As filed on Registration No. 33-43587
November 28, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 9
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
(Exact name of Registrant as specified in Charter)
1201 County Line Road, Rosemont, PA 19010
(Address of Principal Executive Offices)
Registrant's Telephone Number: (610) 525-6102
c/o Robert J. Greenleaf
34 High Street, Cambridge, MD 21613
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
X Immediately upon filing pursuant to paragraph (b)
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on pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
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on pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on pursuant to paragraph (a)(2)
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of Rule 485
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 in accordance with the provisions of Rule 24f-2 under
the Investment Company Act of 1940. The Rule 24f-2 Notice for the Registrant's
fiscal year ended August 31, 1995, was filed on October 3, 1995, and the notice
for the current fiscal year ending August 31, 1996, will be filed no later than
October 31, 1996.
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
CROSS REFERENCE SHEET
Form N-1A, Part A, Item Location - Prospectus
1. Cover Page Page 1
2. Synopsis Expense Table, Page 3
3. Condensed Financial Information Financial Highlights, Page 4
4. General Description of Registrant The Fund, Pages 1 and 5;
Investment Objectives and Policies,
Page 5; Investment Restrictions,
Page 8; Taxes, Pages 16
5. Management of the Fund Management of the Fund, Page 8
6. Capital Stock and Other Securities Capital Stock, Page 19
7. Purchase of Securities Being Offered Purchase of Fund Shares, Page 10;
Reduced Sales Charges, Page 12;
Exchange Privilege, Page 14
8. Redemption or Repurchase Redemption of Fund Shares, Page 18
9. Pending Legal Proceedings None
" i "
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
1201 County Line Road, Rosemont, PA 19010-2614
Account Service and Investment Information
(610) 525-6102
Gibraltar U.S. Government Securities Fund, Inc., ("Fund"), is an open-end,
diversified management investment company. Its investment objective is safety of
principal, liquidity and a high level of current income. It seeks to obtain its
investment objective by investing in obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities. There is no assurance that
the Fund's objective can be achieved. See "Investment Objective and Policies".
The Fund is designed for individual and institutional investors seeking
current income with safety of principal through participation in a
professionally managed portfolio of securities.
The Fund offers its shares at the next determined net asset value plus a
maximum sales load calculated at 4.50% of the offering price or 4.71% of the net
asset value or amount invested.
The Fund's Investment Adviser is Barclay Funds Management. Its Distributor
is Barclay Investments, Inc. Their offices are located in Providence, RI.
This prospectus sets forth the information that a prospective investor
should know before investing in the Fund. A Statement of Additional Information,
dated November 28, 1995 containing additional and more detailed information
about the Fund, has been filed with the Securities and Exchange Commission and
is hereby incorporated by reference into this Prospectus. A copy of the
Statement of Additional Information may be obtained at no charge, by writing or
calling the Fund at the address and General Information number printed above.
Investors are advised to read and retain this Prospectus for future
reference.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS -- November 28, 1995
1
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TABLE OF CONTENTS
Page
Expenses and Costs of Investing in the Fund..................................3
Financial Highlights.........................................................4
The Fund.....................................................................5
Investment Objectives and Policies...........................................5
Investment Restrictions......................................................8
Management of the Fund.......................................................8
Portfolio Brokerage..........................................................9
Portfolio Turnover...........................................................9
Investment Adviser...........................................................9
Purchase of Fund Shares.....................................................10
Reduced Sales Charges.......................................................12
Transfer Agent and Custodian................................................13
Distribution Plan...........................................................14
Fund Expenses...............................................................14
Determination of Net Asset Value Per Share..................................14
Exchange Privilege..........................................................15
Dividend and Distributions..................................................15
Performance Data............................................................16
Taxes.......................................................................16
Other Purchase Programs.....................................................17
Redemption of Fund Shares...................................................18
Capital Stock...............................................................19
General Information.........................................................20
Account Application.........................................................22
No person has been authorized to give any information or to make any
representa tions not contained in this prospectus in connection with the
offering made by this prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Fund
or its distributor. This prospectus does not constitute an offering by the
Fund or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
2
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EXPENSES AND COSTS OF INVESTING IN THE FUND
The following table is designed to assist investors in understanding the
various costs and expenses of investing in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases (as a percentage of offering price)
4.50% Sales load to reinvest dividends NONE Fees to exchange shares NONE
Redemption fees or deferred sales charges except as noted (1) NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment advisory fees net of waiver(2) --
12b-1 fees net of waiver (3) --
Other expenses net of waiver (4) 2.38%
-----
Total Fund operating expenses net of waivers (5) 2.38%
EXAMPLE
An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return and a complete
redemption of the investment at August 31, 1995, for the periods shown below.
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
$68 $116 $166 $304
The example assumes that all dividends and distributions are reinvested and
that the percentage amounts listed under Annual Fund Operating Expenses remain
the same in the years shown. The example should not be considered a
representation of past or future expenses. The Fund's actual expenses may be
higher or lower than those shown and will depend, in part, on the level of
average net assets, the levels of sales and redemptions of shares and the extent
to which variable expenses are incurred.
The percentage shown for other expenses is an annualized amount based on
estimates from the Fund's fiscal year ending August 31, 1995. The assumed 5%
annual return is required by Securities and Exchange Commission regulations
applicable to all mutual funds and is neither a representation nor a prediction
of the Fund's actual or projected performance. For further information on the
investment advisory fee, see section hereafter on "Investment Adviser."
-----------------------------------------------------
(1) A redemption fee may be charged if the value of the shares being redeemed is
$250,000 or more, if it is necessary to sell portfolio securities and if the
Fund's management determines that the Fund and its shareholders might be
disadvantaged were such a fee not charged. Such redemption fee would equal
the amount of brokerage costs incurred but would not exceed 1% of the net
asset value of the Fund shares redeemed.
(2) The Investment Adviser intends to waive its entire fee through August 31,
1996. Otherwise such fee would be 0.60%.
(3) The Distributor intends to waive the entire 12b-1 fee through August 31,
1996. Otherwise such fee would be 0.25.
(4) The Accounting Services Agent intends to waive 1/2 of the accounting
services fee through August 31, 1996. Otherwise other expenses would be
2.91%
(5) If certain expenses were not waived, total Fund operating expenses would be
3.76%.
3
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GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following table sets forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each period indicated.
The financial information appearing below has been audited by Tait, Weller &
Baker, independent certified public accountants. Financial statements for the
fiscal year ended August 31, 1995, and the report of Tait, Weller & Baker
thereon are included in the Statement of Additional Information. Further
information about the Fund's performance is included in its annual report to
shareholders, a copy of which (including the independent auditor's report) may
be obtained from the Fund upon request at no charge.
<TABLE>
<CAPTION>
Years Ended July 1, 1992 *
August 31, To
1995 1994 1993 August 31, 1992
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period $ 9.83 $ 10.00 $ 10.04 $ 10.00
------ ------- ------- ------
Income from Investment operations
Net investment income .64 .59 .69 .13
Net realized and unrealized gain (loss)
on investments (.19) (.39) (.15) .01
------- -------- -------- ------
Total from Investment operations .45 .20 .54 .14
------- -------- -------- ------
Less dividends from net investment income .58 .37 .58 .10
------- -------- -------- ------
Net asset value, end of period $ 9.70 $ 9.83 $ 10.00 $ 10.04
======= ======= ======== =======
TOTAL RETURN (%)** 4.73 2.08 5.53 8.00(a)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $1,473 $1,274 $1,313 $ 685
Ratio to average net assets(%)
Expenses 2.66 3.37 2.92 1.31(a)
Net Investment Income 7.19 5.98 6.96 7.34(a)
Ratio to average net assets
before expenses waived or assumed (%)(b)
Expenses 3.51 3.99 3.77 5.07(a)
Net Investment Income 6.34 5.36 6.11 3.58(a)
PORTFOLIO TURNOVER RATE (%) 56 51 140 0
* Commencement of operations
** Calculated without sales charge
(a) Annualized
(b) Net of expenses waived or assumed by the investment adviser and the
accounting services and transfer agent from commencement of operations
through August 31, 1995.
</TABLE>
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See notes to financial statements
4
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THE FUND
Gibraltar U.S. Government Securities Fund, Inc., (the "Fund"), is an
open-end, diversified management investment company or mutual fund, registered
under the Investment Company Act of 1940 (the "1940 Act"). It was incorporated
in Maryland on June 28, 1991. It is one of the funds in the Gibraltar Fund Group
which is advised, managed and serviced by Barclay Investments, Inc., and its
affiliated companies.
Shares of the Fund may be purchased at the current public offering price
which is the net asset value per share plus a sales charge. The sales charge is
a variable percentage of the offering price and ranges from 4.50% to 0%
depending upon the amount invested.
The Fund maintains a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act. Under the plan the Fund may finance certain activities related to the
promotion and sale of its shares.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is to provide safety of principal,
liquidity and a high level of current income. While there can be no assurance
the Fund will achieve its investment objective, it will seek to do so while
following the investment policies described in this prospectus.
The Fund will invest at least 65% and up to 100% of its total assets in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities ("Government Securities"). Government Securities in which the
Fund may invest include:
Direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes,
and bonds; and
Obligations of U.S. government agencies or instrumentalities, such as Federal
Home Loan Banks, Farmers Home Administration, Federal Farm Credit Banks, Federal
National Mortgage Association ("FNMA"), Government National Mortgage Association
("GNMA"), and Federal Home Loan Mortgage Association ("FHLMC").
The obligations of Government Securities which the Fund may buy are backed in
a variety of ways by the U.S. government or its agencies or instrumentalities.
Some of these obligations, such as GNMA mortgage-backed securities and
obligations of the Farmers Home Administration which represent part ownership in
a pool of mortgage loans, are backed by the full faith and credit of the U.S.
Treasury. Obligations of the Farmers Home Administration are also backed by the
issuer's right to borrow from the U.S. Treasury. Obligations of Federal Home
Loan Banks and the Farmers Home Administration are backed by the discretionary
authority of the U.S. government to purchase certain obligations of agencies or
instrumentalities. Obligations of Federal Home Loan Banks, Farmers Home
Administration, Federal Farm Credit
5
<PAGE>
Banks, FNMA and FHLMC are backed by the credit of the agency or instrumentality
issuing the obligations. Mortgage securities of FNMA and FHLMC are not backed by
the full faith and credit of the United States. Although their close
relationship with the U.S. government is considered to make them high quality
securities with minimal credit risks, the U.S. government is not obligated by
law to support either FNMA or FHLMC.
Government Securities do not generally involve the credit risks associated
with other types of interest-bearing securities. Like other interest-bearing
securities, however, the values of Government Securities change as interest
rates fluctuate. Accordingly, the net asset value of the shares of an open-end
investment company such as the Fund, which invests in interest-bearing
securities, changes as the general levels of interest rates fluctuate. When
interest rates decline, the value of a portfolio invested at higher yields can
be expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested at lower yields can be expected to decline. In addition, the
potential for appreciation in the event of a decline in interest rates may be
limited or negated by increased principal prepayments with respect to certain
mortgage-backed securities such as GNMA's, FNMA's or FHLMC's. Prepayments of
high interest rate mortgage-backed securities during times of declining interest
rates will tend to lower the return of the Fund and may even result in losses to
the Fund if some securities were acquired at a premium.
A strategy of the Fund will be to concentrate on investments in high-coupon,
premium, mortgage-backed securities such as GNMA's, FNMA's and FHLMC's in
amounts under $1 million (commonly known as "odd-lots"). Since the timing of
principal pay-down other than scheduled amortization payments at par value can
be uncertain and spontaneous, the marketplace tends to overcompensate for a
prepayment risk by undervaluing these odd-lots. Historically, this has tended to
result in higher yields despite any increased levels of cash flow. A risk, of
course, is that prepayments can accelerate as interest rates trend lower, thus
producing a lower current return. However, by selecting seasoned mortgage-backed
securities it is possible to mitigate this risk. The Fund's preference for
odd-lot, premium, mortgage-backed securities helps to assure conformance with a
statistical average of prepayment experience through a diversified portfolio.
Additionally, these securities may be obtained at prices below the established
market for round lot offerings (over $1 million) of similar mortgage-backed
securities. Portfolio performance will be related to the ability of the Fund and
its adviser to select undervalued, odd-lot mortgage-backed securities.
