio
Management Limited (the "Subadviser") provides advisory services to the Adviser
of the Fund with respect to the Fund's investments in foreign securities. See
"The Company and Its Management."
DISTRIBUTOR. American Capital Marketing, Inc. (the "Distributor").
MULTIPLE PRICING SYSTEM. The Fund offers three classes of shares to the
general public, each with its own sales charge structure: Class A shares, Class
B shares and Class C shares. Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class of
shares that best suits their circumstances and objectives. See "Multiple Pricing
System -- Factors for Consideration." Each class of shares represents an
interest in the same portfolio of investments of the Fund. The per share
dividends on Class B and Class C shares will be lower than the per share
dividends on Class A shares. See "Multiple Pricing System." For information on
redeeming shares see "Redemption of Shares."
CLASS A SHARES. These shares are offered at net asset value per share plus a
maximum initial sales charge of 5.75% of the offering price. The Fund pays an
3
<PAGE> 13
annual service fee of up to 0.25% of its average daily net assets attributable
to such class of shares. See "Purchase of Shares -- Class A Shares" and
"Distribution Plans."
CLASS B SHARES. These shares are offered at net asset value per share and are
subject to a maximum contingent deferred sales charge of 5% of redemption
proceeds during the first year, declining each year thereafter to 0% after the
fifth year. See "Redemption of Shares." The Fund pays a combined annual
distribution fee and service fee of up to 1% of its average daily net assets
attributable to such class of shares. See "Purchase of Shares -- Class B Shares"
and "Distribution Plans." Class B shares will convert automatically to Class A
shares six years after the end of the calendar month in which the shareholder's
order to purchase was accepted. See "Multiple Pricing System -- Conversion
Feature."
CLASS C SHARES. These shares are offered at net asset value per share and are
subject to a contingent deferred sales charge of 1% on redemptions made within
one year of purchase. See "Redemption of Shares." The Fund pays a combined
annual distribution fee and service fee of up to 1% of its average daily net
assets attributable to such class of shares. See "Purchase of Shares -- Class C
Shares" and "Distribution Plans." Class C shares will convert automatically to
Class A shares ten years after the end of the calendar month in which the
shareholder's order to purchase was accepted. See "Multiple Pricing System --
Conversion Feature."
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income and capital
gains, if any, are distributed annually. All dividends and distributions are
automatically reinvested in shares of the Fund at net asset value per share
(without sales charge) unless payment in cash is requested. See "Dividends,
Distributions and Federal Taxes."
4
<PAGE> 14
- ------------------------------------------------------------------------------
EXPENSE SYNOPSIS
- ------------------------------------------------------------------------------
The following tables are intended to assist investors in understanding the
expenses applicable to each class of shares:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES(G) SHARES(G) SHARES(G)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on
purchases (as a percentage of
offering price).................. 5.75%(a) None None
Sales charge imposed on dividend
reinvestments.................... None None None
5% during the first year, 4%
during the second year, 3%
Deferred sales charge (as a during the third year, 2.5%
percentage of original purchase during the fourth year, 1.5%
price or redemption proceeds, during the fifth year and 0% 1.0% during the
whichever is lower).............. None* after the fifth year(b) first year(b)
Exchange fee(c)................ $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management fees................... 1.00% 1.00% 1.00%
Rule 12b-1 fees(d)................ .25% 1.00%(g) 1.00%(g)
Other expenses(e)................. 1.21% 1.21% 1.21%(f)
Total fund operating expenses..... 2.46% 3.21% 3.21%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Reduced for purchases of $50,000 and over. See "Purchase of Shares -- Class
A Shares" -- page 24.
(b) See "Purchase of Shares -- Class B Shares" and "-- Class C Shares" -- pages
28 and 29.
(c) Not charged in certain circumstances. See "Shareholder
Services -- Shareholder Services Applicable to All Classes -- Systematic
Exchange" and " . . . -- Automatic Exchange" -- page 35.
(d) Up to .25% for Class A shares, and 1% for Class B and C shares. See
"Distribution Plans" -- page 30.
(e) See "The Company and Its Management" -- page 20.
(f) "Other expenses" is based on estimated amounts for the current fiscal year.
(g) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
(1) Annualized.
* Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a contingent deferred sales charge of 1% may be
imposed on certain redemptions made within one year of the purchase.
5
<PAGE> 15
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment including, for Class A
shares, the maximum $57.50 front-end sales
charge and for Class B and Class C shares, a
contingent deferred sales charge assuming (1)
an operating expense ratio of 2.46% for Class
A shares, 3.21% for Class B shares and 3.21%
for Class C shares, (2) a 5% annual return
throughout the period and (3) redemption at
the end of the period:
Class A.................................... $81 $130 $181 $321
Class B.................................... $83 $131 $184 $318**
Class C.................................... $43 $ 99 $168 $351
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Class A.................................... $81 $130 $181 $321
Class B.................................... $32 $ 99 $168 $318**
Class C.................................... $32 $ 99 $168 $351
- -----------------------------------------------------------------------------------------------
</TABLE>
** Based on conversion to Class A shares after six years.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Expenses for Class C shares are based on estimated amounts for
the Fund's current fiscal year. See "Purchase of Shares," "The Company and Its
Management" and "Redemption of Shares." The example is included to provide a
means for the investor to compare expense levels of funds with different fee
structures over varying investment periods. To facilitate such comparison, all
funds are required to utilize a five percent annual return assumption. This
assumption is unrelated to the Fund's prior performance and is not a projection
of future performance. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.
6
<PAGE> 16
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected data for a share of capital stock outstanding throughout each of the
periods indicated)
The following information for the fiscal years ended May 31, 1994 and May 31,
1993, and the period ended May 31, 1992, has been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the related financial statements
and notes thereto included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------
YEAR ENDED MAY 31 AUG. 5, 1991(1)
----------------------- TO
1994 1993(4) MAY 31, 1992(4)
---------- ---------- ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period..................................... $10.76 $10.44 $9.33
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income........................................................ .26 .235 .21
Expenses................................................................. (.32) (.325) (.185)
Expense reimbursement.................................................... -- .035 --
-------- -------- -------
Net investment income (loss)............................................. (.06) (.055) .025
Net realized and unrealized gain on securities........................... 1.0125 .7775 1.145
-------- -------- -------
Total from investment operations......................................... .9525 .7225 1.17
-------- -------- -------
DISTRIBUTIONS FROM NET REALIZED GAINS ON SECURITIES...................... (.0425) (.4025) (.06)
-------- -------- -------
Net asset value, end of period........................................... $11.67 $10.76 $10.44
======== ======== =======
TOTAL RETURN(2).......................................................... 9.17% 7.13% 12.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................................... $41.8 $12.7 $8.4
Average net assets (millions)............................................ $25.8 $9.2 $6.2
Ratios to average net assets
Expenses.............................................................. 2.46% 2.93% 2.07%(3)
Expenses, without expense reimbursement............................... -- 3.28% --
Net investment income................................................. (.46%) (.57%) .29%(3)
Net investment income, without expense reimbursement.................. -- (.92%) --
Portfolio turnover rate.................................................. 116% 120% 135%
<CAPTION>
CLASS B
-----------------------------------------------
YEAR ENDED MAY 31 NOV. 15, 1991(1)
------------------------ TO
1994 1993(4) MAY 31, 1992(4)
---------- ---------- -------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period..................................... $10.67 $10.46 $9.78
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income........................................................ .22 .235 .16
Expenses................................................................. (.35) (.435) (.165)
Expense reimbursement.................................................... -- .065 --
-------- -------- -------
Net investment income (loss)............................................. (.13) (.135) (.005)
Net realized and unrealized gain on securities........................... .9825 .7475 .745
-------- -------- -------
Total from investment operations......................................... .8525 .6125 .74
-------- -------- -------
DISTRIBUTIONS FROM NET REALIZED GAINS ON SECURITIES...................... (.0425) (.4025) (.06)
-------- -------- -------
Net asset value, end of period........................................... $11.48 $10.67 $10.46
======== ======== =======
TOTAL RETURN(2).......................................................... 8.21% 6.15% 7.58%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................................... $48.8 $6.9 $1.2
Average net assets (millions)............................................ $26.4 $2.8 $0.5
Ratios to average net assets
Expenses.............................................................. 3.21% 3.88% 3.11%(3)
Expenses, without expense reimbursement............................... -- 4.50% --
Net investment income................................................. (1.19%) (1.41%) (.12%)(3)
Net investment income, without expense reimbursement.................. -- (2.02%) --
Portfolio turnover rate.................................................. 116% 120% 135%
<CAPTION>
CLASS C
-------------------
JUNE 21, 1993(1)
TO
MAY 31, 1994(4)
-------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period..................................... $10.29
--------
INCOME FROM INVESTMENT OPERATIONS
Investment income........................................................ .24
Expenses................................................................. (.37)
Expense reimbursement.................................................... --
--------
Net investment income (loss)............................................. (.13)
Net realized and unrealized gain on securities........................... 1.4725
--------
Total from investment operations......................................... 1.3425
--------
DISTRIBUTIONS FROM NET REALIZED GAINS ON SECURITIES...................... (.0425)
--------
Net asset value, end of period........................................... $11.59
========
TOTAL RETURN(2).......................................................... 13.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................................... $5.1
Average net assets (millions)............................................ $2.4
Ratios to average net assets
Expenses.............................................................. 3.21%(3)
Expenses, without expense reimbursement............................... --
Net investment income................................................. (1.15%)(3)
Net investment income, without expense reimbursement.................. --
Portfolio turnover rate.................................................. 116%
</TABLE>
- --------------------------------
(1) Commencement of offering of sales.
(2) Total return for periods of less than one year have not been annualized.
Total return does not consider the effect of sales charges.
(3) Annualized.
(4) Based on average month-end share outstanding.
7
<PAGE> 17
- ------------------------------------------------------------------------------
MULTIPLE PRICING SYSTEM
- ------------------------------------------------------------------------------
The Multiple Pricing System permits an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
maximum sales charge of up to 5.75% of the offering price. Class A shares are
subject to an ongoing service fee at an annual rate of up to 0.25% of the Fund's
aggregate average daily net assets attributable to the Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges. See
"Purchase of Shares --Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if they are redeemed within five years of purchase.
Class B shares are subject to an ongoing service fee at an annual rate of up to
0.25% of the Fund's aggregate average daily net assets attributable to the Class
B shares and an ongoing distribution fee at an annual rate of up to 0.75% of the
Fund's aggregate average daily net assets attributable to the Class B shares.
Class B shares enjoy the benefit of permitting all of the investor's dollars to
work from the time the investment is made. The ongoing distribution fee paid by
Class B shares will cause such shares to have a higher expense ratio and to pay
lower dividends than those related to Class A shares. See "Purchase of
Shares -- Class B Shares." Class B shares will automatically convert to Class A
shares six years after the end of the calendar month in which the shareholder's
order to purchase was accepted. See "Conversion Feature" herein for discussion
on applicability of the conversion feature to Class B shares.
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.25% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class C shares. Class C
shares enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid by Class
C shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares. See "Purchase of Shares -- Class
C Shares." Class C shares will automatically convert to Class A shares ten years
after the end of the calendar month in which the shareholder's order to purchase
was accepted. See "Conversion Feature" herein for discussion on applicability of
the conversion feature to Class C shares.
CONVERSION FEATURE. Class B shares and Class C shares will automatically
convert to Class A shares six years or ten years, respectively, after the end of
the
8
<PAGE> 18
calendar month in which the shares were purchased and will no longer be subject
to the distribution fee. Such conversion will be on the basis of the relative
net asset values per share, without the imposition of any sales load, fee or
other charge. The purpose of the conversion feature is to relieve the holders of
the Class B shares and Class C shares that have been outstanding for a period of
time sufficient for the Distributor to have been substantially compensated for
distribution expenses related to the Class B shares or Class C shares as the
case may be, from the burden of the ongoing distribution fee.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid on Class B shares and Class C
shares in a shareholder's Fund account will be considered to be held in a
separate sub-account. Each time any Class B shares or Class C shares in the
shareholder's Fund account (other than those in the sub-account) convert to
Class A, an equal pro rata portion of the Class B shares or Class C shares in
the sub-account will also convert to Class A.
The conversion of Class B shares and Class C shares to Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that (i) the assessment of the distribution fee and transfer agency costs with
respect to Class B shares and Class C shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code, as amended (the "Code"), and (ii) the conversion of
shares does not constitute a taxable event under federal income tax law. The
conversion of Class B shares and Class C shares may be suspended if such an
opinion is no longer available. In that event, no further conversions of Class B
shares or Class C shares would occur, and shares might continue to be subject to
the distribution fee for an indefinite period which may extend beyond the period
ending six years or ten years, respectively, after the end of the calendar month
in which the shareholder's order to purchase was accepted.