This investment strategy used by the Fund may provide the investor with an
opportunity to maximize investment return over the long term, notwithstanding
the direction of future interest rates. Additionally, shareholders will not have
the responsibility to account for monthly payments of principal and interest, or
the year-end requirement of reporting for tax purposes associated with the
direct ownership of mortgage-backed securities. Instead, the Fund intends to
distribute a dividend monthly which can be received directly by the shareholder
or reinvested at the Fund's net asset value in additional shares. The Fund will
provide to the shareholder the necessary information for tax reporting purposes.
6
<PAGE>
It will be the normal practice of the Fund to invest substantially all of its
assets in Government Securities. However, the Fund may maintain short-term cash
positions or invest temporarily in cash equivalents in order to take a defensive
position during times of unusual market conditions or to maintain liquidity.
Cash equivalents may include money market funds of custodian banks;
repurchase agreements; and securities of other open-end, diversified, management
investment companies organized as money market funds for investment primarily in
U.S. government securities, and charging no front-end sales loads or redemption
fees. While investment in such mutual funds would involve a temporary
duplication of administrative expenses, such holdings would be on a short term
basis and be selected for competitively favorable net yields. The Fund does not
intend to invest to a significant degree in the securities of other investment
companies.
The Fund may purchase securities on a when-issued or delayed delivery basis
which means that the price is fixed at the time of commitment but delivery and
payment take place beyond customary settlement time. These commitments will be
made with the intention of acquiring the securities for purposes of achieving
the Fund's investment objectives but the Fund may sell the securities before the
settlement date if it is deemed advisable. Subject to the provisions of Section
12(d) (1) of the 1940 Act, the Fund will not: (a) invest more than 10% of the
value of its total assets in securities of other investment companies; (b)
invest more than 5% of the value of its total assets in any other investment
company; and (C) acquire more than 3% of the total outstanding voting securities
of any other investment company.
Securities purchased on a forward commitment basis involve certain risks.
They may experience changes in value related to changes in interest rate levels
and, when delivery takes place, the yield available in the market may be higher
than that ob tained in the transaction itself. Such obligations are not paid for
until received and do not begin earning interest until the contractual
settlement date.
The Fund may enter into repurchase agreements in order to earn additional
income or as a temporary defensive measure. Under a repurchase agreement, the
Fund acquires a Government Security subject to the seller's agreement to
repurchase at a stated time and at a stated price which exceeds the sale price
by the agreed upon rate of interest to be earned. The Fund's position is
collateralized during the term of the repurchase agreement. If the seller does
not repurchase the securities, the Fund could receive less than the repurchase
price on a sale of such securities.
Safety of principal, liquidity and a high level of current income through
investments in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities are fundamental investment objectives and policies
of the Fund which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting shares. In seeking its objectives the
Fund's management may, without shareholder approval, employ changing investment
strategies consistent with fundamental policies and investment restrictions.
There can be no assurance that the Fund will achieve its investment objectives.
7
<PAGE>
INVESTMENT RESTRICTIONS
The Fund is registered as a diversified management investment company under
the 1940 Act and, accordingly, may not purchase the securities of any one
issuer, other than obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, if, immediately after such purchase, (I) more
than 5% of the value of the Fund's total assets would be invested in such
issuer, or (ii) the Fund would own more than 10% of the outstanding voting
securities of such issuer; except that up to 25% of the value of the Fund's
total assets may be invested without regard to such limitations.
The following investment restrictions and those described in the Statement of
Additional Information are fundamental policies which may be changed only by a
vote of the holders of a majority of the Fund's outstanding shares (as defined
under "General Information"). The Fund may not:
1. Make loans, except that the Fund may purchase or hold debt
instruments, including repurchase agreements, in accordance with
its investment objectives and policies;
2. Enter into repurchase agreements maturing more than seven days
after notice if such investment, together with other illiquid
securities held by the Fund, exceeds 10% of the Fund's net
assets;
3. Purchase any securities which would cause more than 25% of the
value of the Fund's assets at the time of the purchase to be
invested in the securities of one or more issuers conducting
their principal business activities in the same industry;
4. Borrow money except from banks as a temporary measure to meet
unexpectedly high levels of share redemptions, and then only in
an amount not to exceed 5% of the value of its net assets, taken
at the time the loan is made, or pledge its assets taken at
value to any extent greater than 15% of its total assets taken
at cost.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of its
Board of Directors. The Board of Directors approves agreements between the Fund
and persons or companies furnishing services to the Fund including agreements
with the investment advisor, the distributor, the accounting services and
transfer agent, and the custodian. The day-to-day operations of the Fund are
delegated to its officers who are appointed by the Board of Directors. Further
information regarding the directors and officers may be found following the
General Information section of this Prospectus and in the Statement of
Additional Information.
8
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PORTFOLIO BROKERAGE
In the purchase and sale of securities the Fund selects brokers based on
such factors as price, execution ability and the broker's reliability and
financial responsibili ty. The Fund's distributor may also act as broker on
portfolio transactions, consistent with best price and execution and in
compliance with compensation limits specified in the 1940 Act for a broker
affiliated with the Fund.
PORTFOLIO TURNOVER
For the fiscal year ended August 31, 1995, the portfolio turnover rate was
56%. For the fiscal year ended August 31, 1994, the portfolio turnover rate was
51%. Investment changes were made to realize gains and to shorten the average
maturities of mortgage-backed securities pools held in the portfolio.
Redemptions of Fund shares also accounted for some portfolio liquidations. The
changes were deemed consistent with the Fund's investment objective of safety of
principal with a high level of current income. The turnover rate did not affect
transaction expenses or taxes significantly or involve additional gains or
losses for shareholders to a significant degree.
INVESTMENT ADVISER
BFM, Inc., d/b/a/ Barclay Funds Management, ("BFM"), serves as the Fund's
investment adviser and manager under an investment advisory contract effective
December 1, 1994. It is a Rhode Island corporation organized in 1992 and located
at 66 South Main Street, Providence, RI 02903.
BFM is a wholly-owned subsidiary of Barclay Investments, Inc., ("Barclay"),
also located in Providence, RI. Barclay was established in 1930 and incorporated
in Rhode Island in 1972. As a regional broker-dealer and general securities
firm, Barclay and its subsidiaries provide brokerage services, asset allocation
and investment advice, capital management, corporate finance expertise, and
management services to the mutual fund industry. BFM, a registered investment
adviser, was organized as part of the investment advisory services of Barclay.
While personnel of BFM, through their affiliations with other Barclay
organizations, have previously provided investment advice and market analysis to
managers of institutional and private investment accounts, BFM has had no prior
investment company management experience.
BFM is also investment adviser to the Gibraltar Equity Growth Fund Series
of Gibraltar Funds, Inc., a companion fund in the Gibraltar Group of Funds.
The Fund's previous investment adviser was Gibraltar Asset Management,
Inc., ("GAM"), a subsidiary of Internos Partners, Inc., ("Internos"). The
Internos Group of companies also included the Fund's previous distributor and
its accounting services and transfer agent. Internos and its parent, Convergent
Capital Corporation, provided support services to the asset management industry.
The Internos companies discontinued some operations and curtailed others by the
end of the year 1994. Accordingly, the service contracts with the Internos
companies were terminated and
9
<PAGE>
new ones were executed with the Barclay organizations to avail the Fund of the
latter's services. The new investment advisory contract has been approved by the
Fund's shareholders.
Under the new Investment Advisory Contract, the Adviser is required to
provide investment advice regarding the purchase and sale of portfolio
securities in accordance with the Fund's investment objectives, policies and
restrictions. The Investment Committee of the Fund makes investment decisions
and has primary responsibility for the day-to-day management of the Fund's
portfolio. The Adviser also furnishes executive, administrative, and clerical
services required for the overall management of the Fund's business affairs,
subject to the authority of the Board of Directors, other than custodian,
transfer agency, accounting and portfolio pricing services which are provided by
the Fund's custodian and transfer agent. The new contract is the same in all
material respects as relevant terms of the prior contract except for the dates
of execution and the identity of the new adviser.
The Fund pays the Adviser for its services an annual fee equal to a
percentage of the average daily value of the Fund's net assets which declines as
net assets reach specified levels. Under the Investment Advisory Contract, the
adviser is paid an annual fee equal to 0.60 of 1% of the first $50 million of
the Fund's average daily net assets; 0.40 of 1% of the next $50 million of the
Fund's average daily net assets; and 0.25 of 1% of the Fund's average daily net
assets in excess of $100 million. Advisory fees earned for the fiscal year ended
August 31, 1995, at 0.60 of 1% of the Fund's average daily net assets were
$8,364 of which $4,450 was waived by BFM. The fees paid of $3,914 were 0.28 of
1% of average daily net assets of which balance BFM received $2,000 and GAM, the
prior adviser, received $1,914.
The Adviser has agreed to reimburse the Fund monthly for the amount by
which annual expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) would exceed the most restrictive expense limitation
imposed by any state in which its shares are sold. Such reimbursement is limited
to the amount of the yearly investment advisory fee. Such reimbursement is
limited to the amount of the yearly investment advisory fee. Any such
reimbursable expenses so deducted may be refunded to the Adviser in subsequent
months if the level of the Fund's expenses during that fiscal year drops below
the applicable percentage limitation and will not again exceed those limitations
after giving effect to the refund. Final adjustment for any expense
reimbursement is made at the end of each fiscal year. The Fund currently is not
subject to any such expense limitation.
PURCHASE OF FUND SHARES
Barclay Investments, Inc., located at 66 South Main Street, Providence, RI
02903, serves as distributor for shares of the Fund under a distribution
agreement effective December 1, 1994.The previous distributor was Dayton,
Hancock, Waltman Securities, Inc., ("DHW"), one of the Internos companies. The
former agreement was terminated and a new one executed as previously noted. It
is the same in all material respects as relevant terms of the prior agreement
except for the dates of execution and the identity of the new distributor.
Barclay is also distributor for the Gibraltar
10
<PAGE>
Equity Growth Fund Series of Gibraltar Funds, Inc., a companion fund in the
Gibraltar Fund Group.
Shares of the Fund are continuously offered for sale and may be purchased
through authorized investment dealers or directly by contacting the Fund, its
distributor, or its transfer agent. The minimum investment to open an account is
$1,000. Subsequent investments must be at least $100. See "Other Purchase
Programs" for tax-qualified plans.
Shares of the Fund are purchased at net asset value per share next
determined after receipt of an order by an authorized securities dealer and its
prompt transmission to the Fund, or after an order is received by the Fund or
its Distributor, plus a sales load which varies in accordance with the dollar
amount of the shares purchased, as set forth in the table which follows. If a
shareholder's check is dishonored, his purchase and any dividends or
distributions paid thereon will be reversed and his account may be charged a
collection fee by the transfer agent. The Fund reserves the right to reject any
purchase order.
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
Sales Loads
Amount of Purchase Sales Charge
Single Orders As % of
Offering Amount Dealers' Reallowance
Price Invested as % of offering price
Less than $100,000 4.50% 4.71% 4.00%
$ 100,000 but under $ 200,000 3.50% 3.63% 3.25%
$ 200,000 but under $ 300,000 2.50% 2.56% 2.25%
$ 300,000 but under $ 400,000 1.50% 1.52% 1.25%
$ 400,000 but under $ 500,000 1.00% 1.01% 1.00%
$ 500,000 but over 0 0 0
Bank trust departments and investment advisers may purchase Fund shares for
their clients at net asset value without a sales load upon such verification of
eligibility for this privilege as the Fund may request.
No sales load is imposed on the automatic reinvestment in a Fund account of
distributions (capital gains and/or dividend income).
The Fund has continuously offered its shares to the public since July 1,
1992.
11
<PAGE>
PURCHASES THROUGH AUTHORIZED INVESTMENT DEALERS. Purchases can be made
through investment dealers who have entered into sales agreements with the
Distributor.
PURCHASES THROUGH THE DISTRIBUTOR. Purchases can be made on a subscription
basis directly with the Fund through its Distributor, Barclay Investments, Inc.,
66 South Main Street, Providence, RI 02903, by completing the account
application provided with the Prospectus and remitting a check made payable to
the Fund.
PURCHASES BY MAIL. An account may be opened for the purchase of shares by
completing and mailing to Barclay Financial Services, Inc., ("BFS"), the
transfer agent, at 1201 County Line Road, Rosemont, PA 19010-2614, the account
application provided with the Prospectus, accompanied by a check made payable to
the Fund.
Subsequent investments may be made by mailing a check or Federal Reserve
draft payable to the Fund at the above address.
PURCHASES BY BANK WIRE. Wire Federal Funds to the Bank of New York, ABA No.
021000018, for A/C IOC565 for further credit to Custody A/C Gibraltar U.S.
Government Securities Fund, Inc., No. 132677. A sending bank may charge a
shareholder a wire charge for the wire transfer. The sending bank must provide
BFS with the name of the shareholder, the Fund name and the shareholder's Fund
account number. In the case of a new account, an investor may call BFS Monday
through Friday between the hours of 9:00 AM and 4:00 PM at (610) 525-6102. BFS
will request the investor's name, address and social security number. The
investor must then complete and mail the Account Application accompanying this
Prospectus to Barclay Financial Services, Inc., 1201 County Line Road, Lower
Level, Rosemont, PA 19010-2614. A shareholder cannot redeem shares purchased by
wire until BFS has received an Account Application from such shareholder
properly completed and signed.
REDUCED SALES CHARGES
LETTER OF INTENT. An investor may qualify for a reduced sales load on a
purchase of Fund shares by completing a Letter of Intent form available from the
Fund's distributor. In doing so, the investor agrees to purchase within a
13-month period a specified number of Fund shares which, if purchased at one
time, would qualify for a reduced sales load. A minimum initial purchase of
$10,000 is required. Purchases will be made at the then current net asset value
plus the applicable sales load in effect when the Letter of Intent was executed.
In computing the applicable sales load, the offering price of any shares held
when the Letter of Intent is submitted may be used as a credit toward its
completion. However, there will be no refund of sales charges already paid on
such shares.
Income and capital gains distributions taken in additional shares will not
apply toward the completion of the Letter of Intent. Any redemptions made by the
shareholder during the 13-month period will be subtracted from the amount of the
purchases in order to determine whether the Letter of Intent has been completed.
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If total purchases under the Letter of Intent within the 13-month period
are less than the specified amount, the purchaser must remit an amount equal to
the difference between the sales load paid and the sales load applicable to the
purchases actually made. The transfer agent will hold 5% of the dollar amount of
the total intended purchase in escrow in the form of shares registered in the
purchaser's name. The reserved shares will not be available for redemption,
transfer or encumbrance by the purchaser until the Letter of Intent is completed
or the higher sales charge is paid. Income or capital gain distributions on
escrowed shares will be paid in cash or invested in additional shares as the
purchaser may direct.
If the investment specified in the Letter of Intent is completed in timely
manner, the escrowed shares will be released to the purchaser. If the specified
investment is not completed, the purchaser will be asked to remit any difference
between the sales charge on the amount specified and on the amount actually
purchased. If such remittance is not received within 20 days, the transfer agent
will redeem an appropriate number of escrowed shares to realize the difference
and any shares then remaining will be released.
In signing a Letter of Intent the purchaser irrevocably appoints the
transfer agent his attorney to surrender for redemption any or all escrowed
shares with full power of substitution. Signing a Letter of Intent does not bind
the purchaser to purchase, or the Fund to sell, the amount of shares indicated.
However, the intended purchase must be completed to obtain the reduced sales
load.
RIGHTS OF ACCUMULATION. A reduced sales load is also available through
accumulat ing purchases of Fund shares. In calculating the sales load applicable
to a current purchase of shares, an investor may accumulate current purchases
with the current value of previously purchased shares of the Fund if the dollar
amount of a current purchase, plus Fund shares then held of record and valued at
their current offering price, is $10,000 or more. The distributor must be
notified at the time of purchase of any sale subject to the reduced sales load.
The Fund may amend or terminate this right of accumulation at any time as to all
purchases occurring thereafter.
TRANSFER AGENT AND CUSTODIAN
Barclay Financial Services, Inc., ("BFS"), a Rhode Island corporation
organized in 1994, is the Fund's transfer agent, accounting services agent and
dividend disbursing agent. It is a wholly-owned subsidiary of Barclay. It serves
under agreements with the Fund effective December 1, 1994. The previous
accounting services and transfer agent was Gibraltar Service Corporation
("GSC"), one of the Internos companies. The former agreements were terminated
and new ones executed as previously noted. They are the same in all material
respects as relevant terms of the prior agreements except for the dates of
execution and the identity of the new agent.
BFS is located in the Rosemont, Pennsylvania, offices of its predecessor,
GSC, with the same facilities and principal operating officers. It is
positioned, as a Barclay subsidiary, to provide a servicing package to mutual
funds. It is also accounting
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services and transfer agent for Gibraltar Equity Growth Fund Series of Gibraltar
Funds, Inc., a companion fund in the Gibraltar Fund Group.
The Bank of New York, One Wall Street, New York, NY 10286 acts as custodian
for the Fund and for Gibraltar Equity Growth Fund Series of Gibraltar Funds,
Inc.
DISTRIBUTION PLAN
In accordance with a Distribution Plan adopted pursuant to Rule 12b-1 under
the 1940 Act, the Fund finances certain activities in connection with the
promotion and sale of its shares.
The Distribution Plan permits, among other things, payment of compensation
for selling shares and the cost of advertising, the services of public relations
consultants, direct solicitation, entertainment, and awards. Possible recipients
include securities brokers, attorneys, accountants, investment advisers, pension
actuaries, and service organizations. The Fund may expend annually up to 0.25%
of its average daily net assets pursuant to the Distribution Plan to compensate
recipients for providing services under the Plan during a Fiscal year. There are
no provisions in the Plan which permit the carrying over of distribution
expenses from one year to the next. The Fund cannot be charged for interest,
carrying or any other financing charges on any unreimbursed distribution or
other expense incurred in a prior plan year, and does not consider itself under
a legal obligation to pay all or part of any such carryovers. The costs of the
Distribution Plan will be reflected in the disclosure of Fund expenses. A more
detailed description of the Distribution Plan is contained in the Statement of
Additional Information. The Fund did not make any payments under the
Distribution Plan for the fiscal year ending August 31, 1995, or for the fiscal
year ending August 31, 1994. The Board of Directors believes the Plan is in the
best interests of the Fund.
FUND EXPENSES
The Fund is responsible for its own expenses other than those borne by the
Adviser and the Distributor under their service contracts. Expenses which the
Fund expects to pay include investment advisory fees; costs of accounting,
transfer and disbursing services; expenses of its distribution plan when
activated; fees of its "non-interested" directors, independent auditors and
legal counsel; fees payable to government agencies related to registration and
qualification of its shares under Federal and state securities laws; brokerage
commissions on portfolio transactions; and certain miscellaneous expenses and
taxes. The Fund's ratio of expenses to average daily net assets for the fiscal
year ended August 31, 1995, was 2.66% net of all 12b-1 fees and expenses waived
by the investment adviser.
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of the Fund is determined as of the close of
trading (currently 4:00 P.M. Eastern time) on each day the New York Stock
Exchange is open for trading and on which the trading volume in the Fund's
portfolio of securities
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<PAGE>
might be sufficient to affect the net asset value of its shares. Net asset value
is obtained by dividing the asset value of the Fund's securities and other
assets, minus the Fund's liabilities, by the total number of Fund shares
outstanding at the time of valuation.
Mortgage securities and loan pools, and other fixed income securities are
valued at current market values on the basis of valuations provided by a pricing
service, quotations from established dealers and market transactions in
comparable securities. Securities and other assets for which market quotations
are not readily available are valued at fair value as determined in good faith
by the Board of Directors.
Money market instruments (certificates of deposit, commercial paper, etc.)
having maturities of 60 days or less, are valued using the amortized cost
method. The amortized cost method involves valuing a security at its cost and
amortizing any discount or premium over the period until maturity, regardless of
the impact of fluctuating interest rates on the market value of the security.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of other investment
companies in the Gibraltar family of funds. Exchanges are made on the basis of
the net asset values of the companies involved plus a sales charge if one is
applicable. There is no redemption fee. Since the exchange is considered a
redemption and purchase of shares, the shareholder may realize a gain or loss
for Federal income tax purposes. Before any exchange, shareholders should obtain
and review a copy of the current prospectus of the fund into which the exchange
is being made. The exchange privilege may be modified or terminated at any time
upon 60 days written notice to investors.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to accrue dividends from net investment income on a daily
basis. Fund shares begin earning dividends on the day that immediately available
funds are received by the transfer agent in writing or electronically. Such
funds, known as Federal Funds, are monies of member banks in the Federal Reserve
System which are held on deposit at a Federal Reserve Bank. A payment not made
in Federal Funds must be converted into Federal Funds. This usually occurs
within one business day of receipt of a bank wire and within two business days
of receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on non-member banks of the Federal Reserve System may take longer
to convert into Federal Funds.
Periodic payments of both interest and principal are provided for in
mortgage-related securities. The interest portion of these payments will be
distributed by the Fund as income and the capital portion will be reinvested.
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<PAGE>
Dividends from net investment income are usually paid on the last business
day of each month. The Fund's earnings for Saturdays, Sundays and holidays are
accrued as dividends on the next subsequent business day.
Net capital gains from the sale of portfolio securities will be distributed
once each year unless there are offsetting capital loss carryovers from prior
years, in which case no such gains will be distributed to the extent of such
capital loss carryovers. Unless a shareholder requests in his Account
Application, or subsequently in writing, that dividends and distributions be
paid in cash, income dividends and capital gains distributions are reinvested
automatically in additional shares without a charge at the next determined net
asset value after the dividend or distribution. A shareholder desiring to
receive dividends and distributions in cash must so indicate in his Account
Application or may do so at a later date by writing to the Fund's Shareholder
Servicing Agent, Barclay Financial Services, Inc.
If all shares in an account are redeemed at any time during a month, all
dividends to which a shareholder is entitled will be paid to him along with the
proceeds of redemption.
PERFORMANCE DATA
From time to time the Fund may advertise its yield and effective yield in
advertisements or other written sales material. The Fund's yield is a measure of
the net investment income per share earned over a specific period of time such
as seven days or one month. Yield is then annualized by assuming that the same
level of net investment income is generated by the Fund over a period of one
year. Effective yield is similarly calculated but, when annualized, all
dividends and capital gains distribu tions are assumed to be reinvested. Because
of the compounding effect of assumed reinvestment, effective yield will be
slightly higher than yield. The Fund may also show its average annual return
over one, five and ten year periods, or the life of the Fund, if shorter. Yield
and performance information is based on past earnings and is not intended as a
prediction of future performance.
TAXES
The Fund has continued its election to qualify as a regulated investment
company under the Internal Revenue Code. As long as it qualifies for this tax
treatment, it will not be subject to federal income tax on investment income and
on net capital gains distributed to shareholders. To avoid imposition of a
federal excise tax on certain amounts of undistributed income in each calendar
year, the Fund will distribute during the calendar year at least 98% of its net
investment income and 98% of its capital gain net income for the one-year period
ending October 31st, and 100% of any undistributed ordinary or capital gain net
income from the prior calendar year.
Shareholders are taxed on their proportionate share of dividends and
distributions of realized gain, regardless of whether the dividends or
distributions are paid in cash or reinvested in additional shares. Distributions
of dividends and short-term capital gains are taxable as ordinary income.
Distributions of net capital gains (the excess
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<PAGE>
of net long-term capital gains over net short-term capital losses) are taxable
as long-term capital gains, regardless of how long the Fund shares have been
held. Net capital gains are taxed at the same rate as ordinary income except
that, beginning in 1991, a statutory formula provides an effective 28% top
marginal rate for net capital gains.
Redemption of Fund shares is a taxable event and may result in a capital
gain or loss to the redeeming shareholder depending upon whether redemption
proceeds exceed or are less than the adjusted basis for the redeemed shares.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to shareholders who do not provide
the Fund with a correct taxpayer identification number and a certification that
they are not subject to backup withholding.
The foregoing is only a brief statement of significant federal tax
provisions affecting the Fund and its shareholders. No attempt is made here to
present a comprehensive explanation of the federal, state and local income tax
treatment of the Fund and its shareholders.