FACTORS FOR CONSIDERATION. In deciding which class of shares to purchase,
investors should take into consideration their investment goals, present and
anticipated purchase amounts, time horizons and temperaments. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated distribution fees and contingent deferred sales charges on Class
B shares or Class C shares prior to conversion would be less than the initial
sales charge on Class A shares purchased at the same time, and to what extent
such differential would be offset by the higher dividends per share on Class A
shares. To assist investors in making this determination, the table under the
caption "Expense Synopsis" sets forth examples of the charges applicable to each
class of shares. In this regard, Class A shares may be more beneficial to the
investor who qualifies for reduced initial sales charges or purchases at net
asset value, as described herein under "Purchase of Shares -- Class A Shares."
For these reasons, the Distributor
9
<PAGE> 19
will reject any order of $250,000 or more for Class B shares or any order of $1
million or more for Class C shares.
Class A shares are not subject to an ongoing distribution fee and,
accordingly, receive correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase, investors in
Class A shares do not have all their funds invested initially and, therefore,
initially own fewer shares. Other investors might determine that it is more
advantageous to purchase either Class B shares or Class C shares and have all
their funds invested initially, although remaining subject to ongoing
distribution fees and, for a five-year or one-year period, respectively, being
subject to a contingent deferred sales charge. Ongoing distribution fees on
Class B shares and Class C shares will be offset to the extent of the additional
funds originally invested and any return realized on those funds. However, there
can be no assurance as to the return, if any, which will be realized on such
additional funds. For investments held for ten years or more, the relative value
upon liquidation of the three classes tends to favor Class A or Class B shares,
rather than Class C shares.
Class A shares may be appropriate for investors who prefer to pay the sales
charge up front, want to take advantage of the reduced sales charges available
on larger investments, wish to maximize their current income from the start,
prefer not to pay redemption charges and/or have a longer-term investment
horizon. Class B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work
immediately, and/or have a longer-term investment horizon. Class C shares may be
appropriate for investors who wish to avoid a front-end sales charge, put 100%
of their investment dollars to work immediately, have a shorter-term investment
horizon and/or desire a short contingent deferred sales charge schedule.
Under most circumstances, for investments aggregating less than $100,000 at
the time of purchase, investments originally made in Class C shares will tend to
have a slightly higher value upon liquidation than investments originally made
in either Class A or Class B shares if liquidated within approximately the first
six years after the date of the original investment and investments originally
made in Class B shares will tend to have a slightly higher value upon
liquidation than investments originally made in either Class A or Class C shares
for investments held longer. Under most circumstances, for investments
aggregating $100,000 or more at the time of purchase, investments originally
made in Class C shares will tend to have a slightly higher value upon
liquidation than either investments originally made in Class A or Class B shares
if liquidated within approximately the first two to the first six years after
the date of the original investment, but investments originally made in Class A
and Class B shares will tend to have a slightly higher value upon liquidation
for investments held longer. The foregoing will not, however, be true in
10
<PAGE> 20
all cases. Particularly, if the Fund experiences a consistently negative or
widely fluctuating total return, results may differ.
The distribution expenses incurred by the Distributor in connection with the
sale of the shares will be reimbursed, in the case of Class A shares, from the
proceeds of the initial sales charge and, in the case of Class B shares and
Class C shares, from the proceeds of the ongoing distribution fee and any
contingent deferred sales charge incurred upon redemption within five years or
one year, respectively, of purchase. Sales personnel of broker-dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling Class A, Class B or Class C shares. INVESTORS SHOULD UNDERSTAND THAT THE
PURPOSE AND FUNCTION OF THE CONTINGENT DEFERRED SALES CHARGE AND ONGOING
DISTRIBUTION FEE WITH RESPECT TO THE CLASS B SHARES AND CLASS C SHARES ARE THE
SAME AS THOSE OF THE INITIAL SALES CHARGE WITH RESPECT TO CLASS A SHARES. See
"Distribution Plans."
GENERAL. Dividends paid by the Fund with respect to Class A, Class B and Class
C shares will be calculated in the same manner at the same time on the same day,
except that the distribution fees and any incremental transfer agency costs
relating to Class B or Class C shares will be borne by the respective class. See
"Dividends, Distributions and Federal Taxes." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of other
mutual funds advised by the Adviser. See "Shareholder Services -- Exchange
Privilege."
The Directors of the Fund have determined that currently no conflict of
interest exists between the classes of shares. On an ongoing basis, the
Directors of the Fund, pursuant to their fiduciary duties under the Investment
Company Act of 1940 (the "1940 Act") and state laws, will seek to ensure that no
such conflict arises.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The investment objective of the Fund is to provide long-term growth of capital
through investments in an internationally diversified portfolio of equity
securities of companies of any nation including the United States. The Fund
intends to be invested in equity securities of companies of at least three
countries including the United States. Under normal market conditions, at least
65% of the Fund's total assets are so invested. Equity securities include common
stocks, preferred stocks and warrants or options to acquire such securities. In
selecting portfolio securities, the Fund attempts to take advantage of the
differences between economic trends and the anticipated performance of
securities markets in various countries.
Normally, the Fund invests in securities of issuers traded on markets of at
least three of the world's six largest countries by market capitalization
(United States,
11
<PAGE> 21
Japan, United Kingdom, Germany, France and Canada), but securities of issuers
traded on quoted markets of other countries are also considered for investment.
The next six largest countries, in terms of market capitalization, are
Switzerland, Italy, Netherlands, Australia, Sweden and Spain.
The Adviser, subject to the direction of the Company's Directors, provides the
Fund with an overall investment program consistent with the Fund's objective and
policies. The Adviser is solely responsible for advising the Fund with respect
to investments in the United States. The Subadviser, subject to overall review
by the Adviser and the Company's Directors and other authorized officers, is
responsible for recommending an optimal geographic equity allocation and is
responsible for providing advice with respect to the Fund's investments in
countries other than the United States. Investments may be shifted among the
world's various capital markets and among different types of securities in
accordance with ongoing analysis provided by the Adviser and the Subadviser of
trends and developments affecting such markets and securities. The Adviser and
the Subadviser are sometimes referred to as the Advisers.
While the investment policy of the Fund is to be broadly diversified as to
both countries and individual issuers, the Advisers select individual countries
and securities on the basis of several factors. Investments are allocated among
issuers in countries selected based on a comparison of values between the equity
markets in those countries. This comparison is based upon criteria such as
return on equity, book value, earnings, dividends, and interest rates in each
market. After evaluating these factors and others for each country and comparing
opportunities among countries, the Advisers select those countries which, in
their opinion, have the most attractive equity markets. This evaluation is
influential in deciding the amount of investment in each equity market.
Individual equity securities are selected within each market. The Advisers seek
the most attractive individual equity securities based on factors such as book
value, earnings per share and other financial data. The Advisers' approach to
both country and individual security selection is characterized as a
quantitative method utilizing specific financial criteria to identify both value
and opportunity in the equity markets. The Advisers also endeavor to identify
industry, political, and geographical trends which may affect equity values
within individual countries or among a group of countries. The Advisers use
these financial criteria and analysis of industry, political, and geographical
trends to evaluate and compare equity investment opportunities among various
countries and among securities within each country with the objective of
identifying and investing in those securities which can best meet the Fund's
investment objective. Of course, there is no assurance that the Advisers will be
successful in this endeavor or that the investment objective will be realized.
The Fund may purchase foreign securities in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securi-
12
<PAGE> 22
ties representing underlying shares of foreign companies. ADRs are publicly
traded on exchanges or over-the-counter in the United States and are issued
through "sponsored" or "unsponsored" arrangements. In a sponsored ADR
arrangement, the foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available in the
United States about an unsponsored ADR than about a sponsored ADR. The Fund may
invest in ADRs through both sponsored and unsponsored arrangements. For further
information on ADRs and EDRs, investors should refer to the Statement of
Additional Information.
The Fund may invest cash temporarily in short-term debt instruments. Such
temporary investments will only be made with cash held to maintain liquidity or
pending investment. See "Temporary Short-Term Investments" herein.
The investment objective and policies, the percentage limitations and the
kinds of securities in which the Fund may invest may be changed by the Board of
Directors unless expressly governed by those limitations as described under
"Investment Practices and Restrictions -- Investment Restrictions" which can be
changed only by action of the shareholders. If there is a change in investment
objective, shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and needs.
RISK FACTORS. An investment in the Fund involves risks similar to those of
investing in foreign common stocks generally. Investment in common stocks of
foreign issuers may subject the Fund to risks of foreign political, economic and
legal conditions and developments. Such conditions or developments might include
favorable or unfavorable changes in currency exchange rates, exchange control
regulations (including currency blockage), expropriation of assets of companies,
imposition of withholding taxes on dividend or interest payments, and possible
difficulty in obtaining and enforcing judgments against a foreign issuer. Also,
foreign common stocks may not be as liquid and may be more volatile than
comparable domestic common stocks.
Furthermore, issuers of foreign common stocks are subject to different, often
less comprehensive, accounting, reporting and disclosure requirements than
domestic issuers. The Fund, in connection with its purchases and sales of
foreign securities, other than securities purchased or sold in United States
dollars, will incur transaction costs in converting currencies. Also, brokerage
costs incurred in purchasing and selling securities in foreign securities
markets generally are higher than such costs in comparable transactions in
domestic securities markets, and foreign custodial costs relating to the Fund's
portfolio securities are higher than domestic custodial costs. See also
"Investment Practices and Restrictions" for a discussion
13
<PAGE> 23
of certain additional risks related to investment practices that may be utilized
by the Fund, including use of options, futures contracts and related options.
FOREIGN CURRENCY TRANSACTIONS. The value of the Fund's portfolio securities
that are traded in foreign markets may be affected by changes in currency
exchange rates and exchange control regulations. In addition, the Fund will
incur costs in connection with conversions between various currencies. The
Fund's foreign currency exchange transactions generally will be conducted on a
spot basis (that is, cash basis) at the spot rate for purchasing or selling
currency prevailing in the foreign currency exchange market. The Fund purchases
and sells foreign currency on a spot basis in connection with the settlement of
transactions in securities traded in such foreign currency. The Fund does not
purchase and sell foreign currencies as an investment.
The Fund also may enter into contracts with banks or other foreign currency
brokers or dealers to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts
to hedge against changes in foreign currency exchange rates. A foreign currency
forward contract is a negotiated agreement between the contracting parties to
exchange a specified amount of currency at a specified future time at a
specified rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.
The Fund may attempt to hedge against changes in the value of the United
States dollar in relation to a foreign currency by entering into a forward
contract for the purchase or sale of the amount of foreign currency invested or
to be invested, or by buying or selling a foreign currency futures contract for
such amount. Such hedging strategies may be employed before the Fund purchases a
foreign security traded in the hedged currency which the Fund anticipates
acquiring or between the date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Hedging against a change in
the value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions reduce
or preclude the opportunity for gain if the value of the hedged currency should
move in the direction opposite to the hedged position. The Fund will not
speculate in foreign currency forward or futures contracts or through the
purchase and sale of foreign currencies.
TEMPORARY SHORT-TERM INVESTMENTS. It is the Fund's policy to be fully invested
in common stocks and securities convertible into common stocks. However, the
Fund may hold a portion of its assets in cash to meet redemptions and other
day-to-day operating expenses. The Fund may invest cash held for such purposes
in obligations of the United States and of foreign governments, including their
political subdivisions, commercial paper, bankers' acceptances, certificates of
deposit, repurchase agreements collateralized by these securities, and other
short-term evidences
14
<PAGE> 24
of indebtedness. The Fund will only purchase commercial paper if it is rated
Prime-1 or Prime-2 by Moody's Investors Services, Inc. or A-1 or A-2 by Standard
& Poor's Corporation. The Fund also may invest cash held for such purposes in
short-term, high grade foreign debt securities. High grade foreign debt
securities are those debt securities of foreign issuers which the Advisers
determine to have creditworthiness substantially equivalent to that of domestic
issuers of debt securities rated investment grade.