Information concerning the tax status of dividends and distributions is
mailed to shareholders shortly after the end of each calendar year. Dividends,
capital gains distributions and redemptions of Fund Shares may be subject to
state and local, as well as federal income taxes. Shareholders are advised to
consult their tax advisers regarding their own tax situations and possible
changes in the federal income tax laws.
OTHER PURCHASE PROGRAMS
RETIREMENT PLANS. The Fund offers individual retirement account plans for
use by individuals (IRA's). Minimum investment requirements in accounts for such
tax-qualified plans sponsored by the Fund will be subject only to any such
requirements specified in the plans. If a shareholder fails to maintain his
account at any minimum required by the plan, the Fund would redeem the account
and distribute the proceeds to the trustee or custodian of the plan. Premature
distribution of the proceeds would be prohibited by the terms of the plan so
that proceeds would remain uninvested until the shareholder became entitled to a
distribution or made additional contributions to his account to return the
account to the minimum level required.
Anyone under the age of 70 1/2 earning wages or self-employment income is
eligible to establish and contribute to an IRA or Spousal IRA, regardless of
whether or not such person is also an active participant in various types of
qualified pension, profit sharing, stock bonus or annuity plans. The individual
may contribute 100% of income, up to a maximum of $2,000 per year. In addition,
individuals who receive certain lump sum distributions from employer-sponsored
retirement plans may make rollover contributions to an IRA and by doing so defer
taxes on the distribution and shelter any investment earnings.
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<PAGE>
An investor considering the establishment of an IRA Plan available through
the Fund, should review the applicability of Federal tax law provisions which
limit the amount and deductibility of contributions based upon adjusted gross
income or earned income levels, and whether or not the investor also
participates in various types of qualified plans. Income on contributions can be
sheltered from tax until distribution. Contributions in excess of those
permitted by law incur a penalty, as do premature distributions and prohibited
transactions.
Detailed information regarding the Fund's IRA retirement plan, and
disclosures required pursuant to Internal Revenue Service and Department of
Labor regulations, may be obtained by writing or calling BFS, the transfer and
shareholder servicing agent, Monday through Friday between the hours of 9 AM and
5 PM at (610) 525- 6102. Applicable trustee fees, enrollment procedures, and
contribution limitations will be explained upon request.
Shares of the Fund are available for purchase by other types of individual,
partnership or employer sponsored tax-qualified retirement plans which allow for
investment in mutual funds. The purchase of Fund shares may be limited by the
plans' provisions and does not itself establish such plans.
It is important to note that retirement plans are legally binding documents
with tax consequences for covered participants. The foregoing discussion relates
only to Federal income taxes. An investor considering establishing an IRA or
purchasing Fund shares in connection with a retirement plan should obtain
competent legal and tax advice.
REDEMPTION OF FUND SHARES
Fund shares may be redeemed at any time without a redemption charge except
as hereafter noted. A shareholder should write directly to the Fund's transfer
agent, Barclay Financial Services, Inc., 1201 County Line Road, Rosemont, PA
19010. Requests for redemption must be signed (by all shareholders, if a joint
account) and the signature(s) must be guaranteed by a commercial bank or trust
company, or a member firm of a national securities exchange. Further
documentation may be required as to the authority of the person requesting
redemption of shares held of record in the name of corporations, executors,
administrators, trustees or guardians. The value of shares on redemption may be
more or less than the shareholder's purchase price, depending upon the net asset
value of Fund shares at the time of redemption. A shareholder may also redeem
shares through a broker-dealer of his choice who may charge a fee for such
service.
Redemption payments are made at the net asset value next determined after
receipt of a redemption request in proper form. Proceeds are generally mailed
within seven (7) days thereafter. However, the Fund will not mail redemption
payments until checks (including certified checks or cashier's checks) received
for the purchase of shares have cleared, which may take up to fifteen (15)
calendar days after a purchase order is received. The Fund reserves the right
to: (1) suspend the right of redemption or postpone the date of payment during
any period when (a) trading on
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<PAGE>
the New York Stock Exchange is suspended for other than customary weekend and
holiday closings; (b) the Securities and Exchange Commission has by order
permitted such suspension; or (c) an Emergency (as defined by the rules of the
Securities and Exchange Commission) exists making disposal of portfolio
securities or determinations of the value of net assets not reasonably
practical; and (2) pay the redemption price in whole or part by a distribution
in kind from its portfolio securities and other assets, in lieu of cash.
A redemption fee may also be charged if the value of the shares being
redeemed is $250,000 or more, if it is necessary to sell portfolio securities to
meet the redemption, and if the Fund's management determines that the Fund and
its shareholders might be disadvantaged were such a fee not charged. Such
redemption fee would equal the amount of brokerage costs incurred but would not
exceed 1% of the net asset value of the Fund shares redeemed.
The Fund reserves the right, in its discretion, to redeem shares in any
account if the account balance falls below $1,000 as a result of redemptions by
the shareholder. Before such a redemption is effected, the shareholder will be
allowed thirty days after written notice from the Fund to make an additional
investment sufficient to bring the value of the account up to $1,000. In the
event a shareholder fails to keep an IRA or Keogh account at any minimum
required by such a tax-qualified plan, the Fund would, after 30 days notice to
the shareholder, redeem the account and distribute the proceeds to the trustee
or custodian of the plan.
CAPITAL STOCK
The Fund is authorized to issue up to 3,000,000 shares of common stock, par
value $.01 per share. Each share or fractional share is nonassessable and has
equal rights as to dividends, distributions and voting. When voting on nominees
for the election of directors there is no cumulative voting. Shareholders have
no preemptive rights to acquire shares offered publicly by the Fund. Fund shares
may be freely transferred; however, such transfer will not be effective unless
duly noted on the books of the Fund. Each share is entitled to one vote.
Fractional shares are entitled to fractional votes.
The Fund raised its required initial net worth through private offering
subscriptions for its shares in accordance with the provisions of Section 14(a)
of the Investment Company Act of 1940. The Fund commenced investment operations
and the continuous offering of its shares to the public on July 1, 1992.
CONTROL PERSONS. As of November 14, 1995, Mr. Edgar U. Peters owned
beneficially 25.04% of the voting securities of the Fund through shares owned
individually and by his wife and may be deemed to be a "controlling person" of
the Fund. The officers and directors as a group owned beneficially 3.79% of the
Fund's voting securities.
The organizational expenses of the Fund will be amortized over a period of
sixty months from the commencement of operations. If any holder of the initial
shares
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<PAGE>
redeems prior to the end of the amortization period, the Fund will deduct and
retain from the redemption proceeds the holder's pro rata share of the
unamortized expenses as of the date of redemption.
GENERAL INFORMATION
As used in the Prospectus, a vote of the holders of a majority of the
Fund's shares means the affirmative vote of the lesser of (a) 67% or more of the
shares present at a meeting if more than 50% of the outstanding shares of the
Fund are represented at the meeting in person or by proxy, or (b) more than 50%
of the outstanding shares.
The Maryland General Corporation Law does not require corporations
registered under the Investment Company Act of 1940 to hold routine annual
meetings of shareholders in any year in which the election of directors is not
required to be acted upon under the 1940 Act. The Fund does not intend to hold
such routine annual meetings.
In compliance with the 1940 Act, shareholder meetings will be held to elect
directors whenever fewer than a majority of the directors holding office have
been elected by the shareholders or, if necessary in the case of filling
vacancies, to assure that at least two-thirds of the directors holding office
after vacancies are filled have been elected by the shareholders. The Fund may
hold meetings to approve changes in investment policy, a new investment advisory
agreement or other matters requiring shareholder action under the 1940 Act.
A meeting may also be called by shareholders holding at least 10% of the
shares entitled to vote at the meeting for the purpose of voting upon the
removal of directors, in which case shareholders may receive assistance in
communicating with other shareholders similar to the provisions contained in
Section 16 (C) of the 1940 Act. In addition, Maryland General Corporation Law
provides for the calling of a special meeting by the written request of
shareholders holding at least 25% of the shares entitled to vote at the meeting.
Neither the Fund, its Adviser nor its Distributor are involved in any
pending legal proceedings.
A copy of an account application for the Fund is contained in the back of
this Prospectus. To establish an IRA Plan account, please call or write the Fund
or its Shareholder Servicing Agent, Barclay Financial Services, Inc., (BFS), for
a separate account application and/or transfer form. Shareholders should also
call BFS at (610) 525-6102 for information regarding their accounts and for
general information regarding the Fund.
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DIRECTORS AND OFFICERS INVESTMENT ADVISER
OF THE COMPANY
Joseph J. Waltman 1,2 Barclay Funds Management
President 66 South Main Street
Providence, RI 02903
Basil C. Williams 1
Director DISTRIBUTOR
Timothy R. Hutchinson 1 Barclay Investments, Inc.
Director 66 South Main Street
Providence, RI 02903
Robert Scandone 3
Director; Attorney-at-Law SHAREHOLDER SERVICING AGENT
AND TRANSFER AGENT
M. David Chassen 3
Director; Options Floor Barclay Financial Services, Inc.
Broker Philadelphia Stock 1201 County Line Road
Exchange Rosemont, PA 19010
Norman M. McAvoy 2,3 CUSTODIAN
Director; Investment
Consultant The Bank of New York
One Wall Street
Bruce H. Rogove 1 New York, NY 10286
Vice President
AUDITORS
S. Grey Dayton, Jr. 1
Vice President Tait, Weller & Baker
Independent Certified Public
J. G. Gordon Yocum 2,4 Accountants
Secretary Two Penn Center Plaza
Suite 700
David F. Ganley 1,2 Philadelphia, PA 19102
Treasurer
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1. Affiliated with Barclay Companies.
2. Messrs. Waltman, McAvoy, Dayton, Yocum and Ganley were previously
affiliated in various capacities with the Fund and/or its former service
companies.
3. "Non-Interested" Director
4. Mr. Yocum is also Legal Counsel for the Fund.
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GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
1201 County Line Road, Rosemont, PA 19010-2614
(610) 525-6102
STATEMENT OF ADDITIONAL INFORMATION
November 28, 1995
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus of Gibraltar U.S. Government Securities
Fund, Inc., dated November 28, 1995. Because this Statement of Additional
Information is not a Prospectus, no investment in shares of the Fund should be
made solely upon the information contained herein. A copy of the Prospectus may
be obtained by writing the Shareholder Servicing and Transfer Agent, Barclay
Financial Services, Inc., or the Fund at 1201 County Line Road, Lower Level,
Rosemont, PA 19010-2614. Or telephone (610) 525-6102.
TABLE OF CONTENTS PAGE
General Information and History.............................................1
Investment Objectives and Policies..........................................1
Policies, Objectives and Strategies....................................1
Repurchase Agreements..................................................1
Investment Restrictions................................................2
Portfolio Turnover.....................................................3
Management of the Fund......................................................3
Directors and Officers.................................................3
Control Persons and Principal Holders of Securities.........................7
Investment Advisory and Other Services......................................8
Adviser................................................................8
Accounting Services...................................................10
Transfer Agency and Administration....................................10
Distribution of Fund Shares...........................................11
Distributor...........................................................12
Organization of Service Companies.....................................13
Brokerage Allocation.......................................................13
Capital Stock..............................................................15
Purchase, Redemption and Pricing of Shares.................................16
Other Information..........................................................16
Majority Vote.........................................................17
Custodian.............................................................17
Independent Certified Public Accountants..............................17
Legal Counsel.........................................................17
Registration Statement................................................17
Financial Statements.......................................................18
" i "
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GENERAL INFORMATION AND HISTORY
Gibraltar U.S. Government Securities Fund, Inc., (the "Fund"), is an
open-end, diversified management investment company or mutual fund, registered
under the Investment Act of 1940 (the "1940 Act"). Incorporated in Maryland on
June 28, 1991, it first offered its shares to the public on July 1, 1992, and
has been in operation continuously thereafter. It is one of the funds in the
Gibraltar Fund Group which is advised, managed and serviced by Barclay
Investments, Inc., and its affiliated companies.
INVESTMENT OBJECTIVES AND POLICIES
The investment policy of the Fund is to provide safety of principal,
liquidity and a high level of current income. It seeks to do this through
investing in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These are fundamental objectives and policies
which cannot be changed without the approval of a majority of the outstanding
voting shares.
In retaining flexibility to respond to changes in market or economic
conditions, the Fund may employ different investment strategies by investing in
varying combinations of U.S. government securities such as mortgage-backed
securities, agency obligations and direct obligations of the U.S. Treasury.
These strategies may also include when issued and delayed delivery transactions
and the use of repurchase agreements. When consistent with fundamental
investment policy and investment restrictions, Fund management may change
investment strategies without shareholder approval. The investment objectives
and policies are set forth at length in the Prospectus.
The discussion in this Statement of Additional Information on policies and
strategies supplements material presented in the Prospectus. There is no
guarantee that the Fund's investment objectives will be achieved.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under a repurchase agreement, the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The repurchase price exceeds the
sale price reflecting an agreement by the seller of the security subject to the
repurchase agreement to pay an agreed upon rate of interest on the security.
When investing in repurchase agreements, the Fund will make payment for such
securities only upon physical delivery of the underlying security, or evidence
of book entry transfer, to the account of the custodian or bank acting as agent
for the Fund. Repurchase agreements are considered to be loans by the Fund under
the 1940 Act, as amended (the "Act"), collateralized by the underlying
securities.
In the event of a bankruptcy or other default of the party obligated to
repurchase, the Fund could experience both delays in liquidating the underlying
securities and losses including: a) possible decline in the value of the
underlying securities while the Fund seeks to enforce its rights thereto; b)
below market levels of income and lack of access to income on that security
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<PAGE>
during this period; c) expenses incurred in enforcing its rights.
INVESTMENT RESTRICTIONS. Without the vote of the holders of a majority of
the Fund's outstanding shares, (as defined under "Other Information"), the Fund
may not:
(a) issue senior securities;
(b) borrow money except from banks as a temporary measure to meet
unexpectedly high levels of share redemptions, and then only in
an amount not to exceed 5% of the value of its net assets, taken
at the time the loan is made, or pledge its assets taken at value
to any extent greater than 15% of its total assets taken at cost;
(c) act as an underwriter of securities of other issuers;
(d) invest in real estate or real estate loans;
(e) purchase or sell commodities, commodity contracts, futures
contacts or options on futures contracts;
(f) lend its cash or portfolio securities to any other person except
for the following which is permitted: the purchase of a portion
of publicly distributed bonds, debentures or other debt
instruments, certificates of deposit or U.S. Government debt
securities, as specified in its investment objectives and
policies; and the execution of repurchase agreements; provided,
however, that repurchase agreements covering a period of greater
than seven days, together with other illiquid securities, are
limited to not more than 10% of the value of the Fund's net
assets;
(g) purchase the securities of any one issuer, other than obligations
issued or guaranteed by the United States government and its
agencies and instrumentalities, if, immediately after such
purchase, (I) more that 5% of the value of the Fund's total
assets would be invested in such issuer, or (ii) the Fund would
own more than 10% of the outstanding voting securities of such
issuer; except that up to 25% of the value of the Fund's total
assets may be invested without regard to such limitations;
(h) purchase any securities on margin, make any so called "short"
sale of securities, or participate in any joint or joint and
several trading account;
(I) invest more than 25% of its net assets valued at the time of
purchase in the securities of companies in any one industry;
(j) invest in restricted securities or in securities for which there
is no readily available market quotation except for repurchase
agreements;
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(k) invest in securities of companies which have a record of less
than three year's continuous operation, if, at the time of such
purchase, more than 5% of the Fund's total assets (taken at
value) would be so invested;
(l) purchase participations or other direct interests in oil, gas or
other mineral exploration or development programs;
(m) write put or call options.
Notwithstanding (b) above, because of certain state investment
restrictions, the Fund's operating policy is to not pledge assets having a value
in excess of 10% of the Fund's net asset value; however, this policy is subject
to change without shareholder approval.
As noted in the prospectus, the Fund may invest on a short term basis in
securities of other investment companies organized as money market funds for
investment primarily in U.S. government securities and which charge no front-end
sales loads or redemption fees. The Fund does not intend to follow such policy
to a significant degree. Subject to the provisions of Section 12 (d) (1) of the
1940 Act, the Fund will not: (a) invest more than 10% of the value of its total
assets in securities of other investment companies; (b) invest more than 5% of
the value of its total assets in any other investment company; and (C) acquire
more than 3% of the total outstanding voting securities of any other investment
company.
PORTFOLIO TURNOVER. Portfolio turnover rates for the fiscal years ended
August 31, 1995 and 1994 were 56% and 51% respectively. Investment changes were
made to realize gains and to shorten the average maturities of mortgage-back
securities pools held in the portfolio. Redemptions of Fund shares also
accounted for some portfolio liquidations. The changes were deemed consistent
with the Fund's investment objective of safety of principal with a high level of
current income. The turnover rate did not affect transaction expenses or taxes
significantly or involve additional gains or losses for shareholders to a
significant degree.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS. The names and addresses, positions with the Fund,
affiliations and principal occupations during the past five years of the
directors and officers are listed below. Directors deemed to be "interested
persons" of the Fund as defined in the Investment Company Act of 1940 are
indicated by an asterisk (*).
3
<PAGE>
POSITIONS WITH THE FUND;
PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS PAST FIVE YEARS
- ------------------------------------------------------------------------------
Basil C. Williams * Director of the Fund and of Gibraltar Equity
Barclay Investments, Inc. Growth Fund, Inc.; President and Director,
685 Fifth Ave., 11th Fl. Barclay Investments, Inc.; Director, Barclay
New York, NY 10022 Funds Management and Barclay Financial
Services, Inc.; Vice President and Director,
Barclay Capital Management, Inc.
Timothy R. Hutchinson * Director of the Fund and of Gibraltar Equity
Barclay Investments, Inc. Growth Fund, Inc.; Branch Manager, Barclay
Ste. 701 Barclay Funds Management; Vice President
Princeton Junction, NJ 08550 and Director, Barclay Financial Services,
Inc.
Robert Scandone Director of the Fund and of Gibraltar Equity
1135 Land Title Bldg. Growth Fund, Inc.; Attorney-at-Law.
Philadelphia, PA 19110
M. David Chassen Director of the Fund and of Gibraltar Equity
Phila. Stock Exchange Growth Fund, Inc.; options floor broker,
1900 Market Street Philadelphia Stock Exchange, affiliated with
Phila., PA 19103 Birchwood Securities Corp. and D.C.
Options, Inc., formerly: director of the
Gibraltar funds; equity and options
specialist on the Philadelphia and American
stock exchanges.
Norman M. McAvoy Director of the Fund and of Gibraltar Equity
Gibraltar Fund Group Growth Fund, Inc.; self-employed as an
1201 County Line Rd. investment consultant; former positions
Rosemont, PA 19010 included: investment consultant, Widman
Blee & Co.; Treas., C.W. Benedum
Foundation; Sr. Vice Pres., Insurance Co. Of
N. America; member, Philadelphia Stock
Exchange.
4
<PAGE>
Joseph J. Waltman President of the Fund and of Gibraltar Equity
Gibraltar Fund Group Growth Fund, Inc., formerly Chairman and
1201 County Line Rd. Director of the Gibraltar Funds; President
Rosemont, PA 19010 and Director, Barclay Financial Services,
Inc.; President and Director, Dayton,
general insurance agent and general
securities principal, Trans Financial
Investment Services, Inc.; President and
Director of the former Gibraltar Asset
Management, Inc., and Gibraltar Service
Corporation.
Bruce H. Rogove Vice President of the Fund and of Gibraltar
Barclay Investments, Inc. Equity Growth Fund, Inc.;Director, Barclay
14 Washington Rd., Ste. 701 Investments, Inc., and Barclay Financial
Princeton Junction, NJ 08550 Services, Inc.; Vice President and Director,
Barclay Funds Management; formerly First
Vice President, Dominick & Dominick, Inc.
S. Grey Dayton, Jr. Vice President of the Fund and of Gibraltar
Gibraltar Fund Group Equity Growth Fund, Inc.; Vice President,
1201 County Line Rd. Dayton, Hancock, Waltman Securities, Inc.,
Rosemont, PA 19010 and Birchwood Securities Corp.; principal,
D.C. Options, Inc.; Vice president and
Director of the former Gibraltar Asset
Management, Inc., and Gibraltar Service
Corporation; former positions included:
President and Governor, Philadelphia Stock
Exchange.
J. G. Gordon Yocum Secretary of the Fund and of Gibraltar
Gibraltar Fund Group Equity Growth Fund, Inc.; counsel to
1201 County Line Rd. Henderson, Wetherill, O'Hey & Horsey; former
Rosemont, PA 19010 positions included: Vice President and
and its clearing and depositary
subsidiaries.
5
<PAGE>
David F. Ganley Treasurer of the Fund and of Gibraltar
Gibraltar Fund Group Equity Growth Fund, Inc.; formerly President
1201 County Line Rd. of the Funds; Treasurer, Barclay Funds
Rosemont, PA 19010 Management, Inc.; Director and Treasurer,
Barclay Financial Services, Inc.;
Treasurer, Dayton, Hancock, Waltman
Securities, Inc.; officer of the former
Gibraltar Asset Management, Inc.; officer
and director of the former Gibraltar Service
Corporation.
COMPENSATION TABLE
--------------------------------------------
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Annual From Registrant
Name of Person From Accrued As Benefits Upon and Fund
Position Registrant Part of Fund Retirement Complex Paid
Expenses to Directors
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Robert Scandone $150 -0- -0- $300 (1)
Director
Charles H. Jones, Jr. -0- -0- -0- -0- (1)
Director
Norman M. McAvoy $150 -0- -0- $300 (1)
Director
Basil C. Williams -0- -0- -0- -0-
Director (*)
Timothy R. Hutchinson -0- -0- -0- -0-
Director (*)
Officers (2) -0- -0- -0- -0-
- ----------------------------------
(*) "Interested Persons".
(1) Includes the one other investment company in fund complex. Each
"noninterested" director's annual fee is not to exceed $1,000 from
any one fund in the complex. Compensation amounts shown are for
the fiscal year ended August 31, 1995.
(2) The officers of the Fund, (President, Secretary and Treasurer),
listed in the preceding section, serve without compensation and have
no retirement benefits from the Fund and the one other fund in the
complex. Mr. Yocum receives compensation as counsel to the Fund and
the one other fund in the complex.
6
</TABLE>
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table shows as of November 14, 1995, any person (including
any "group" as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934) known by the Fund to be the beneficial owner (as defined by
Regulation 13(d)(3) under such Act), of more than 5% of the voting securities of
the Fund, and also such shares held by all officers and directors of the Fund as
a group. The address of each, unless otherwise noted, is c/o Barclay Financial
Services, Inc., 1201 County Line Road, Lower Level, Rosemont, PA 19010.
NAME AND ADDRESS AMOUNT OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP IN SHARES CLASS
A. G. Peters & Son, Inc.
Profit Sharing Trust
Diane L. Lansberry,
Trustee 21,052.996(1) 15.380%
Anne Kayarian
421 Spring Green Rd.
Warwick, RI 02888 18,904.132 13.810%
Edgar U. Peters 18,429.053(2) 13.470%
Edgar U. Peters
Mildred M. Peters 15,837.209 11.570%
A. G. Peters & Son, Inc.
Cash Management Account
Diane L. Lansberry, Pres. 12,754.921(1) 9.320%
Accupac, Inc., Employees
Profit Sharing Plan Tr.
P.O. Box 200
Mainland, PA 19451 11,564.668 8.450%
Evangelical Lutheran Church
2300 South 18th Street
Philadelphia, PA 19145 10,298.805(3) 7.530%
All Officers and Directors as a Group 5,191.261(5) 3.790%
---------------------------
(1) Mr. Edgar U. Peters has no voting power with respect to these shares.
(2) Mr. Edgar U. Peters' total includes shares held in IRA accounts by
Delaware Charter Guarantee & Trust Co. for himself and his wife.
7
<PAGE>
(3) Evangelical Lutheran Church's total includes shares held in the
following accounts: Cemetery Operating Capital (4,000.000); Cemetery
Operating Income (2,000.000); Cemetery Endowment Capital (2,000.000);
Church Endowment (2,298.805).