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES AND RESTRICTIONS
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
domestic or foreign banks or broker-dealers in order to earn a return on
temporarily available cash. A repurchase agreement is a short-term investment in
which the purchaser (i.e., the Fund) acquires ownership of a debt security and
the seller agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the holding period. Repurchase agreements
involve certain risks in the event of a default by the other party. The Fund
will not invest in repurchase agreements maturing in more than seven days if any
such investment, together with any other illiquid securities held by the Fund,
exceeds ten percent of the value of the Fund's net assets. In the event of the
bankruptcy or other default of the seller of a repurchase agreement, the Fund
could experience delays in liquidating the underlying securities including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto, (b) possible lack of access to
income on the underlying security during this period, and (c) expenses of
enforcing its rights. See the Statement of Additional Information.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that substantially all of the funds advised or subadvised by
the Adviser would otherwise invest separately into a joint account. The cash in
the joint account is then invested and the funds that contributed to the joint
account share pro rata in the net revenue generated. The Adviser believes that
the joint account produces greater efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for the Fund than would be
available to the Fund investing separately. The manner in which the joint
account is managed is subject to conditions set forth in the SEC order obtained
by the Fund authorizing this practice, which conditions are designed to ensure
the fair administration of the joint account and to protect the amounts in that
account.
PORTFOLIO TRANSACTIONS AND BROKERAGE PRACTICES. The Advisers are responsible
for the placement of orders for the purchase and sale of portfolio securities
for the
15
<PAGE> 25
Fund and the negotiation of brokerage commissions on such transactions.
Brokerage firms are selected on the basis of their professional capability for
the type of transaction and the value and quality of execution of services on a
continuing basis. The Advisers are authorized to place portfolio transactions
with broker and dealer firms participating in the distribution of shares of the
Fund and other American Capital mutual funds if it reasonably believes that the
quality of the execution and the commission are comparable to that available
from other qualified firms. The Advisers are authorized to pay higher
commissions to brokerage firms that provide investment and research information
than to firms which do not provide such services if the Advisers determine that
such commissions are reasonable in relation to the overall services provided.
The information received may be used by the Advisers in managing the assets of
other advisory accounts as well as in the management of the assets of the Fund.
The Fund may from time to time, place brokerage transactions with brokers that
may be considered affiliated persons of the Adviser's parent, The Travelers Inc.
("Travelers"). Such affiliated persons include Smith Barney, Inc. ("Smith
Barney"), a wholly owned subsidiary of Travelers, and Robinson Humphrey, Inc., a
wholly owned subsidiary of Smith Barney. Similarly, the Fund may from time to
time, place brokerage transactions with brokers that may be considered
affiliated persons of the Subadviser, including the Subadviser's parent company,
Lombard, Odier & Cie ("LOC"). When such transactions are made, in accordance
with Rule 17e-1 of the 1940 Act, commissions paid must be "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities during a comparable period of time."
PORTFOLIO TURNOVER. A change in securities held by the Fund is known as
"portfolio turnover" and may involve the payment by the Fund of brokerage
commissions or dealer mark-up and other transaction costs on the sale of
securities as well as on the investment of the proceeds in other securities. The
portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the average value of portfolio
securities, excluding debt securities whose maturities at acquisition were one
year or less. The rate may exceed 100% in any given year, which is higher than
that of many other investment companies. The turnover rate will not be a
limiting factor, however, if the Adviser deems portfolio changes appropriate.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
unaffiliated brokers, dealers and financial institutions provided that (a)
immediately after any such loan, the value of the securities loaned does not
exceed 15% of the total value of the Fund's assets, and (b) any securities loan
is collateralized in accordance with applicable regulatory requirements. The
Advisers believe the risk of loss on such transactions is slight, because, if a
borrower were to default for any
16
<PAGE> 26
reason, the collateral should satisfy the obligation. See the Statement of
Additional Information.
RESTRICTED SECURITIES. The Fund may invest up to ten percent of its net assets
in restricted securities and other illiquid assets. As used herein, restricted
securities are those that have been sold in the United States without
registration under the Securities Act of 1933 ("1933 Act") and are thus subject
to restrictions on resale. Excluded from the limitation, however, are any
restricted securities which are eligible for resale pursuant to Rule 144A under
the 1933 Act and which have been determined to be liquid by the Board of
Directors or by the Adviser pursuant to Board-approved guidelines. The
determination of liquidity is based on the volume of reported trading in the
institutional secondary market for each security. Since it is not possible to
predict with assurance how the markets for restricted securities sold and
offered under Rule 144A will develop, the Directors will carefully monitor the
Fund's investment in these securities focusing on such factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and delays could
result in the Fund's inability to realize a favorable price upon disposition of
restricted securities, and in some cases might make disposition of such
securities at the time desired by the Fund impossible. Since market quotations
are not readily available for restricted securities, such securities will be
valued by a method that the Fund's Board of Directors believes accurately
reflects fair value.
SHORT SALES AGAINST THE BOX. The Fund may from time to time make short sales
of securities it owns or has the right to acquire through conversion or exchange
of other securities it owns. A short sale is "against the box" to the extent
that the Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short. In a short sale, the Fund does not
immediately deliver the securities sold and does not receive the proceeds from
the sale. The Fund is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. The Fund may not make short sales or maintain a short position if to do so
would cause more than 25% of its total assets, taken at market value, to be held
as collateral for such sales.
To secure its obligation to deliver the securities sold short, the Fund will
deposit in escrow in a separate account with its Custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. The Fund may close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short. However, the Fund
will not purchase and deliver new securities to satisfy its
17
<PAGE> 27
short order if such purchase and sale would cause such Fund to derive more than
30% of its gross income from the sale of securities held for less than three
months.
USING OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS. The Fund expects to
utilize options, futures contracts and options thereon in several different
ways, depending upon the status of the Fund's portfolio and the Advisers'
expectations concerning the securities markets.
In times of stable or rising security prices, the Fund generally seeks to
obtain maximum exposure to the securities markets, i.e., to be "fully invested."
Nevertheless, even when the Fund is fully invested, prudent management requires
that at least a small portion of assets be available as cash to honor redemption
requests and for other short-term needs. The Fund may also have cash on hand
that has not yet been invested. The portion of the Fund's assets that is
invested in cash equivalents does not fluctuate with security market prices, so
that, in times of rising market prices, the Fund may underperform the market in
proportion to the amount of cash equivalents in its portfolio. By purchasing
futures contracts, however, the Fund can compensate for the cash portion of its
assets and obtain equivalent performance to investing 100% of its assets in
equity securities.
If the Advisers forecast a market decline, the Fund may take a defensive
position, reducing its exposure to the securities markets by increasing its cash
position. By selling futures contracts instead of portfolio securities, a
similar result can be achieved to the extent that the performance of the stock
index futures contracts correlates to the performance of the Fund's portfolio
securities. Sale of futures contracts could frequently be accomplished more
rapidly and at less cost than the actual sale of securities. Once the desired
hedged position has been effected, the Fund could then liquidate securities in a
more deliberate manner, reducing its futures position simultaneously to maintain
the desired balance, or it could maintain the hedged position.
As an alternative to selling stock index futures contracts, the Fund can
purchase stock index puts (or stock index futures puts) to hedge the portfolio's
risk in a declining market. Since the value of a put increases as the index
declines below a specified level, the portfolio's value is protected against a
market decline to the degree the performance of the index correlates with the
performance of the Fund's investment portfolio. If the market remains stable or
advances, the Fund can refrain from exercising the put and its portfolio will
participate in the advance, having incurred only the premium cost for the put.
In certain cases the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities. See the Statement of Additional
Information for further
18
<PAGE> 28
discussion of options, futures contracts and related options, and risks related
thereto.
Potential Risks of Options, Futures Contracts and Related Options. The
purchase and sale of options and futures contracts involve risks different from
those involved with direct investments in securities. While utilization of
options, futures contracts and similar instruments may be advantageous to the
Fund, if the Advisers are not successful in employing such instruments in
managing the Fund's investments, the Fund's performance will be worse than if
the Fund did not make such investments. In addition, the Fund would pay
commissions and other costs in connection with such investments, which may
increase the Fund's expenses and reduce its return. The Fund may write or
purchase options in privately negotiated transactions ("OTC Options") as well as
listed options. OTC Options can be closed out only by agreement with the other
party to the transaction. Any OTC Option purchased by the Fund is considered an
illiquid security. Under current policy, any OTC Option written by the Fund will
be with a qualified dealer pursuant to an agreement under which the Fund may
repurchase the option at a formula price. Any such OTC Option is presently
considered illiquid to the extent that the formula price exceeds the intrinsic
value of the option. The Fund may not purchase or sell futures contracts or
related options for which the aggregate initial margin and premiums exceed five
percent of the fair market value of the Fund's assets. In order to prevent
leverage in connection with the purchase of futures contracts by the Fund, an
amount of cash, cash equivalents or liquid high grade debt securities equal to
the market value of the obligation under the futures contracts (less any related
margin deposits) will be maintained in a segregated account with the Custodian.
The Fund may not invest more than ten percent of its net assets in illiquid
securities including OTC Options and repurchase agreements which have a maturity
of longer than seven days.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment
restrictions which may not be changed without the approval of the holders of a
majority of the Fund's shares. See the Statement of Additional Information. The
percentage limitations need only be met at the time the investment is made or
other relevant action taken. These restrictions provide, among other things,
that the Fund may not:
1. Purchase any security (other than obligations of the United States
Government, its agencies, or instrumentalities) if more than 25% of its
total assets (taken at current value) would then be invested in a single
industry.
2. Invest more than five percent of its total assets (taken at current
value) in securities of a single issuer other than the United States
Government, its agencies or instrumentalities, or hold more than ten
percent of the outstanding voting securities of an issuer.
19
<PAGE> 29
3. Borrow money except temporarily from banks to facilitate payment of
redemption requests and then only in amounts not exceeding 33 1/3% of its
net assets, or pledge more than ten percent of its net assets in
connection with permissible borrowings or purchase additional securities
when money borrowed exceeds five percent of its net assets. Margin
deposits or payments in connection with the writing of options or in
connection with the purchase or sale of forward contracts, futures,
foreign currency futures and related options, are not deemed to be a
pledge or other encumbrance.
4. Lend money except through the purchase of (i) United States and foreign
government securities, commercial paper, bankers' acceptances,
certificates of deposit and similar evidences of indebtedness, both
foreign and domestic, and (ii) repurchase agreements; or lend securities
in an amount exceeding 15% of the total assets of the Fund. The purchase
of a portion of an issue of securities described under (i) above
distributed publicly, whether or not the purchase is made on the original
issuance, is not considered the making of a loan.
- ------------------------------------------------------------------------------
THE COMPANY AND ITS MANAGEMENT
- ------------------------------------------------------------------------------
The Company is an open-end, management investment company, commonly referred
to as a "mutual fund," incorporated in Maryland on May 25, 1990. A mutual fund
provides, for those who have similar investment goals, a practical and
convenient way to invest in a more diversified portfolio of securities than such
investors could assemble independently by combining their resources in an effort
to achieve such goals. The Fund is a diversified portfolio of the Company and is
one of two series of shares of common stock which the Company is currently
authorized to issue. The other series is American Capital Global Government
Securities Fund ("Global Government"). From time to time, the Company may
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Each series of the Company is a
separate and distinct entity, and a shareholder of one series has no interest in
or entitlement to the assets of any other series.
A board of eight directors has the responsibility for overseeing the affairs
of the Company. The Adviser, 2800 Post Oak Boulevard, Houston, Texas 77056 and
the Subadviser, Norfolk House, 13 Southampton Place, London WC1A 2AJ, England,
are responsible for the provision of advisory services in relation to the Fund's
assets. The Adviser also provides administrative services and manages the Fund's
business and affairs. The Adviser, together with its predecessors, has been in
the investment advisory business since 1926. As of August 31, 1994, the Adviser
provides
20
<PAGE> 30
investment advice to 45 investment company portfolios with total net assets of
approximately $16.8 billion.
The Adviser and the Distributor are wholly owned subsidiaries of American
Capital Management & Research, Inc. ("ACMR"), an indirect wholly owned
subsidiary of Travelers. Travelers is a financial services holding company
engaged through its subsidiaries, principally in three business
segments -- investment services, consumer finance services and insurance
services. Mr. Don G. Powell is President and Director of the Company, President,
Chief Executive Officer and Director of the Adviser, and Executive Vice
President and Director of the Distributor. Most other officers of the Company
are also officers and/or directors of the Adviser, and a number are also
officers and directors of the Distributor. The Subadviser provides investment
advisory services to the Adviser of the Fund with respect to the Fund's
investments in foreign securities, including recommending optimal geographic and
equity allocation. The Subadviser is wholly owned by LOC, one of the largest and
oldest private banks in Switzerland, established in 1798. Mr. Pierre Keller, a
Managing Partner of LOC, is Chairman and Mr. Robert van Maasdijk is Managing
Director of the Subadviser. The Subadviser presently serves as investment
subadviser to two open-end investment company portfolios and one closed-end
investment company portfolio other than the Company.
The Company retains the Adviser to manage the investment of its assets and to
place orders for the purchase and sale of its portfolio securities. The Adviser
has entered into a sub-advisory agreement dated July 17, 1991, as supplemented,
(the "Sub-advisory Agreement") with the Subadviser to assist it in performing
its investment advisory functions. The Subadviser will be primarily responsible
for recommending the allocation of investments among various international
markets and currencies; recommendation and selection of particular securities in
the international markets; and placement of portfolio transactions in the
foreign equity markets. Under an investment advisory agreement dated July 17,
1991, as supplemented, (the "Advisory Agreement"), the Company pays the Adviser
a monthly fee computed on average daily net assets of the Fund at the annual
rate of 1.00% of the Fund's average daily net assets. This fee is higher than
that charged by most other mutual funds but the Fund believes it is justified by
the special international nature of the Fund and is not necessarily higher than
the fees charged by certain mutual funds with investment objective and policies
similar to those of the Fund. Under the Advisory Agreement, the Company also
reimburses the Adviser for the cost of the Fund's accounting services, which
include maintaining its financial books and records and calculating its daily
net asset value. Operating expenses paid by the Fund include shareholder service
agency fees, distribution charges, custodial fees, legal and accounting fees,
the costs of reports and proxies to shareholders, directors' fees, and all other
business expenses not specifically assumed by the Adviser. Advisory (management)
fee, and total operating expense, ratios are shown under the caption "Expense
Synopsis" herein. Pursuant to the
21
<PAGE> 31
Sub-advisory Agreement, the Subadviser receives on an annual basis 50% of the
compensation received by the Adviser. The Adviser and the Subadviser may, from
time to time, agree to waive their respective investment advisory fees or any
portion thereof or elect to reimburse the Fund for ordinary business expenses in
excess of an agreed upon amount.
Jeff New is primarily responsible for the day-to-day management of the Fund's
investment portfolio with respect to investments in the United States. Mr. New
is Vice President of the Fund. He has been an associate portfolio manager with
the Adviser since April 1990. Prior to that he was a securities analyst with
Texas Commerce Investment Management Company. Mr. New has been primarily
responsible for managing the Fund's investment portfolio with respect to
investments in the United States since May 13, 1994. The Subadviser employs
Ronald Armist as Director and Senior Investment Manager, who is primarily
responsible for the day-to-day management of the Fund's investments in countries
other than the United States. Mr. Armist has provided such services since the
Fund's inception.
- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------
GENERAL
The Fund offers three classes of shares to the general public. Class A shares
are sold with an initial sales charge; Class B shares and Class C shares are
sold without an initial sales charge and are subject to a contingent deferred
sales charge upon certain redemptions. See "Multiple Pricing System" for a
discussion of factors to consider in selecting which class of shares to
purchase. Contact the American Capital Service Department at (800) 421-5666 for
further information and appropriate forms.
Shares are offered continuously for sale by the Distributor and are available
through authorized dealers. Initial investments must be at least $500, and
subsequent investments must be at least $25. Both minimums may be waived by the
Distributor for plans involving periodic investments. Shares of the Fund may be
sold in foreign countries where permissible. The Fund and the Distributor
reserve the right to refuse any order for the purchase of shares. The Fund also
reserves the right to suspend the sale of the Fund's shares in response to
conditions in the securities markets or for other reasons.
Shares may be purchased on any business day through authorized dealers. Shares
may also be purchased by completing the application included in this Prospectus
and forwarding the application, through the designated dealer, to the
shareholder service agent, American Capital Companies Shareholder Services, Inc.
("AC-
22
<PAGE> 32
CESS"). When purchasing shares of the Fund, investors must specify whether the
purchase is for Class A, Class B or Class C shares.
Shares are offered at the next determined net asset value per share, plus a
front-end or contingent deferred sales charge depending on the method of
purchasing shares chosen by the investor, as shown in the tables herein. Net
asset value per share is determined once daily as of the close of trading on the
New York Stock Exchange ("Exchange") (currently 4:00 p.m. New York time) each
day the Exchange is open. Net asset value per share for each class is determined
by dividing the value of the Fund's securities, cash and other assets (including
accrued interest) attributable to such class, less all liabilities (including
accrued expenses) attributable to such class, by the total number of shares of
the class outstanding. With respect to foreign securities, income is accrued by
the Fund on the ex date or when data becomes available, whichever is later.
Securities listed or traded on a national securities exchange are valued at the
last sale price. Unlisted securities and listed securities for which the last
sale price is not available are valued at the most recent bid price. Options and
futures contracts are valued at the last sale price or if no sales are reported,
at the mean between the bid and asked prices. Short-term investments and other
securities are valued in the manner described in the Statement of Additional
Information.
Generally, the net asset values per share of the Class A, Class B and Class C
shares are expected to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class A, Class B and Class C
shares may differ from one another, reflecting the daily expense accruals of the
distribution and the higher transfer agency fees applicable with respect to the
Class B and Class C shares and the differential in the dividends paid on the
classes of shares. The price paid for shares purchased is based on the next
calculation of net asset value plus applicable Class A sales charges after an
order is received by a dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of business on such day. Orders
received by dealers after the close of the Exchange are priced based on the next
close, provided they are received by the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of dealers to transmit
orders received by them to the Distributor so they will be received prior to
such time. Orders of less than $500 are mailed by the dealer and processed at
the offering price next calculated after acceptance by ACCESS.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights and is identical in all respects,
except that (i) Class B and Class C shares bear the expenses of the deferred
sales arrangement and any expenses (including the distribution fee and
incremental transfer agency costs) resulting from such sales arrangement, (ii)
each class has exclusive voting rights with respect to approvals of the Rule
12b-1 distribution plan pursuant to which its distribution fee and/or service
fee is paid which relate to a specific class, and
23
<PAGE> 33
(iii) Class B and Class C shares are subject to a conversion feature. Each class
has different exchange privileges and certain different shareholder service
options available. See "Distribution Plans" and "Shareholder
Services -- Exchange Privilege." The net income attributable to Class B and
Class C shares and the dividends payable on Class B and Class C shares will be
reduced by the amount of the distribution fee and incremental expenses
associated with such distribution fees. Sales personnel of broker-dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling Class A, Class B or Class C shares.
CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value plus a sales charge, as set forth below.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
REALLOWED
TO DEALERS
SIZE OF AS % OF NET AS % OF (AS A % OF
INVESTMENT AMOUNT INVESTED OFFERING PRICE OFFERING PRICE)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000..... 6.10% 5.75% 5.00%
$50,000 but less than
$100,000............ 4.99% 4.75% 4.00%
$100,000 but less than
$250,000............ 4.17% 4.00% 3.50%
$250,000 but less than
$500,000............ 3.09% 3.00% 2.50%
$500,000 but less than
$1,000,000.......... 2.04% 2.00% 1.75%
$1,000,000 and over... (see herein) (see herein) (see herein)
- -----------------------------------------------------------------------------
</TABLE>
No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a contingent
deferred sales charge of 1% in the event of certain redemptions within one year
of the purchase. The contingent deferred sales charge incurred upon redemption
is paid to the Distributor in reimbursement for distribution-related expenses. A
commission will be paid to dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1% on sales to $2 million, plus
0.80% on the next million, plus 0.20% on the next $2 million and 0.08% on the
excess over $5 million.
For qualified 401(k) retirement plans administered under American Capital
Trust Company's (k) Advantage Program, or similar recordkeeping programs made
available through American Capital Trust Company, no sales charge is payable at
the time of purchase for plans with at least 50 eligible employees or investing
at least $250,000 in American Capital funds, which include Participating Funds
as described herein under "Volume Discounts," and American Capital Reserve Fund,
24
<PAGE> 34
Inc. ("Reserve"). For such investments the Fund imposes a contingent deferred
sales charge of 1% in the event of certain redemptions within one year of the
purchase. No such charge will be imposed unless and until appropriate relief is
granted by the SEC. The contingent deferred sales charge incurred upon
redemption is paid to the Distributor in reimbursement for distribution-related
expenses. A commission will be paid to dealers who initiate and are responsible
for such purchases as follows: 1% on sales to $5 million, plus 0.50% on the next
$5 million, plus 0.25% on the excess over $10 million.
In addition to the reallowances from the applicable public offering price
described above, the Distributor may, from time to time, pay or allow additional
reallowances or promotional incentives, in the form of cash or other
compensation, to dealers that sell shares of the Fund. The Distributor may pay
dealers through whom purchases are made at net asset value as described in
clause (e) herein an amount equal to 0.40% of the amount invested. Dealers which
are reallowed all or substantially all of the sales commissions may be deemed to
be underwriters for purposes of the 1933 Act.
The Distributor may also pay financial institutions (which may include banks)
and other industry professionals that provide services to facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the reallowance allowable to dealers described herein. Such financial
institutions, other industry professionals and dealers are hereinafter referred
to as "Service Organizations." Banks are currently prohibited under the
Glass-Steagall Act from providing certain underwriting or distribution services.
If banking firms were prohibited from acting in any capacity or providing any of
the described services, the Distributor would consider what action, if any,
would be appropriate. The Distributor does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
the Fund. State securities laws regarding registration of banks and other
financial institutions may differ from the interpretations of federal law
expressed herein, and banks and other financial institutions may be required to
register as dealers pursuant to certain state laws.
Class A shares of the Fund may be purchased at net asset value, upon written
assurance that the purchase is made for investment purposes and that the shares
will not be resold except through redemption by the Fund, by (a) current or
retired directors of the Fund; current or retired employees of ACMR and any of
its affiliates; spouses, minor children and grandchildren of the above persons;
and parents of employees and parents of spouses of employees of ACMR and any of
its affiliates; (b) employees of an investment subadviser to any fund in the
same "group of investment companies" (as defined in Rule 11a-3 under the 1940
Act) as the Fund or an affiliate of the subadviser; employees and registered
representatives of Service Organizations with selling group agreements with the
Distributor; employees of financial institutions that have arrangements with
Service Organiza-
25
<PAGE> 35
tions having selling group agreements with the Distributor; and spouses and
minor children of such persons; (c) any trust, pension, profit sharing or other
benefit plan for such persons; and (d) trustees or other fiduciaries purchasing
shares for retirement plans of organizations with retirement plan assets of $10
million or more. Shares are offered at net asset value to such persons because
of anticipated economies in sales efforts and sales related expenses. Such
shares are also offered at net asset value to (e) accounts opened for
shareholders by dealers where the amounts invested represent the redemption
proceeds from investment companies distributed by an entity other than the
Distributor if such redemption has occurred no more than 15 days prior to the
purchase of shares of the Fund and the shareholder paid an initial sales charge
and was not subject to a deferred sales charge on the redeemed account. Shares
are also offered at net asset value to (f) registered investment advisers, trust
companies and bank trust departments exercising discretionary investment
authority with respect to the money to be invested in the Fund, provided that
the aggregate amount invested in the Fund alone, or in any combination of shares
of the Fund and shares of certain other participating American Capital mutual
funds as described herein under "Purchase of Shares -- Class A Shares -- Volume
Discounts," during the 13-month period commencing with the first investment
pursuant hereto at net asset value, equals at least $1 million. Purchase orders
made pursuant to clause (f) may be placed either through authorized dealers as
described above or directly with ACCESS by the investment adviser, trust company
or bank trust department, provided that ACCESS receives federal funds for the
purchase by the close of business on the next business day following acceptance
of the order. An authorized dealer or financial institution may charge a
transaction fee for placing an order to purchase shares pursuant to this
provision or for placing a redemption order with respect to such shares. Service
Organizations will be paid a service fee as described herein under "Distribution
Plans" on purchases made on behalf of registered investment advisers, trust
companies and bank trust departments described in clause (f) above, retirement
plans described in clause (d) above, and for registered representatives'
accounts.
The Distributor may pay commissions of up to 1% for purchases described in
clause (d). The Distributor may pay Service Organizations through which
purchases are made as described in clause (f) above for transactions of $1
million or more an amount up to 0.50% of the amount invested, over a
twelve-month period following the pertinent transaction. The Company may
terminate, or amend the terms of, offering shares of the Fund at net asset value
to such groups at any time.