(4) The beneficial ownership of all officers and directors as a group is
composed of shares held as follows: by Mr. Ganley, Treasurer, (902.122)
individually; (442.793) jointly with a family member; and (194.333) as
fiduciary for a family member; by Mr. Chassen, Director, (2,938.623);
by Mr. Yocum, Secretary and Counsel (713.390).
As of November 14, 1995, Mr. Peters owned beneficially 25.04% of
the voting securities of the Fund through shares owned individually and by his
wife and may be deemed to be a "controlling person" of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISER. The Adviser to the Fund, BFM, Inc, d/b/a/ Barclay Funds
Management, ("BFM"), is a wholly-owned subsidiary of Barclay Investments, Inc.,
("Barclay"). Timothy R. Hutchinson is a Director of the Fund and a Director and
President of the Adviser. Bruce H. Rogove is a Vice President of the Fund and
the Adviser and a Director of the latter. David F. Ganley is Treasurer of the
Fund and the Adviser. For further information see section hereafter entitled
"Organization of Service Companies".
The Adviser serves the Fund under an Investment Advisory Contract,
effective December 1, 1994, and is paid an annual fee, in monthly installments
for the previous month, equal to a percentage of its average daily net assets,
as follows: 0.60 of 1% of the first $50 million; 0.40 of 1% of the next $50
million; and 0.25 of 1% of the amount in excess of $100 million. Advisory fees
earned for the fiscal year ended August 31, 1995, were $8,364 of which $4,450
was waived by BFM. Of the $3,914 in fees paid BFM received $2,000 and Gibraltar
Asset Management, Inc., ("GAM"), the prior Adviser received $1,914. For the
fiscal years ended August 31, 1994 and 1993 GAM received fees of $7,688 and
$8,574 respectively.
The new investment advisory contract has been approved by the shareholders
and is the same in all material respects as relevant terms of the prior contract
except for the dates of execution and the identity of the new adviser. It
continues in effect from year to year if such continuation is specifically
approved at least annually by vote of the holders of a majority of the
outstanding shares of the Fund or by the vote of a majority of the Fund's
directors and by a majority of the non-interested directors. The contract may be
terminated by either party upon 60 days' notice provided, that in the case of
termination by the Fund, the termination shall have been authorized by
resolution of the Board of Directors or by vote of the holders of a majority of
the outstanding shares of the Fund. The Investment Advisory Contract will
terminate automatically upon assignment by either party thereto.
8
<PAGE>
The Adviser has agreed to reimburse the Fund monthly for the amount by
which annual expenses (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) would exceed the most restrictive expense limitation
imposed by any state in which its shares are sold. Such reimbursement is limited
to the amount of the yearly investment advisory fee. Any such reimbursable
expenses so deducted may be refunded to the Adviser in subsequent months if the
level of the Fund's expenses during that fiscal year drops below the applicable
percentage limitation and will not again exceed those limitations after giving
effect to the refund. Final adjustment for any expense reimbursement is made at
the end of each fiscal year. The Fund currently is not subject to any such
expense limitation.
The Adviser provides the Fund with a program of general administration
including:
1. office space, equipment, supplies and utility services as required by
the Fund to conduct its business;
2. supervision of all persons performing the executive, administrative,
and clerical functions necessary for the conduct of the Fund's
business;
3. supervision of accounting and record keeping;
4. preparation and distribution of reports to shareholders and regulatory
bodies;
5. supervision of the daily determination of the purchase and redemption
price of Fund shares; and
6. other facilities, services, and activities necessary for the conduct of
the Fund's business, except for services provided by the Fund's
custodian, registrar, transfer agent, accounting services agent,
dividend disbursing agent, auditors, and legal counsel.
The Adviser also provides the Fund with a program of shareholder services
including:
1. the supervision of the issuance of timely and accurate confirmations
of share purchases and redemptions; the supervision of the activities
of the Fund's custodian, registrar, and transfer agent; and the
supervision of the issuance of appropriate statements of transactions
and shareholders' accounts;
2. the services of persons competent to receive and respond to inquiries
from shareholders as to the status of their accounts, the disposition
of their funds, and the meaning and the use of the programs for share
purchases; and
3. all other facilities, services, and activities necessary for the
general assistance of the Fund's shareholders.
The Adviser pays the compensation of the Fund's Directors, officers and
employees who are also employees of the Adviser. The Fund pays all other
expenses incurred in the organization and operation of the Fund and the
continuous offering of its shares
9
<PAGE>
including the fees and expenses of the Fund's legal counsel and auditors, fees
incurred in connection with the Fund's organization and registration, fees of
the Fund's Custodian, Transfer Agent, Accounting Services Agent or Dividend
Disbursing Agent, income or other taxes, fees payable to governmental agencies
in connection with the qualification or registration of fund shares for sale,
insurance premiums, costs of printing and mailing prospectuses, reports, proxies
and other notices to shareholders, brokerage fees or commissions on portfolio
transactions, and distribution expenses pursuant to the Distribution Plan.
The Investment Committee receives recommendations from the Adviser for
purchases and sales of securities and has primary responsibility for the
management of the Fund's portfolio. Members of the committee are: Timothy R.
Hutchinson and Norman M. McAvoy, Directors of the Fund; and Joseph J. Waltman,
J.G. Gordon Yocum and David F. Ganley, President, Secretary and Treasurer
respectively, of the Fund.
ACCOUNTING SERVICES. The Fund has executed an Accounting Services
Agreement, effective December 1, 1994, with Barclay Financial Services, Inc.,
("BFS"), for the performance of accounting and record keeping functions. BFS is
a wholly-owned subsidiary of Barclay. Certain officers and directors of BFS are
affiliated in various capacities with the Fund, its investment adviser, BFM, and
its distributor, Barclay. The new agreement is the same in all material respects
as relevant terms of the prior agreement except for the dates of execution and
the identity of the accounting services agent. For further information see
section hereafter entitled "Organization of Service Companies".
Pursuant to the Accounting Services Agreement, BFS examines and reviews the
Fund's existing accounts, records, and other documents and systems to determine
or recommend how such accounts, records, and other documents and systems shall
be maintained. BFS maintains and keeps the books, accounts, records, journals,
and other records of original entry relating to the business of the Fund. It
also calculates the Fund's net asset value in accordance with the Fund's
currently effective Prospectus. Net asset value per share (the price at which
shares are purchased and redeemed) is determined at 4:00 P.M., Philadelphia
time, on each day the New York Stock Exchange is open and on each additional day
on which the Fund's net asset value might be materially affected by changes in
the value of its portfolio. BFS is paid an annual fee on the Fund's net assets
as follows: the greater of $15,000 per year or 0.20 of 1% on the first $50
million of assets; 0.15 of 1% on the next $50 million of assets; and 0.10 of 1%
on assets in excess of $100 million. Accounting services fees earned for the
fiscal year ended August 31, 1995, were $15,000 of which $7,500 was waived by
the accounting services agents. Of the $7,500 in fees paid BFS received $5,625
and Gibraltar Service Corporation ("GSC"), the prior agent, received $1,875. For
the fiscal year ended August 31, 1994, accounting services fees earned were
$15,000 of which GSC was paid $7,500 after waiving half of such fees. In
addition, GSC assumed $408 of other expenses. For the fiscal year ended August
31, 1993, accounting services fees earned were $15,000 of which GSC was paid
$2,829 after waiving $12,171.
TRANSFER AGENCY AND ADMINISTRATION. The Fund has also executed a Transfer
Agency and Administration Agreement with BFS, effective December 1, 1994, under
which the latter serves as the Fund's transfer agent, dividend disbursing
10
<PAGE>
agent and redemption agent. The new agreement is the same in all material
respects as relevant terms of the prior agreement except for the dates of
execution and the identity of the new transfer agent. BFS is paid a fee of
$12 per shareholder account annually or a minimum monthly fee of $500. For
the fiscal year ended August 31, 1995, transfer agency fees paid were $6,000
In each of the fiscal years ended August 31, 1994 and 1993, GSC was paid $6,000
in transfer agency fees.
DISTRIBUTION OF FUND SHARES. The Fund has adopted a Distribution Plan for
the Sale of Shares (the "Distribution Plan") which permits the Fund to finance
certain activities in connection with the promotion and sale of its shares.
Although the Distributor otherwise bears the expense of all promotional and
distribution and related activities on behalf of the Fund, the Distribution Plan
provides that the Fund may make reimbursements for the activities and services
described below which may foster additional sales of fund shares: (1)
compensation to sales representatives and other broker-dealers for selling
shares; (2) compensation to securities brokers and dealers, accountants,
attorneys, investment advisers, pension actuaries, and service organizations,
for services rendered by them to their clients in reviewing the Fund's
prospectuses and other selling materials, reviewing the various plans or
programs offered by the Fund or its Adviser or any affiliates of the Adviser,
and in explaining or interpreting any of the foregoing to their clients; (3)
cost of advertising; (4) cost of telephone, mail and other direct solicitation
of prospective investors and of responding to the inquiries; (5) cost of
preparing and printing prospec tuses and other selling materials and the cost of
distribution; (6) reimbursement of travel and entertainment expenses in
promoting the Fund; (7) payment of fees of public relations consultants; and (8)
payment of awards (such as bonuses for meeting sales targets) to broker-dealers.
Pursuant to the Distribution Plan the Fund may expend annually an amount
not exceeding .25% of the average daily net assets of the Fund to compensate the
Distributor for providing services under the Plan during a fiscal year. Under
the Distribution Plan, a report of the amounts expended and the purpose of the
expenditures must be made to and reviewed by the Board of Directors at least
quarterly. There are no provisions in the Plan which permit the carrying over of
distribution expenses from one year to the next. The Fund cannot be charged for
interest, carrying or any other financing charges on any unreimbursed
distribution or other expense incurred in a prior plan year, and does not
consider itself under a legal obligation to pay all or part of any such
carryovers. In addition, the Distribution Plan may not be amended to materially
increase the costs which the Fund may bear for distribution pursuant to the
Distribution Plan without stockholder approval and other material amendments
must be approved by the Board of Directors, and by the non-interested directors
who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any related service agreement. The Distribution Plan and
any related service agreement are terminable at any time by vote of a majority
of the "non-interested" directors who have no direct or indirect financial
interest in the operation of the Distribution Plan or in any related service
agreements or by vote of the majority of the Fund's shares. Any related service
agreement automatically terminates in the event of assignment.
11
<PAGE>
The Distribution Plan will continue in effect if approved at least annually
by the vote of the holders of a majority of the outstanding shares of the Fund
or by the vote of a majority of the Fund's directors and by a majority of the
"non-interested" directors. During the time the Distribution Plan is effective
the selection and nomination of the non-interested directors is committed to the
discretion of the directors who are non-interested directors.
It is anticipated that the expenditures under the Distribution Plan will
result in the sale of additional shares of the Fund thereby increasing the
Fund's asset base to permit greater flexibility in diversifying its portfolio
and reduce expense ratios. Although no agreements have been reached with any
person pursuant to the Distribution Plan, the Fund may enter into agreements
whereby companies with which some of the directors and officers are affiliated
will be paid for their assistance in explaining the Fund, its investment
objectives and policies, and its retirement plans, to their clients. The costs
of the Distribution Plan will be reflected in the disclosure of Fund expenses.
When no amounts are expended under the Plan, as in the fiscal years ending
August 31, 1993 and August 31, 1994, expenses will be correspondingly reduced.
The Board of Directors believes the Plan is the best interests of the Fund.
DISTRIBUTOR. The Fund's Distributor is Barclay Investments, Inc. Certain
officers and directors of Barclay are affiliated in various capacities with the
Fund and its investment adviser, BFM. For further information see section
hereafter entitled "Organization of Service Companies".
The Distributor and the Fund have executed a Distribution Agreement,
effective December 1, 1994. The new agreement is the same in all material
respects as relevant terms of the prior agreement except for the dates of
execution and the identity of the distributor. Under its terms the Distributor,
as agent for the Fund, either directly or through authorized dealers, offers for
sale the Fund's shares at the current offering price plus a sales load as
determined in accordance with the currently effective Prospectus. The
Distributor will receive applicable sales charges as set forth in such
Prospectus. It will also be entitled to amounts payable by the Fund under any
Plan of Distribution adopted by the Fund pursuant to Rule 12b-1 under the Act.