Investors purchasing Class A shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described herein.
26
<PAGE> 36
VOLUME DISCOUNTS. The size of investment shown in the preceding table applies
to the total dollar amount being invested by any person in shares of the Fund,
or in any combination of shares of the Fund and shares of certain other
participating American Capital mutual funds (the "Participating Funds"),
although other Participating Funds may have different sales charges. The
Participating Funds are American Capital Comstock Fund, Inc., American Capital
Corporate Bond Fund, Inc. ("Corporate Bond"), American Capital Emerging Growth
Fund, Inc., American Capital Enterprise Fund, Inc., American Capital Equity
Income Fund, Inc., American Capital Federal Mortgage Trust ("Federal Mortgage"),
American Capital Global Managed Assets Fund, Inc., American Capital Government
Securities, Inc., American Capital Government Target Series ("Government
Target"), American Capital Growth and Income Fund, Inc., American Capital Harbor
Fund, Inc., American Capital High Yield Investments, Inc. ("High Yield"),
American Capital Municipal Bond Fund, Inc. ("Municipal Bond"), American Capital
Pace Fund, Inc., American Capital Real Estate Securities Fund, Inc. ("Real
Estate"), American Capital Tax-Exempt Trust ("Tax-Exempt"), American Capital
Texas Municipal Securities, Inc. ("Texas Municipal"), American Capital U.S.
Government Trust for Income ("Government Trust"), American Capital Utilities
Income Fund, Inc. ("Utilities Income"), and American Capital World Portfolio
Series, Inc. A person eligible for a volume discount includes an individual;
members of a family unit comprising husband, wife, and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
table may also be determined by combining the amount being invested in shares of
the Participating Funds plus the current offering price of all shares of the
Participating Funds which have been previously purchased and are still owned.
Shares previously purchased are only taken into account, however, if the
Distributor is notified by the investor or the investor's dealer at the time an
order is placed for a purchase which would qualify for a reduced sales charge on
the basis of previous purchases and if sufficient information is furnished to
permit confirmation of such purchases.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the investments over a 13-month
period to determine the sales charge as outlined in the preceding table. The
size of investment shown in the preceding table also includes purchases of
shares of the Participating Funds over a 13-month period based on the total
amount of intended purchases plus the value of all shares of the Participating
Funds previously purchased and still owned. An investor may elect to compute the
13-month period starting up to 90 days before the date of execution of a Letter
of Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. If the goal is not
achieved within the period, the investor must pay the difference between the
charges applicable to the
27
<PAGE> 37
purchases made and the charges previously paid. The initial purchase must be for
an amount equal to at least five percent of the minimum total purchased amount
of the level selected. If trades not initially made under a Letter of Intent
subsequently qualify for a lower sales charge through the 90-day back-dating
provisions, an adjustment will be made at the expiration of the Letter of Intent
to give effect to the lower charge. Such adjustments in sales charge will be
used to purchase additional shares for the shareholder at the applicable
discount category. Additional information is contained in the application form
included in this Prospectus.
CLASS B SHARES
Class B shares are offered at the next determined net asset value. Class B
shares which are redeemed within five years of purchase are subject to a
contingent deferred sales charge at the rates set forth in the following table
charged as a percentage of the dollar amount subject thereto. The charge is
assessed on an amount equal to the lesser of the then current market value or
the cost of the shares being redeemed. Accordingly, no sales charge is imposed
on increases in net asset value above the initial purchase price. In addition,
no charge is assessed on shares derived from reinvestment of dividends or
capital gains distributions.
The amount of the contingent deferred sales charge, if any, varies depending
on the number of years from the time of payment for the purchase of Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchases
of shares, all payments during a month are aggregated and deemed to have been
made on the last day of the month.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
------------------------------------------------------------------------------
<S> <C>
First.............................................. 5%
Second............................................. 4%
Third.............................................. 3%
Fourth............................................. 2.5%
Fifth.............................................. 1.5%
Sixth.............................................. None
------------------------------------------------------------------------------
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation is determined in the manner that results in the
lowest possible rate being charged. Therefore, it is assumed that the redemption
is first of any shares in the shareholder's Fund account that are not subject to
a contingent deferred sales charge, second, of shares held for over five years
or shares acquired pursuant to reinvestment of dividends or distributions and
third, of shares held
28
<PAGE> 38
longest during the five-year period. The charge is not applied to dollar amounts
representing an increase in the net asset value since the time of purchase.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired ten
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), ten shares will not
be subject to charge because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds is subject to a deferred sales charge at a
rate of 4% (the applicable rate in the second year after purchase).
A commission or transaction fee of 4% of the purchase amount will be paid to
broker-dealers and other Service Organizations at the time of purchase.
Additionally, the Distributor may, from time to time, pay additional promotional
incentives, in the form of cash or other compensation, to Service Organizations
that sell Class B shares of the Fund.
CLASS C SHARES
Class C shares are offered at the next determined net asset value. Class C
shares which are redeemed within the first year of purchase are subject to a
contingent deferred sales charge of 1%. The charge is assessed on an amount
equal to the lesser of the then current market value or the cost of the shares
being redeemed. Accordingly, no sales charge is imposed on increases in net
asset value above the initial purchase price. In addition, no charge is assessed
on shares derived from reinvestment of dividends or capital gains distributions.
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation is determined in the manner that results in the
lowest possible rate being charged. Therefore, it is assumed that the redemption
is first of any shares in the shareholder's Fund account that are not subject to
a contingent deferred sales charge, and second of shares held for more than one
year or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of 1% of the purchase amount will be paid to
broker-dealers and other Service Organizations at the time of purchase. Broker-
dealers and other Service Organizations will also be paid ongoing commissions
and transaction fees of up to 0.65% of the average daily net assets of the
Fund's Class C shares for the second through tenth year after purchase.
Additionally, the Distributor may, from time to time, pay additional promotional
incentives, in the form of cash or other compensation, to Service Organizations
that sell Class C shares of the Fund.
29
<PAGE> 39
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B and
Class C shares (i) following the death or disability (as defined in the Code) of
a shareholder, (ii) in connection with certain distributions from an IRA or
other retirement plan, and (iii) pursuant to the Fund's systematic withdrawal
plan but limited to 12% annually of the initial value of the account. The
contingent deferred sales charge is also waived on redemptions of Class C shares
as it relates to the reinvestment of redemption proceeds in shares of the same
class of the Fund within 120 days after redemption. See the Statement of
Additional Information for further discussion of waiver provisions.
- ------------------------------------------------------------------------------
DISTRIBUTION PLANS
- ------------------------------------------------------------------------------
Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment company
to directly or indirectly pay expenses associated with the distribution of its
shares ("distribution expenses") and servicing its shareholders in accordance
with a plan adopted by the investment company's board of directors and approved
by its shareholders. Pursuant to such Rule, the Directors of the Fund, and the
shareholders of each class have adopted three Distribution Plans hereinafter
referred to as the "Class A Plan," the "Class B Plan" and the "Class C Plan."
Each Distribution Plan is in compliance with the rules of fair practice of the
National Association of Securities Dealers, Inc. ("NASD Rules") as amended July
7, 1993. The NASD Rules limit the annual distribution charges that a mutual fund
may impose on a class of shares. The NASD Rules also limit the aggregate amount
which the Fund may pay for such distribution costs. Under the Class A Plan, the
Fund pays a service fee to the Distributor at an annual rate of up to 0.25% of
the Fund's aggregate average daily net assets attributable to the Class A
shares. Under the Class B Plan and the Class C Plan, the Fund pays a service fee
to the Distributor at an annual rate of up to 0.25% and a distribution fee at an
annual rate of up to 0.75% of the Fund's aggregate average daily net assets
attributable to the Class B shares and Class C shares to reimburse the
Distributor for service fees paid by it to Service Organizations and for its
distribution costs.
The Distributor uses the Class A, Class B and Class C service fees to
compensate Service Organizations for personal services and/or the maintenance of
shareholder accounts. Under the Class B Plan, the Distributor receives
additional payments from the Fund in the form of a distribution fee at the
annual rate of up to 0.75% of the net assets of the Class B shares as
reimbursement for (i) upfront commissions and transaction fees of up to 4% of
the purchase price of Class B shares purchased by the clients of broker-dealers
and other Service Organizations, and (ii) other distribution expenses as
described in the Statement of Additional Information.
30
<PAGE> 40
Under the Class C Plan, the Distributor receives additional payments from the
Fund in the form of a distribution fee at the annual rate of up to 0.75% of the
net assets of the Class C shares as reimbursement for (i) upfront commissions
and transaction fees of up to 0.75% of the purchase price of Class C shares
purchased by the clients of broker-dealers and other Service Organizations and
ongoing commissions and transaction fees of up to 0.65% of the average daily net
assets of the Fund's Class C shares, and (ii) other distribution expenses as
described in the Statement of Additional Information.
In adopting the Class A Plan, the Class B Plan and the Class C Plan, the
Directors of the Fund determined that there was a reasonable likelihood that
such Plans would benefit the Fund and its shareholders. Information with respect
to distribution and service revenues and expenses is presented to the Directors
each year for their consideration in connection with their deliberations as to
the continuance of the Distribution Plans. In their review of the Distribution
Plans, the Directors are asked to take into consideration expenses incurred in
connection with the distribution and servicing of each class of shares
separately. The sales charge and distribution fee, if any, of a particular class
will not be used to subsidize the sale of shares of the other classes.
Service expenses accrued by the Distributor in one fiscal year may not be paid
from the Class A service fees received from the Fund in subsequent fiscal years.
Thus, if the Class A Plan were terminated or not continued, no amounts (other
than current amounts accrued but not yet paid) would be owed by the Fund to the
Distributor.
The distribution fee attributable to Class B shares or Class C shares is
designed to permit an investor to purchase such shares without the assessment of
a front-end sales load and at the same time permit the Distributor to compensate
Service Organizations with respect to such shares. In this regard, the purpose
and function of the combined contingent deferred sales charge and distribution
fee are the same as those of the initial sales charge with respect to the Class
A shares of the Fund in that in both cases such charges provide for the
financing of the distribution of the Fund's shares.
Actual distribution expenditures paid by the Distributor with respect to Class
B or Class C shares for any given year are expected to exceed the fees received
pursuant to the Class B Plan and Class C Plan and payments received pursuant to
contingent deferred sales charges. Such excess will be carried forward, without
interest charges unless permitted under SEC regulations, and may be reimbursed
by the Fund or its shareholders from payments received through contingent
deferred sales charges in future years and from payments under the Class B Plan
and Class C Plan so long as such Plans are in effect. For example, if in a
fiscal year the Distributor incurred distribution expenses under the Class B
Plan of $1 million, of which $500,000 was recovered in the form of contingent
deferred sales charges paid
31
<PAGE> 41
by investors and $400,000 was reimbursed in the form of payments made by the
Fund to the Distributor under the Class B Plan, the balance of $100,000 would be
subject to recovery in future fiscal years from such sources. For the plan year
ended June 30, 1994, the unreimbursed expenses incurred by the Distributor under
the Class B Plan and carried forward were approximately $1.5 million or 2.85% of
the Class B shares' net assets. The unreimbursed expenses incurred by the
Distributor under the Class C Plan from June 21, 1993 (inception of Class C
shares) through May 31, 1994, and carried forward were approximately $90,000 or
1.48% of the Class C shares' net assets.
If the Class B Plan or Class C Plan was terminated or not continued, the Fund
would not be contractually obligated to pay and has no liability to the
Distributor for any expenses not previously reimbursed by the Fund or recovered
through contingent deferred sales charges.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. The
following is a description of those services.
SHAREHOLDER SERVICES APPLICABLE TO ALL CLASSES
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
shares are held by ACCESS. Stock certificates are not issued except upon
shareholder request. Most shareholders elect not to receive certificates in
order to facilitate redemptions and transfers. A shareholder may incur an
expense to replace a lost certificate. Except as described herein, after each
share transaction in an account, the shareholder receives a statement showing
the activity in the account. Each shareholder who has an account in any of the
Participating Funds listed under "Purchase of Shares -- Class A Shares -- Volume
Discounts," or Reserve, may receive statements quarterly from ACCESS showing any
reinvestments of dividends and capital gains distributions and any other
activity in the account since the preceding statement. Such shareholders also
will receive separate confirmations for each purchase or sale transaction other
than reinvestment of dividends and capital gains distributions and systematic
purchases or redemptions. Additions to an investment account may be made at any
time by purchasing shares through authorized investment dealers or by mailing a
check directly to ACCESS.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the
32
<PAGE> 42
record date. Unless the shareholder instructs otherwise, the reinvestment plan
is automatic. The investor may, on the initial application or prior to any
declaration, instruct that dividends be paid in cash and capital gains
distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize ACCESS to charge a bank account on a regular
basis to invest pre-determined amounts in the Fund. Additional information is
available from the Distributor or authorized dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); Keogh and corporate pension and profit sharing plans; 401(k)
plans; or Section 403(b)(7) plans in the case of employees of public school
systems and certain non-profit organizations. Documents and forms containing
detailed information regarding these plans are available from the Distributor.
American Capital Trust Company serves as Custodian under the IRA, 403(b)(7) and
Keogh plans and charges an annual fee. Details regarding other fees, as well as
full plan administration for profit sharing, pension and 401(k) plans are
available from the Distributor.
FUND TO FUND DIVIDENDS. A shareholder may, upon written request or by
completing the appropriate section of the application form in this Prospectus,
elect to have all dividends and other distributions paid on a Class A, Class B
or Class C account in the Fund invested into a pre-existing Class A, Class B or
Class C account in any of the Participating Funds listed under "Purchase of
Shares -- Class A Shares -- Volume Discounts," or Reserve. Both accounts must be
of the same class and of the same type, either non-retirement or retirement. Any
two non-retirement accounts can be used. If the accounts are retirement
accounts, they must both be for the same class and of the same type of
retirement plan (e.g., IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the
same individual. If a qualified, pre-existing account does not exist, the
shareholder must establish a new account subject to minimum investment and other
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value as of
the payable date of the distribution only if shares of such selected fund have
been registered for sale in the investor's state.
EXCHANGE PRIVILEGE. Shares of the Fund or of any Participating Fund (listed
herein under "Purchase of Shares -- Volume Discounts"), other than Government
Target, may be exchanged for shares of the same class of any other fund without
sales charge, provided that shares of Corporate Bond, Federal Mortgage, Global
Government, Government Trust, High Yield, Municipal Bond, Real Estate, Tax-
Exempt, Texas Municipal and Utilities Income are subject to a 30-day holding
period requirement. Shares of Government Target may be exchanged for shares of
Reserve or Class A shares of any other Participating Fund without sales charge.
33
<PAGE> 43
Shares of Reserve may be exchanged for Class A shares of any Participating Fund
upon payment of the excess, if any, of the sales charge rate applicable to the
shares being acquired over the sales charge rate previously paid. Shares of any
Participating Fund or Reserve may be exchanged for shares of any other
Participating Fund if shares of that Participating Fund are available for sale;
however, during periods of suspension of sales, shares of a Participating Fund
may be available for sale only to existing shareholders. Additional funds may be
added from time to time as a Participating Fund.
Class B and Class C shareholders of the Fund have the ability to exchange
their shares ("original shares") for the same class of shares of any other
American Capital fund that offers such shares ("new shares") in an amount equal
to the aggregate net asset value of the original shares, without the payment of
any contingent deferred sales charge otherwise due upon redemption of the
original shares. For purposes of computing the contingent deferred sales charge
payable upon a disposition of the new shares, the holding period for the
original shares is added to the holding period of the new shares. Class B and
Class C shareholders may exchange their shares for shares of Reserve without
incurring the contingent deferred sales charge that otherwise would be due upon
redemption of such Class B or Class C shares. Class B or Class C shareholders
would remain subject to the contingent deferred sales charge imposed by the
original fund upon their redemption from the American Capital complex of funds.
Shares of Reserve acquired through an exchange of Class B or Class C shares may
be exchanged only for the same class of shares of a Participating Fund without
incurring a contingent deferred sales charge.
Since the maximum sales charge rate applicable to purchases of Class A shares
of the Fund is at least one percentage point higher than the maximum sales
charge rate applicable to the purchase of Class A shares of American Capital
Fixed-Income funds, the foregoing exchange privilege may be utilized to reduce
the sales charge paid to purchase Class A shares of the Fund, subject to the
exchange fee described below.
Shares of the fund to be acquired must be registered for sale in the
investor's state and an exchange fee, currently $5 per transaction, is charged
by ACCESS except as described herein under "Systematic Exchange" and "Automatic
Exchange." Exchanges of shares are sales and may result in a gain or loss for
federal income tax purposes, although if the shares exchanged have been held for
less than 91 days, the sales charge paid on such shares is not included in the
tax basis of the exchanged shares, but is carried over and included in the tax
basis of the shares acquired. See the Statement of Additional Information.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS, or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges
34
<PAGE> 44
unless otherwise designated in the application form included in this Prospectus.
ACMR and its subsidiaries, including ACCESS (collectively, "American Capital"),
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither American Capital nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
American Capital and the Fund may be liable for any losses due to unauthorized
or fraudulent instructions if reasonable procedures are not followed. Exchanges
are effected at the net asset value per share next calculated after the request
is received in good order with adjustment for any additional sales charge. See
both "Purchase of Shares" and "Redemption of Shares." If the exchanging
shareholder does not have an account in the fund whose shares are being
acquired, a new account will be established with the same registration, dividend
and capital gains options (except fund to fund dividends) and dealer of record
as the account from which shares are exchanged, unless otherwise specified by
the shareholder. In order to establish a systematic withdrawal plan for the new
account or reinvest dividends from the new account into another fund, however,
an exchanging shareholder must file a specific written request. The Fund
reserves the right to reject any order to acquire its shares through exchange,
or otherwise to modify, restrict or terminate the exchange privilege at any time
on 60 days' notice to its shareholders of any termination or material amendment.
A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for additional information regarding such
fund prior to investing.
SYSTEMATIC EXCHANGE. A shareholder may invest regularly into any Participating
Fund by systematically exchanging from the Fund into such other fund account
($25 minimum for existing account, $100 minimum for establishing new account).
Both accounts must be of the same type and class. The exchange fee as described
above under "Shareholder Services -- Exchange Privilege" will be waived for such
systematic exchanges. Additional information on how to establish this option is
available from the Distributor.
AUTOMATIC EXCHANGE. The exchange fee described above under "Shareholder
Services -- Exchange Privilege" will be waived for any exchange transmitted
through ACCESS Plus, FUNDSERV or via computer transmission. Contact the American
Capital Service Department at (800) 421-5666 for further information on how to
utilize this option.
35
<PAGE> 45
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the offering price next computed after receipt of
instructions may establish a monthly withdrawal plan. Any investor whose shares
in a single account total $5,000 or more may establish a withdrawal plan on a
quarterly, semiannual or annual basis. This plan provides for the orderly use of
the entire account, not only the income but also the capital, if necessary. Each
withdrawal constitutes a redemption of shares on which any capital gain or loss
will be recognized. The planholder may arrange for monthly, quarterly,
semiannual, or annual checks in any amount not less than $25. Such a systematic
withdrawal plan may also be maintained by an investor purchasing shares for a
retirement plan established on a form made available by the Fund. See
"Shareholder Services -- Retirement Plans."
Class B and Class C shareholders who establish a withdrawal plan may redeem up
to 12% annually of the shareholder's initial account balance without incurring a
contingent deferred sales charge. Initial account balance means the amount of
the shareholder's investment in the Fund at the time the election to participate
in the plan is made. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" and the Statement of Additional Information.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under this plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any taxable gain or loss will be recognized by the shareholder upon
redemption of shares.
- ------------------------------------------------------------------------------
REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized investment
dealer. Orders received from dealers must be at least $500 unless transmitted
via the FUNDSERV network. The redemption price for such shares is the net asset
value next calculated after an order is received by a dealer provided such order
is transmitted to the Distributor prior to the Distributor's close of business
on such day. It is the responsibility of dealers to transmit redemption requests
received by them to the Distributor so they will be received prior to such time.
36
<PAGE> 46
As described herein under "Purchase of Shares," redemptions of Class B and
Class C shares are subject to a contingent deferred sales charge. In addition, a
contingent deferred sales charge of 1% may be imposed on certain redemptions of
Class A shares made within one year of purchase for investments of $1 million or
more. The contingent deferred sales charge incurred upon redemption is paid to
the Distributor in reimbursement for distribution-related expenses. See
"Purchase of Shares." A custodian of a retirement plan account may charge fees
based on the custodian's fee schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption exceed $50,000, or if the
proceeds are not to be paid to the record owner at the record address, or the
record address has changed within the previous 60 days, signature(s) must be
guaranteed by one of the following: a bank or trust company; a broker-dealer; a
credit union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it will do so if a special request has been
made to ACCESS. In the case of shareholders holding certificates, the
certificates for the shares being redeemed must accompany the redemption
request. In the event the redemption is requested by a corporation, partnership,
trust, fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 60 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to ACCESS. Where American Capital Trust Company
serves as IRA custodian, special IRA, 403(b)(7), or Keogh distribution forms
must be obtained from and be forwarded to American Capital Trust Company, P.O.
Box 944, Houston, Texas 77001-0944. Contact the custodian for information.
In the case of redemption requests sent directly to ACCESS, the redemption
price is the net asset value per share next determined after the request is
received. Payment for shares redeemed will be made by check mailed within seven
days after acceptance by ACCESS of the request and any other necessary documents
in proper order. Such payment may be postponed or the right of redemption
suspended as provided by the rules of the SEC. If the shares to be redeemed have
been recently purchased by check, ACCESS may delay mailing a redemption check
until the purchase check has cleared, usually a period of 15 days. Any
37
<PAGE> 47
taxable gain or loss will be recognized by the shareholder upon redemption of
shares.
The Fund may redeem any shareholder account if such account has for a period
of more than six months had a net asset value of less than $500. The Fund would
redeem a shareholder's account falling below $500 only if this results from
shareholder withdrawals and not from market decline. Sixty days prior written
notice of any such involuntary redemption is required, and the shareholder is
given an opportunity to purchase the required value of additional shares at the
next determined net asset value without sales charge. Any applicable contingent
deferred sales charge will be deducted from the proceeds of this redemption.
TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures
previously set forth, the Fund permits shareholders and the dealer
representative of record to redeem shares by telephone and to have redemption
proceeds sent to the address of record for the account or to the bank account of
record as described below. To establish such privilege, a shareholder must
complete the appropriate section of the application form in this Prospectus or
call the Fund at (800) 421-5666 to request that a copy of the Telephone
Redemption Authorization form be sent to them for completion. To redeem shares,
contact the telephone transaction line at (800) 421-5684. American Capital and
the Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither American Capital nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
American Capital and the Fund may be liable for any losses due to unauthorized
or fraudulent instructions if reasonable procedures are not followed. Telephone
redemptions may not be available if the shareholder cannot reach ACCESS by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's regular redemption
procedure previously described. Requests received by ACCESS prior to 4:00 p.m.,
New York time, on a regular business day will be processed at the net asset
value per share determined that day. These privileges are available for all
accounts other than retirement accounts. The telephone redemption privilege is
not available for shares represented by certificates. If an account has multiple
owners, ACCESS may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed once in each 30-day period. The proceeds must be payable to the
shareholder(s) of record and sent to the address of record for the account or
wired directly to their predesignated bank account. This privilege is not
available if the address of record has been changed within 60 days prior to a
telephone redemption
38
<PAGE> 48
request. Proceeds from redemptions are expected to be wired on the next business
day following the date of redemption. The Fund reserves the right at any time to
terminate, limit or otherwise modify this redemption privilege.
REINSTATEMENT PRIVILEGE. A Class A or Class B shareholder who has redeemed
shares of the Fund may reinstate any portion or all of the net proceeds of such
redemption in Class A shares of the Fund. A Class C shareholder who has redeemed
shares of the Fund may reinstate any portion or all of the net proceeds of such
redemption in Class C shares of the Fund with credit given for any contingent
deferred sales charge paid upon such redemption. Such reinstatement is made at
the net asset value (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 120 days after the date of the redemption. See "Purchase of
Shares -- Waiver of Contingent Deferred Sales Charge" and the Statement of
Additional Information. Reinstatement at net asset value is also offered to
participants in those eligible retirement plans held or administered by American
Capital Trust Company for repayment of principal (and interest) on their
borrowings on such plans.
- ------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
- ------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS. Dividends from stocks and interest earned from other investments
are the Fund's main source of income. Substantially all of this income, less
expenses, is distributed annually as dividends to shareholders. Unless the
shareholder instructs otherwise, dividends are automatically applied to purchase
additional shares of the Fund at the next determined net asset value. See
"Shareholder Services -- Reinvestment Plan."