Such a plan has been adopted and is available to the Fund should it wish to use
it. The agreement may be terminated by either party upon 60 days notice
provided, that in the case of termination by the Fund, the termination shall
have been authorized by resolution of the Board of Directors or by a vote of the
holders of a majority of the outstanding shares of the Fund.
The Distributor bears the cost of printing and distributing any Prospectus
and Statement of Additional Information to persons who are not shareholders, and
preparing, printing and distributing any literature, advertisement or material
which is primarily intended to result in the sale of shares. It arranges for and
oversees the proper execution of account applications by potential investors and
holders of the Fund's shares. The Fund pays expenses incurred in the
preparation, printing and distribution to shareholders of prospectuses, reports
and other communications; in the registration of shares under the Securities
Acts; and in the qualification of the shares for sale in jurisdictions
reasonably designated by the Distributor.
12
<PAGE>
Under the Distribution Agreement commissions on the sale of Fund shares
were paid as follows: for the fiscal year ended August 31, 1995, Barclay
Investments, Inc., received $1,416; for the fiscal years ended August 31, 1994
and 1993, Dayton Hancock, Waltman Securities, Inc., the prior distributor,
received $189 and $25,564 respectively.
ORGANIZATION OF SERVICE COMPANIES. Barclay Investments, Inc., (Barclay),
was established in 1930 and incorporated in Rhode Island in 1972. As a
registered broker-dealer with locations in providence, RI; New York City;
Princeton Junction, NJ; and an affiliate in central Europe, Barclay seeks
investment opportunities worldwide. Barclay and its subsidiaries provide
brokerage services, asset allocation and investment advice, capital management,
corporate finance expertise, and management services to the mutual fund
industry.
Barclay's wholly-owned subsidiaries include Barclay Financial Management,
(BFM), a registered investment adviser organized in 1992, and Barclay Financial
Services, Inc., (BFS), an accounting services and registered transfer agent
organized in 1994. Both are Rhode Island corporations. BFM was organized as part
of the investment advisory services of Barclay. BFS was organized to provide
accounting and transfer agency services to mutual funds as well as origination
and servicing of new funds.
Barclay and BFM are located at 66 Main Street, Providence, RI 02903. BFS is
located at 1201 County Line Road, Lower Level, Rosemont, PA 19010. It continues
the business, under new management, of the Fund's former accounting services and
transfer agent at the same location with the same facilities and principal
operating officers. Barclay, BFM and BFS also provide services for the Gibraltar
Equity Growth Fund Series of Gibraltar Funds, Inc.
Prior to December, 1994, the Fund was serviced by the Internos Group of
companies owned by Internos Partners, Inc., and its parent, Convergent Capital
Corporation. These companies were Gibraltar Asset Management, Inc., Dayton,
Hancock, Waltman Securities, Inc., and Gibraltar Service Corporation which
acted, respectively, as investment adviser, distributor, and accounting services
and transfer agent. The companies advised the Fund of their business decisions
to discontinue some operations and curtail others. Accordingly, the Fund
directors terminated such service agreements and executed new ones with the
Barclay organization to avail the Fund of the services of a general securities
firm.
BROKERAGE ALLOCATION
When selecting brokers and dealers for the purchase and sale of securities,
the Adviser looks for best execution of portfolio transactions, taking into
consideration such relevant factors as price, execution ability and the broker's
reliability and financial responsibility. Commission rates, as a component of
price, are also considered. In transactions with dealers, the Adviser will
generally use those who are recognized dealers in specific portfolio investments
unless a more favorable result is obtainable elsewhere.
13
<PAGE>
Purchases and sales of securities for the Fund's portfolio may include a
brokerage commission charged by the broker effecting the transaction. While
there is no duty or obligation to seek competitive bidding for the most
favorable negotiated commission, consideration will be given to such "posted"
commission rates, if any, as may be applicable to a particular transaction, as
well as to any other information available at the time concerning the level of
commissions known to be charged on comparable transactions by qualified
brokerage firms.
In the most recent fiscal year ending August 31, 1995, the Fund paid an
aggregate of $1,416 for brokerage commissions on portfolio transactions. Barclay
Investments, Inc., was paid 100% of this amount. Such transactions represented
100% of the portfolio's aggregate dollar amount of transactions involving the
payment of commissions. All such transactions were entered on an agency basis.
In the fiscal year ended August 31, 1994, the Fund paid an aggregate of
$1,475 for brokerage commissions on portfolio transactions of which Dayton,
Hancock, Waltman Securities, Inc., (DHW), the prior distributor, retained $999
after payments of $476 for clearing agent services. In the fiscal year ended
August 31, 1993, the Fund paid an aggregate of $10,730 for such commissions of
which DHW retained $6,974 after payments of $3,755 for clearing agent services.
All such transactions were entered on an agency basis. The amount of payments in
1993 reflects adjustments in portfolio composition.
Either the Adviser or the Distributor may act as broker in connection with
the purchase or sale of portfolio securities for the Fund. Should they do so,
neither of them will receive from any source a commission, fee or other
remuneration for effecting such transactions which exceeds (A) the usual and
customary broker's commission if the sale is effected on a securities exchange,
or (B) 2 per centum of the sales price if the sale is effected in connection
with a secondary distribution of such securities, or (C) 1 per centum of the
purchase or sale price of such securities if the sale is otherwise effected. The
Board of Directors, including a majority of the "non-interested" directors, will
conduct periodic reviews to determine that any such compensation is consistent
with the foregoing standards.
No adviser or distributor for the Fund will, acting as principal, accept
orders for the purchase or sale of portfolio securities.
The Adviser, BFM, does not plan to act as broker in the purchase and sale
of Fund portfolio securities. The Distributor, Barclay, may act in such
capacity.
Neither the Adviser nor the Distributor will knowingly participate in
commissions paid by the Fund to other brokers or dealers and will not seek or
knowingly receive any reciprocal business as the result of the payment of such
commissions. In the event either learns it has received reciprocal business, it
will so inform the Board. To the extent that either may receive brokerage
commissions on the Fund's portfolio transac tions, officers and directors of the
Fund who are affiliated persons of the Adviser or Distributor may receive
indirect compensation from the Fund through their participation in the profits
of the Adviser or the Distributor.
14
<PAGE>
In selecting brokers to execute portfolio transactions, the Board of
Directors will consider their ability to provide research and statistical
services. If the Board of Directors determines in good faith that the amount of
commissions charged by such brokers is reasonable in relation to the value of
the brokerage and research services provided by such brokers, the Fund may pay
commissions to such brokers in an amount greater than the amount another firm
might charge on the same transaction. Research so obtained may consist of
reports on particular companies of interest to the Fund, statistical data of
interest to management or directors regarding the mutual fund industry (such as
performance ratings, sales and redemption figures, cost comparisons, and
expenses ratio comparisons), or may consist of evaluations of industry-wide
trends, economic factors in general, or factors applicable to particular
companies, industries or economies, domestic or foreign. Research obtained
through brokerage commissions paid by the fund may be used by the Adviser for
the benefit of its other clients. Conversely, research obtained through
brokerage commissions paid by other clients of the Adviser may benefit the Fund.
The Board of Directors believes that the investment information received in this
manner assists the Fund by supplementing the research otherwise available to it.
In order to assure that the Fund is paying reasonable commissions, the Fund will
attempt to determine the rates being paid by other institutional investors of
similar size.
There is no formula for the allocation of orders to brokers who provide
research and, since it is generally not possible to place a value on such
research, no direct correlation between the amount of brokerage commissions
generated by portfolio activities of the Fund and the research received by it is
expected to exist. Situations may arise in which the Fund might wish to receive
some research available to it either for a cash payment or in return for a
stipulated amount of brokerage commissions. In such instances, brokerage
commissions would normally be used. Brokerage is not allocated as an inducement
or reward for selling the Fund's shares.
The Adviser may be the investment manager with respect to various
individual accounts. In the event that the same security is being purchased or
sold for more than one account simultaneously, the Adviser would expect to place
a single order and pro-rate the combined order based upon the size of the order
for each account. While such a procedure could generally be expected to benefit
all accounts, there is a possibility that it might adversely affect the price of
the security and/or the quantity which may be bought or sold for each account.
CAPITAL STOCK
The Fund has 3,000,000 shares of on stock, par value of $.01 per share,
currently authorized. Each share or fractional share is non-assessable and has
equal rights as to dividends, distributions, the proceeds of liquidation and
voting rights. When voting on nominees for the election of directors, there is
no cumulative voting. Shareholders have no preemptive rights to acquire shares
offered publicly by the Fund. Each share is enti tled to one vote (and
fractional shares to fractional votes) in the election of directors and on other
matters submitted to a vote of shareholders. Shares may be freely transferred
but such transfers will not be effective unless noted on the books maintained by
BFS as transfer agent for the Fund.
15
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
The following discussion supplements the information in the Prospectus
describing the manner in which the Fund's securities are offered to the public,
see Prospectus sections "Purchase of Fund Shares" and "Determination of Net
Asset Value".
If a purchaser's check is dishonored, his purchase of shares and the
payment of any dividends thereon will be reversed and his account may be charged
a collection fee by BFS. The Fund's Adviser will reimburse the Fund the amount
of any uncollected loss on such transaction.
If shares are purchased by check, BFS will delay payment of redemption
proceeds until a check used to purchase shares has cleared, which may take up to
fifteen (15) calendar days subsequent to the date the shares are purchased. The
Board of Directors has notified the Securities and Exchange Commission of its
election under Rule 18f-1 of the Investment Company Act of 1940 to commit itself
to pay in cash all redemptions by a shareholder of record, subject to the
provisions of that rule which are to the general effect that the Fund must pay
in cash each redemption of not more than $250,000 or 1% of its net asset value
(whichever is less), made by any shareholder during any 90 day period. It is the
present intention of the Fund to redeem only in cash. If, however, the Fund were
to redeem in kind, the shareholder could be required to pay brokerage
commissions to dispose of the securities distributed to the shareholder.
Net asset value per share (the price at which shares are purchased and
redeemed) is determined at 4:00 p.m., Philadelphia time, on each day the New
York Stock Exchange is open and on each additional day on which the Fund's net
asset value might be materi ally affected by changes in the value of its
portfolio securities. The New York Stock Exchange is not open for business on
those days on which it observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
OTHER INFORMATION
WHEN - ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. A purchase of when-issued
securities will not be made in an amount which, taken together with any other
when-issued securities then held, exceeds 5% of the Fund's net assets at the
time of purchase. These transactions are made to secure what is believed to be
an advantageous price and yield and are arrangements under which the price is
fixed at the time of commitment but delivery and payment take place beyond
customary settlement time. When such transactions are incurred, the Fund will
establish and maintain in a segregated account with its custodian cash or liquid
high grade debt securities having a fair market value equal to the amount of the
purchase commitment until payment is made.
These transactions are subject to market fluctuation and value or yields at
delivery may be more or less than the purchase price or the yields available
when the transaction was made. The Fund may sell securities so purchased before
settlement date if it is deemed advisable in view of changes in market values.
To the extent the Fund engages in when-issued or delayed delivery transactions,
16
<PAGE>
it will do so only for the purpose of acquiring securities consistent with its
investment objectives.
MAJORITY VOTE. As used in the Prospectus and the Statement of Additional
Information, a vote of the holders of a majority of the Fund's shares means the
affirmative vote of the lesser of (a) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares of the Fund are represented
at the meeting in person or by proxy, or (b) more than 50% of the outstanding
shares.
CUSTODIAN. The Fund's custodian is The Bank of New York, One Wall Street,
New York, NY 10286. Under the Custodian Agreement, the Bank acts as the
custodian of the Fund's securities and cash and collects dividends and interest
paid on the Fund's portfolio and securities.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The Fund's independent certified
public accountants are Tait, Weller & Baker, Two Penn Center, Suite 700,
Philadelphia, PA 19102. The accountants examine the books and records of the
Fund and provide audit services and consultation in connection with their review
of filings by the Fund with the Securities and Exchange Commission.
LEGAL COUNSEL. J.G. Gordon Yocum, 1201 County Line Road, Lower Level,
Rosemont, PA 19010 acts as counsel to the Fund and has passed upon the
legality of the shares offered hereby.