The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A shares as a result of the higher distribution
charges and incremental transfer agency fees applicable to such classes of
shares.
CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower than their purchase prices. The Fund distributes to shareholders at
least once a year the excess, if any, of its total profits on the sale of
securities during the year over its total losses on the sale of securities,
including capital losses carried forward from prior years under tax laws. As in
the case of income dividends, capital gains distributions are automatically
reinvested in additional shares of the Fund at net asset value. See "Shareholder
Services -- Reinvestment Plan."
39
<PAGE> 49
Transactions in stock index futures traded on domestic exchanges or boards of
trade will generally give rise to a combination of short-term and long-term
capital gains and losses.
TAXES. The Fund has qualified and intends to be taxed as a regulated
investment company under the Code. By qualifying as a regulated investment
company, the Fund is not subject to federal income taxes to the extent it
distributes its net investment income and net realized capital gains. Dividends
from net investment income and distributions from any net realized short-term
capital gains are taxable to shareholders as ordinary income. Long-term capital
gains constitute long-term capital gains for federal income tax purposes. All
such dividends and distributions are taxable to the shareholder whether or not
reinvested in shares. However, shareholders not subject to tax on their income
will not be required to pay tax on amounts distributed to them.
Shareholders are notified annually of the Federal tax status of dividends and
capital gains distributions.
To avoid being subject to a 31% federal backup withholding on dividends,
distributions and redemption payments, shareholders must furnish the Fund with a
certification of their correct taxpayer identification number.
Dividends and distributions paid by the Fund have the effect of reducing net
asset value per share on the record date by the amount of the payment.
Therefore, a dividend or distribution paid shortly after the purchase of shares
by an investor would represent, in substance, a return of capital to the
shareholder (to the extent it is paid on the shares so purchased) even though
subject to income taxes as discussed herein.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Investors
may be entitled to claim United States foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in the Code. If
more than 50% in value of the Fund's total assets at the close of its fiscal
year consists of securities of foreign issuers, the Fund will be eligible, and
may file elections with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such taxes in their United States income tax returns as gross
income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their United States
income taxes. The Fund will report annually to its shareholders the amount per
share of such withholding.
Under Code Section 988, foreign currency gains or losses from certain forward
contracts not traded in the interbank market generally are treated as ordinary
40
<PAGE> 50
income or loss. Such Code Section 988 gains or losses will increase or decrease
the amount of the Fund's investment company taxable income available to be
distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to make any ordinary dividend
distributions, and any distributions made before the losses were realized but in
the same taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing each shareholder's basis in his or her Fund
shares.
The foregoing is a brief summary of some of the federal income tax
considerations affecting the Fund and its investors who are U.S. residents or
U.S. corporations. Investors should consult their tax advisors for more detailed
tax advice including state and local tax considerations. Foreign investors
should consult their own counsel for further information as to the U.S. and
their country of residence or citizenship tax consequences of receipt of
dividends and distributions from the Fund.
- ------------------------------------------------------------------------------
PRIOR PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
From time to time the Fund may advertise its total return for prior periods.
Any such advertisement would include at least average annual total return
quotations for one year and for the life of the Fund. Other total return
quotations, aggregate or average, over other time periods may also be included.
The total return of the Fund for a particular period represents the increase
(or decrease) in the value of a hypothetical investment in the Fund from the
beginning to the end of the period. Total return is calculated by subtracting
the value of the initial investment from the ending value and showing the
difference as a percentage of the initial investment; the calculation assumes
the initial investment is made at the current maximum public offering price
(which includes a maximum sales charge of 5.75% for Class A shares); that all
income dividends or capital gains distributions during the period are reinvested
in Fund shares at net asset value; and that any applicable contingent deferred
sales charge has been paid. The Fund's total return will vary depending on
market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Total return is based on historical earnings and asset value fluctuations and is
not intended to indicate future performance. No adjustments are made to reflect
any income taxes payable by shareholders on dividends and distributions paid by
the Fund.
41
<PAGE> 51
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
Total return is calculated separately for Class A, Class B and Class C shares.
Class A total return figures include the maximum sales charge of 5.75%; Class B
and Class C total return figures include any applicable contingent deferred
sales charge. Because of the differences in sales charges and distribution fees,
the total returns for each of the classes will differ.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the ratings or rankings prepared by Lipper Analytical Services, Inc., CDA,
Morningstar Mutual Funds or similar independent services which monitor the
performance of mutual funds or with the Dow Jones Industrial Average Index or
Standard & Poor's, or with other global indexes, such as the Morgan Stanley
Capital International World Index, other appropriate indices of investment
securities, or with investment or savings vehicles. The performance information
may also include evaluations of the Fund published by nationally recognized
ranking services and by financial publications that are nationally recognized,
such as Business Week, Forbes, Fortune, Institutional Investor, Investor's
Business Daily, Kiplinger's Personal Finance Magazine, Money, Mutual Fund
Forecaster, Stanger's Investment Advisor, USA Today, U.S. News & World Report
and The Wall Street Journal. Such comparative performance information will be
stated in the same terms in which the comparative data or indices are stated.
Any such advertisement would also include the standard performance information
required by the SEC as described above. For these purposes, the performance of
the Fund, as well as the performance of other mutual funds or indices, do not
reflect sales charges, the inclusion of which would reduce Fund performance. The
Fund will include performance data for Class A, Class B and Class C shares of
the Fund in any advertisement or information including performance data of the
Fund. The Fund may also refer to results of top performing world equity markets
as compiled by Morgan Stanley Capital International or other independent
statistical services or to products or services produced or provided by domestic
or foreign companies.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
The Fund's Annual Report contains additional performance information. A copy
of the Annual Report may be obtained without charge by calling or writing the
Fund at the telephone number and address printed on the cover page of this
Prospectus.
42
<PAGE> 52
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
ORGANIZATION OF THE FUND. The Company was organized on May 25, 1990, under the
laws of the State of Maryland, and presently is authorized to sell two series.
These series are American Capital Global Government Securities Fund and the
Fund. Each of these series offers three classes of shares: Class A, Class B and
Class C shares. Each class of shares represents interests in the assets of the
Fund and has identical voting, dividend, liquidation and other rights on the
same terms and conditions except that the distribution fees and/or service fees
related to each class of shares are borne solely by that class, and each class
of shares has exclusive voting rights with respect to provisions of the Fund's
Class A Plan, Class B Plan and Class C Plan which pertain to that class. An
order has been received from the SEC permitting the issuance and sale of
multiple classes of shares representing interests in the Fund's existing
portfolio. Shares issued are fully paid, non-assessable and have no preemptive
or conversion rights.
VOTING RIGHTS. The Bylaws of the Company provide that shareholder meetings are
required to be held to elect directors only when required by the 1940 Act. Such
event is likely to occur infrequently. In addition, a special meeting of the
shareholders of the Fund will be called, if requested by the holders of ten
percent of the Fund's outstanding shares, for the purposes, and to act upon the
matters, specified in the request (which may include election or removal of
directors). When matters are submitted for a shareholder vote, each shareholder
is entitled to one vote for each share owned. Shares of the Fund will be voted
by the Fund's shareholders individually when the matter affects the specific
interest of the Fund only, such as a change in a fundamental investment policy.
The shares of all the Company's series will be voted in the aggregate on other
matters, such as the election of the Company's directors. The shares have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the directors
if they choose to do so, and in such an event, the holders of the remaining less
than 50% of the shares voting for the election of directors will not be able to
elect any person to the Board of Directors.
SHAREHOLDER INQUIRIES. Shareholder inquiries should be directed to the Company
at 2800 Post Oak Boulevard, Houston, Texas 77056, (800) 421-5666.
SHAREHOLDER SERVICE AGENT. ACCESS, P.O. Box 418256, Kansas City, Missouri
64141-9256, serves as transfer agent, shareholder service agent and dividend
disbursing agent for the Fund. ACCESS, a wholly owned subsidiary of the
Adviser's parent, provides these services at cost plus a profit.
LEGAL COUNSEL. O'Melveny & Myers, 400 South Hope Street, Los Angeles,
California 90071, is legal counsel to the Company.
43
<PAGE> 53
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1201 Louisiana, Suite 2900,
Houston, Texas 77002, are the independent accountants for the Company.
CUSTODIAN. The Company's securities and cash in the United States will be held
under a custodian agreement with State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110. The Custodian may employ
sub-custodians outside the United States approved by the Directors of the
Company in accordance with regulations of the SEC.
44
<PAGE> 54
- ------------------------------------------------------------------------------
INVESTMENT HOLDINGS
- ------------------------------------------------------------------------------
May 31, 1994
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -------------------------------------
<S> <C>
AUSTRALIA
17,000 Broken Hill Property
150,000 TNT
AUSTRIA
10,000 Flughafen Wien
BELGIUM
2,700 Ackermans
9,100 GIB
1,370 Kredietbank
CANADA
*32,000 Advanced Information
Technology
13,200 Alcan Aluminium
*106,000 Current Technology Corp.
*25,000 DY 4 Systems, Inc.
*174,000 Global Election Systems,
Inc.
*12,000 Home Oil, Ltd.
*13,800 Hummingbird Communications,
Ltd.
*21,500 ID Biomedical Corp.
69,000 Laidlaw, Inc., Class B
*113,000 Markborough Properties
*24,400 Northern Reef Explorations,
Ltd.
*182,000 Ondaatje Corp.
12,200 Seagram Co., Ltd.
*26,700 Speedy Muffler King, Inc.
DENMARK
7,100 Tele Danmark, AS, Class B
FRANCE
3,800 Alcatel Alst (CGE)
4,000 Alcatel Cable
2,900 BIC
4,450 Castorama Dubois
21,600 CSF (Thomson)
6,550 Guilbert, SA
230 LeGrand
9,700 Michelin, Class B
3,600 Primagaz (Cie Gaz)
6,000 Roussel UCLAF
7,300 TV Francaise (TF1)
10,750 Total, Class B
GERMANY
2,060 Bayer Hypo/Wech Bank
400 Bayerische Motoren Werke
*400 Bayerische Motoren Werke,
Rights (expiring 6/94)
820 Daimler Benz
750 Deutsche Bank AG
*1,000 Duer
1,640 Felten & Guilleaume
900 Leifheit
2,000 Man
695 Siemens AG
1,500 Veba
HONG KONG
28,800 China Light & Power
126,000 Dairy Farm International
600,000 Goldlion Holdings, Ltd.
*34,000 Guoco Group
*128,000 Hong Kong Telecomm,
Warrants (expiring 2/95)
550,000 S. Megga International
155,000 Varitronix International
600,000 Wai Kee Holdings
400,000 World Houseware
ITALY
41,500 Burgo (Cartiere) SPA
90,000 Danieli & Co.
*100,000 Fiat SPA, Warrants
(expiring 12/94)
55,900 Rinascente (La)
144,000 SIP
33,000 Sirti SPA
JAPAN
34,000 Ajinomoto Co., Inc.
10,000 Asatsu, Inc.
60,000 Citizen Watch Co.
7 DDI Corp.
</TABLE>
45
<PAGE> 55
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -------------------------------------
<S> <C>
95,000 Dowa Mining Co.
115 East Japan Railway
*450 Ebara Corp., Warrants
(expiring 3/98)
60,000 Hitachi
95,000 Hitachi Zosen Corp.
20,000 Honda Motor Corp.
120,000 Ishikawajima Har
120,000 Isuzu Motors
80,000 Japan Air Lines Co.
70,000 Japan Wool Textile
40,000 Kitano Construction Co.
240,000 Kobe Steel
20,000 Kokusai Electric
60,000 Komatsu
43,000 Komatsu Seiren Co.
35,000 Makino Milling
80,000 Marubeni Corp.
28,000 Marui Co.
24,000 Matsushita Electric
Industries
40,000 Matsushita Electric Works
100,000 Mazda Motor Corp.
110,000 Minolta Camera Co.
45,000 Mitsubishi Construction
90,000 Mitsubishi Electric Corp.
120,000 Mitsubishi Ka Sei
50,000 NEC Corp.
50,000 New Oji Paper Co.
*10,700 Nikkei, Warrants
(expiring 12/95)
*10,400 Nikkei, Warrants (expiring
6/96)
110,000 Nippon Diesel Motor
75,000 Nippon Sanso Corp.
65 Nippon Telephone &
Telegraph Corp.
65,000 NTN Corp.
45,000 Onward Kashiyama
10,000 Rohm Co.
20,000 Shimachu
300 Sony Music Entertainment
60,000 Toray Industries, Inc.
140,000 Ube Industries
90,000 Yokohama Rubber Co.
20,000 Yurtec Industries, Inc.
MALAYSIA
17,000 Edaran Otomobil
20,000 Resorts World BHD
*16,000 United Engineers Malaysia
BHD, Convertible
NETHERLANDS
*5,300 ABN Amro Holdings NV,
Rights
4,000 Aegon NV
3,100 Akzo NV
4,555 International Nederlanden
Group
15,000 KNP BT (KON) NV
5,550 Royal Dutch Petroleum
16,000 Stork NV
1,300 Unilever NV
SINGAPORE
25,000 Cycle & Carriage
22,000 Fraser & Neave
45,000 Sembawang Maritime
18,000 Singapore Airlines
10,000 Singapore Press Holdings
SPAIN
6,900 Banco Santander
7,500 Empresa Nac Elec
4,000 Gas Natural SDG, SA
67,200 Iberdrola, SA
37,700 Uralita
SWEDEN
22,500 Astra, AB, Series B
13,800 Celsius Industriar, AB,
Series B
*31,600 Hoganas, AB, Series B
*14,400 Skanska, AB, Series B
13,400 Svedala Industrial
12,200 Svenska Cellulosa, Series B
SWITZERLAND
240 Baloise Holdings
*350 Brown, Bov and Cie, AG,
Series A
375 Ciba Geigy, AG
1,000 CS Holdings
*325 Grands Mgs Jelmoli
</TABLE>
46
<PAGE> 56
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ------------------------------------------------
<CAPTION>
<S> <C>
*1,625 Grands Mgs Jelmoli,
Warrants (expiring 5/96)
500 Nestle, SA
400 Publicitas Holdings
800 Sandoz, AG
210 Schindler Holdings, AG
THAILAND
4,000 Advanced Information
Services
17,000 Ban Pu Coal
17,000 Hana Microelectronic
55,000 NTS Steel Groups
12,500 Siam City Cement
11,000 Sino Thai Eng, PLC
14,000 Thai Glass Industries, PLC
UNITED KINGDOM
60,000 BAA
94,200 Bank of Ireland
50,000 Barclay's
103,000 British Petroleum Co., PLC
126,000 British Steel, PLC, ADS
148,000 BTR
110,750 Cable & Wireless, PLC, ADS
53,457 Claremont Garments
114,000 Cowie Group, PLC
76,000 Croda International
48,000 Eurotherm
44,000 Fairey Group
93,500 Granada Group
105,000 Hanson, PLC, ADR
110,000 Hartstone Group
23,500 La Porte
175,000 MAI
145,000 Next, PLC
*140,000 Northern Ireland
Electricity
*120,000 Pelican Group
*66,666 Pelican Group, Rights
(expiring 6/94)
37,500 Reed International
63,000 Reuters Holdings, PLC, ADR
106,000 Royal Insurance
49,000 Scottish Power
45,000 Shell Transportation &
Trading
14,300 Siebe
117,000 Standard Chartered
73,000 Trinity Holdings
75,000 Willis Corroon Group
UNITED STATES
8,000 Abbott Laboratories
6,000 Adobe Systems, Inc.
2,800 Allied-Signal, Inc.
8,000 Alltel Corp.
6,500 American Greetings Corp.,
Class A
3,100 American International
Group, Inc.
5,000 American Telephone &
Telegraph Co.
*2,000 Amgen, Inc.
3,500 Amoco Corp.
4,600 Anheuser Busch Companies,
Inc.
3,300 Apache Corp.
*3,700 Applied Materials, Inc.
2,000 Atlantic Richfield Co.
6,200 Bankamerica Corp.
8,000 Baxter International, Inc.
4,000 Baybanks, Inc.
4,400 Bellsouth Corp.
2,000 Belo (A.H.) Corp.
5,800 Birmingham Steel Corp.
*2,200 BMC Software, Inc.
6,000 British Petroleum Co., PLC,
ADR
3,500 Browning-Ferris Industries,
Inc.
2,200 Callaway Golf Co.
100 Capital Cities-ABC, Inc.
2,000 Caterpillar, Inc.
4,000 Chrysler Corp.
5,000 Citicorp
2,100 Clorox Co.
1,400 Coca-Cola Co.
1,800 Columbia/HCA Healthcare
*6,000 Community Health Systems,
Inc.
1,500 Compania de Telefonos,
Chili, ADR
2,000 Crestar Financial
1,500 CSX Corp.
</TABLE>
47
<PAGE> 57
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -------------------------------------------------
<S> <C>
3,500 Dayton Hudson Corp.
5,500 Dollar General Corp.
2,200 Dow Chemical Co.
*5,000 Dr Pepper/Seven Up
Companies, Inc.
1,200 DuPont (E.I.) de Nemours &
Co., Inc.
2,000 Duracell International,
Inc.
1,400 Eaton Corp.
4,600 Enron Corp.
5,000 Enron Oil & Gas Co.
2,000 Federal National Mortgage
Association
*3,600 Filenet Corp.
2,600 First Bank Systems, Inc.
7,200 First Chicago Corp.
2,500 First Interstate Bancorp.
3,600 First USA, Inc.
2,000 Fluor Corp.
2,600 Ford Motor Co.
*1,500 Fore Systems
5,000 Gap, Inc.
4,500 Gaylord Entertainment Co.,
Class A
*2,500 General Instrument Corp.
2,200 General Motors Corp.
*3,100 Georgia Gulf Corp.
3,400 Gillette Co.
107,000 Glaxo Holdings, PLC, ADR
2,500 Grainger (W.W.) Financial
Corp.
1,700 Green Tree Financial Corp.
4,100 Harley Davidson, Inc.
*10,000 Healthcare & Retirement
Corp.
*2,600 Healthsource, Inc.
3,500 Healthtrust Inc.-The
Hospital Company
3,500 Heilig Meyers Co.
1,700 Hercules, Inc.
900 Hewlett-Packard Co.
*3,700 Hospitality Franchise
Systems
12,000 Host Marriott Corp.
4,565 IDB Communications Group,
Inc.
5,700 Illinois Central Corp.
2,700 Illinois Tool Works, Inc.
*3,500 Integrated Device
Technology
5,300 International Business
Machines Corp.
2,000 International Paper Co.
900 ITT Corp.
3,400 Kimberly Clark Corp.
*4,600 Kohls Corp.
1,400 Leggett & Platt, Inc.
*11,800 Lincare Holdings, Inc.
6,500 Loral Corp.
*4,500 LSI Logic Corp.
4,400 Marriott International,
Inc.
3,200 May Department Stores Co.
3,900 McDonald's Corp.
*2,500 Michaels Stores, Inc.
1,600 Micron Technology, Inc.
*3,000 Microsoft Corp.
5,500 Midlantic Corp.
5,000 Mobil Corp.
2,700 Monsanto Co.
2,300 Motorola, Inc.
4,000 NationsBank Corp.
*8,000 Nellcor, Inc.
8,000 NIPSCO Industries, Inc.
1,800 Nordstrom, Inc.
*4,000 Office Depot, Inc.
6,200 Omnicom Group, Inc.
*3,000 Outback Steakhouse, Inc.
6,000 Penney (J.C.), Inc.
13,000 Pet, Inc.
1,000 Pfizer, Inc.
2,000 Philip Morris Companies,
Inc.
2,500 Philippine Long Distance
Telephone, ADR
2,800 Pioneer HiBred
International, Inc.
3,000 PPG Industries, Inc.
11,000 Praxair, Inc.
2,500 Procter & Gamble Company
4,600 Rockwell International
Corp.
3,000 Schering-Plough Corp.
5,500 Service Corp. International
4,000 Southwestern Bell Corp.
7,500 Sprint Corp.
</TABLE>
48
<PAGE> 58
<TABLE>
<CAPTION>
COMMON STOCK INVESTMENTS
NUMBER OF
SHARES
- ----------------------------------------
<S> <C>
*2,500 Sterling Software, Inc.
3,500 SunAmerica, Inc.
9,300 Telefonos de Mexico, SA,
ADR
3,200 Tenneco, Inc.
1,500 Texas Instruments, Inc.
*1,000 3Com Corp.
3,300 Tribune Co.
5,000 United States Shoe Corp.
4,000 United Technologies Corp.
*2,300 Varity Corp.
700 Wells Fargo & Company
*2,200 Western Atlas, Inc.
6,400 West One Bancorp
4,000 Weyerhaeuser Co.
2,000 Williamette Industries,
Inc.
3,400 Williams Companies, Inc.
8,000 WMX Technologies, Inc.
14,800 YPF Sociedad Anonima, ADR
SHORT-TERM
----------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
REPURCHASE AGREEMENT
$7,685,000 Kidder, Peabody & Company,
Inc., dated 5/31/94,
4.27%, due 6/1/94
(collateralized by U.S.
Government obligations in
a pooled cash account)
repurchase proceeds
$7,685,911
U.S. GOVERNMENT OBLIGATIONS
120,000 U.S. Treasury Bills, 4.01%
to 4.02%, due 7/28/94 to
8/4/94
</TABLE>
* Non-income producing security.
49
<PAGE> 59
BACKUP WITHHOLDING INFORMATION
STEP 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies with
the following guidelines:
Account Type Give Social Security Number or Tax
Identification Number of:
- --------------------------------------------------------------------------------
Individual Individual
- --------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- --------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- --------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- --------------------------------------------------------------------------------
Sole Proprietor Owner of Business
- --------------------------------------------------------------------------------
Trust, Estate, Pension
Plan Trust Trust, Estate, Pension Plan Trust (not
personal TIN of fiduciary)
- --------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other
Organization
- --------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- --------------------------------------------------------------------------------
STEP 2. If you do not have a TIN or you do not know your TIN, you must obtain
Form SS-5 (Application for Social Security Number) or Form SS-4 (Application
for Employer Identification Number) from your local Social Security or IRS
office and apply for one. Write "Applied For" in the space on the application.
STEP 3. If you are one of the entities listed below, you are exempt from
backup withholding and should not check the box on the Application in Section
2, Taxpayer Identification.
* A corporation
* Financial institution
* Section 501 (a) exempt organization (IRA, Corporate Retirement Plan,
403(b), Keogh)
* United States or any agency or instrumentality thereof
* A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof
* International organization or any agency or instrumentality thereof
* Registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
* Real estate investment trust
* Common trust fund operated by a bank under section 584 (a)
* An exempt charitable remainder trust, or a non-exempt trust described in
section 4947 (a) (1)
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
STEP 4. IRS PENALTIES -- If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable cause
and not willful neglect. If you fail to report interest, dividend or
patronage dividend income on your federal income tax return, you will be
treated as negligent and subject to an IRS 5% penalty tax on any resulting
underpayment of tax unless there is clear and convincing evidence to the
contrary. If you falsify information on this form or make any other false
statement resulting in no backup withholding on an account which should be
subject to backup withholding, you may be subject to an IRS $500 penalty and
certain criminal penalties including fines and imprisonment.
<PAGE> 60
AMERICAN CAPITAL
GLOBAL EQUITY FUND
PROSPECTUS
September 29, 1994
NATIONAL DISTRIBUTOR
American Capital Marketing, Inc.
2800 Post Oak Blvd.
Houston, TX 77056
INVESTMENT ADVISER
American Capital
Asset Management, Inc.
2800 Post Oak Blvd.
Houston, TX 77056
INVESTMENT SUBADVISER
Lombard Odier International
Portfolio Management Limited
Norfolk House
13 Southampton Place
London WC1A 2AJ
England
TRANSFER, DISBURSING, REDEMPTION
AND SHAREHOLDER SERVICE AGENT
American Capital Companies
Shareholder Services, Inc.
P.O. Box 418256
Kansas City, MO 64141-9256
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1201 Louisiana
Houston, TX 77002
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Inquiries concerning transfer of
registration, distributions, redemptions
and shareholder service should be
directed to the Shareholder Service Agent
American Capital Companies Shareholder
Services, Inc. (ACCESS), P.O. Box 418256,
Kansas City, MO 64141-9256.
Inquiries concerning sales should be
directed to the Distributor, American
Capital Marketing, Inc., P.O. Box 1411,
Houston, TX 77251-1411.
American Capital C/O ACCESS
Global Equity Fund P.O. Box 418256
A Fund of Kansas City, MO 64141-9256
American Capital
World Portfolio
Series, Inc.
A Fund of American Capital
World Portfolio Series, Inc.
PRINTED MATTER
Printed in U.S.A. (###-##-####/075 PRO-001/WS)