REGISTRATION STATEMENT. The Prospectus and this Statement of Additional
Information do not contain all the information included in the Fund's
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to the shares offered hereby. The
complete Registration Statement, including the exhibits filed therewith and
other information pursuant to rules and regulations of the Securities and
Exchange Commission, may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in the Prospectus and this Statement of Additional
Information as to the contents of any contract or other documents are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other documents filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
17
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
ANNUAL REPORT TO SHAREHOLDERS
AUGUST 31, 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Gibraltar U.S. Government Securities Fund, Inc.
Rosemont, Pennsylvania
We have audited the accompanying statement of assets and liabilities of
Gibraltar U.S. Government Securities Fund, Inc., including the portfolio of
investments, as of August 31, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Gibraltar U.S. Government Securities Fund, Inc. at August 31, 1995, and the
results of its operations, changes in its net assets and its financial
highlights for each of the respective periods presented, in conformity with
generally accepted accounting principles.
/s/ Tait, Weller & Baker
Philadelphia, Pennsylvania
September 20, 1995
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
August 31, 1995
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MORTGAGE-BACKED CERTIFICATES - 92.6% VALUE
Government National Mortgage
Association - 43.0%
$ 39,431 9.50%, 9/15/09 $ 41,206
31,243 10.00%, 9/15/00 32,727
37,313 10.25%, 4/15/98 - 5/15/01 38,689
59,180 10.50%, 3/15/99 - 8/15/01 167,813
131,748 11.00%,12/15/00 - 11/15/15 141,963
56,870 11.25%, 7/15/98 59,430
66,774 11.50%, 3/15/00 - 7/15/00 71,116
52,976 13.75%, 2/15/97 - 10/15/97 55,653
23,659 14.75%, 9/15/97 25,197
633,794
-----------
Government National Mortgage
Association II - 10.4%
20,386 9.50%, 7/20/02 21,100
46,304 10.50%, 2/20/00 - 1/20/01 48,390
28,202 11.00%, 9/20/00 29,613
51,004 11.50%, 8/20/00 - 1/20/01 53,810
-----------
152,913
-----------
Federal Home Loan Mortgage Corp. - 31.4%
30,776 10.00%, 9/01/01 32,007
213,329 10.50%,11/15/01 - 4/01/04 223,592
25,793 11.00%, 6/01/11 27,986
56,880 11.50%, 2/01/00 - 6/01/19 61,105
61,012 11.75%, 7/01/00 - 12/15/13 66,201
30,520 12.00%, 3/01/00 32,352
18,682 12.25%, 8/01/00 19,805
-----------
463,048
-----------
Federal National Mortgage
Association - 7.8%
101,572 9.85%, 7/01/02 105,890
7,976 10.25%, 3/01/01 8,316
-----------
114,206
-----------
Total Value of Investments
(Cost $1,371,290) 92.6% 1,363,961
Other Assets, Less Liabilities 7.4 108,630
------ -----------
NET ASSETS 100.0% $ 1,472,591
====== ===========
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(Identified cost $1,371,290) (Note 1) $ 1,363,961
Cash and cash equivalents 93,531
Receivables
Interest 16,212
Principal on mortgage-backed certificates 6,437
Deferred organization expenses (Note 1) 1,285
-----------
Total assets 1,481,426
-----------
LIABILITIES
Accrued expenses 6,282
Cash portion of dividend payable September 1, 1995 2,553
-----------
Total liabilities 8,835
-----------
NET ASSETS $ 1,472,591
===========
SOURCE OF NET ASSETS
Capital paid-in $ 1,511,061
Accumulated net realized loss on investment transactions (31,141)
Net unrealized depreciation in value of investments (7,329)
-----------
Total $ 1,472,591
===========
Net Asset Value Per Share
($1,472,591 divided by 151,856 shares outstanding -
3,000,000 shares authorized, $.01 par value) $ 9.70
=======
Sample Price Computation - August 31, 1995
Net asset value per share $ 9.70
Sales charge: 4.5% of offering price* .46
-------
Offering price (adjusted to nearest cent) $ 10.16
=======
Redemption price $ 9.70
=======
* On purchases of $100,000 or more, the sales charge is reduced.
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF OPERATIONS
Year ended August 31, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income $ 138,371
----------
EXPENSES
Accounting services fees (Note 2) 15,000
Professional fees 14,600
Investment advisory fee (Note 2) 8,364
Transfer agent fees 6,000
Registration fees 1,236
Custodian fees 1,226
Amortization of organization expenses 745
Other expenses 2,146
----------
Total expenses 49,317
==========
Less expenses waived (Note 2) 11,951
----------
Net expenses 37,366
----------
Net investment income 101,005
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (24,968)
Net unrealized depreciation of investments (9,672)
----------
Net realized and unrealized loss on investments (34,640)
----------
Net increase in net assets resulting from operations $ 66,365
==========
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Years ended August 31, 1995 and 1994
- -------------------------------------------------------------------------------
1995 1994
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 101,005 $ 76,606
Net realized loss on investments (24,968) (43,563)
Net unrealized depreciation
of investments (9,672) (6,690)
---------- -----------
Net increase in net assets
resulting from operations 66,365 26,353
---------- -----------
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (80,717) (48,317)
---------- -----------
CAPITAL SHARE TRANSACTIONS * 213,421 (17,174)
---------- -----------
Net increase (decrease) in net assets 199,069 (39,138)
NET ASSETS
Beginning of year 1,273,522 1,312,660
---------- -----------
End of year
(including undistributed net
investment income of $-0- and
$5,444, respectively) $ 1,472,591 $ 1,273,522
========== ===========
* Transactions in capital shares were as follows:
1995 1994
Shares Amount Shares Amount
Capital stock sold 28,963 $ 280,739 3,611 $ 35,925
Capital stock issued to
shareholders in reinvestment
of dividends from net
investment income 6,657 64,625 4,077 40,477
------- --------- ------ ---------
35,620 345,364 7,688 76,402
Capital stock redeemed (13,293) (131,943) (9,379) (93,576)
------- --------- ------ ---------
Net increase (decrease) 22,327 $ 213,421 (1,691) $ (17,174)
======= ========= ====== =========
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- -------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gibraltar U.S. Government Securities Fund, Inc. is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund's investment objective is safety of
principal, liquidity and a high level of current income. The Fund seeks to
obtain its investment objective by investing in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
A. SECURITY VALUATION
Mortgage securities and loan pools, and other fixed income securities
are valued at current market values on the basis of valuations
provided by a pricing service, quotations from established dealers,
and market transactions in comparable securities. Securities and other
assets for which market quotations are not readily available are
valued at fair value as determined in good faith by the Board of
Directors.
B. CASH EQUIVALENTS
Funds on deposit in short-term money market accounts are considered to
be a cash equivalent.
C. FEDERAL INCOME TAXES
No provision has been made for federal income taxes on net income or
capital gains since it is the policy of the Fund to continue to comply
with the special provisions of the Internal Revenue Code applicable to
investment companies and to make sufficient distributions of income
and capital gains (in excess of any available capital loss carryovers)
to relieve it from all or substantially all such taxes. At August 31,
1995, the Fund had a capital loss carryover of $31,113, of which
$5,913 expires in the year 2001 and $25,200 expires in 2002.
D. DEFERRED ORGANIZATION EXPENSES
The organization expenses of the Fund are being amortized over a
period of sixty months from the commencement of operations. Investors
purchasing shares of the Fund bear such expenses only as they are
amortized against the Fund's investment income. If any shareholder of
the initial shares redeems prior to the end of the amortization
period, the Fund will deduct and retain from the redemption proceeds
the shareholder's pro rata share of the unamortized expenses as of the
date of redemption.
E. DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income are declared
daily and paid monthly. Interest income and estimated expenses are
accrued daily. Income dividends and capital gain distributions are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for mortgaged-backed securities,
organization costs, capital loss carryforwards and post October
losses.
F. OTHER
Security transactions are accounted for on the date the securities are
purchased or sold. Cost is determined, and gains and losses are based,
on the identified cost basis for both financial statement and Federal
income tax purposes.
- -------------------------------------------------------------------------------
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
August 31, 1995
- -------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to December 1, 1994, the Fund was serviced by the Internos group of
companies composed of Gibraltar Asset Management, Inc. ("GAM"), its
investment adviser; Dayton, Hancock, Waltman Securities, Inc. ("DHW"), its
distributor; and Gibraltar Service Corporation ("GSC"), its accounting
services and transfer agent.
the advisory, distribution, and accounting services and transfer agent
contracts and the execution of a new investment advisory contract with
Barclay Funds Management, Inc. ("BFM"); a new distribution agreement with
Barclay Investments, Inc. ("Barclay"); and a new accounting services and
transfer agent agreement with Barclay Financial Services, Inc. ("BFS").
BFM is a registered investment adviser and wholly-owned subsidiary of
Barclay (a regional broker-dealer and general securities firm). BFS, also
a wholly-owned subsidiary of Barclay, is a registered transfer agent.
The new contracts are the same in all material respects to the prior
contracts except for the dates of execution and the identities of the
parties. The contracts all dated November 1, 1994, became effective on
December 1, 1994. The investment advisory contract was approved by
shareholders at their January 23, 1995 meeting.
Under the terms of both Investment Advisory Contracts, the Adviser is
required to provide investment advice regarding the purchase and sale of
portfolio securities in accordance with the Fund's investment objectives,
policies and restrictions. The Adviser also furnishes all executive and
clerical services required for the overall management of the Fund's
business affairs, subject to the authority of the Board of Directors,
other than those services which are provided by the Fund's custodian and
transfer agent.
The annual advisory fee, which is payable monthly, at the same rate under
both the new and old contracts is equal to 0.60% of the first $50 million
of the Fund's average daily net assets; 0.40% of the next $50 million of
average daily net assets; and 0.25% of average daily net assets in excess
of $100 million. Beginning March 1, 1995, BFM waived all advisory fees.
This waiver amounted to $4,451.
Pursuant to certain state regulations, the Adviser has agreed to reimburse
the Fund by the amount which the Fund's annual expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) exceed
the most restrictive expense limitation imposed by any state in which the
Fund's shares are sold. The amount of any such reimbursement is limited to
the annual advisory fee. For the year ended August 31, 1995, no
reimbursement was required pursuant to this provision.
Effective December 1, 1994, BFS replaced GSC as the Fund's accounting
services agent. The annual accounting service fee, under both contracts,
is payable monthly and is equal to the greater of $15,000 per year or .20%
of the first $50 million of the Fund's average daily net assets; 15% of
the next $50 million of average daily net assets; and .10% of average
daily net assets in excess of $100 million. For the year ended August 31,
1995, GSC and BFS waived 1/2 of their accounting fees amounting to $7,500.
BFS also replaced GSC as the Fund's transfer agent. The annual transfer
agent fee (which is also unchanged under both contracts) is payable
monthly and is equal to $12 per shareholder account annually or a minimum
monthly fee of $500.
- -------------------------------------------------------------------------------
<PAGE>
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
August 31, 1995
- -------------------------------------------------------------------------------
For the year ended August 31, 1995, the Fund paid Barclay $1,416 in
commissions earned on Fund portfolio transactions.
Certain officers and Directors of the Fund were also officers and
Directors of GAM, DHW, GSC and Internos. Effective December 1, 1994,
certain officers and Directors of the Fund are also officers and Directors
of Barclay, BFM and BFS.
(3) SECURITIES PURCHASED AND SOLD
For the year ended August 31, 1995, purchases and sales (including
pay-downs) of U.S. Government obligations, aggregated $911,972 and
$750,579, respectively.
At August 31, 1995, the cost of investments for Federal income tax
purposes was $1,371,290. Accumulated net unrealized depreciation on
investments was $7,329, consisting of $2,304 of unrealized appreciation
and $9,633 of unrealized depreciation.
(4) DISTRIBUTION PLAN
In accordance with a Distribution Plan for the Sale of Shares (the "Plan")
pursuant to Rule 12b-1 under the Act, the Fund may finance certain
activities in connection with the promotion and sale of its shares.
The Plan permits, among other things, payment of compensation for selling
shares and the cost of advertising, the services of public relations
consultants, direct solicitation, entertainment, and awards. Possible
recipients include securities brokers, attorneys, accountants, investment
advisers, pension actuaries, and service organizations. The Fund may
expend annually up to 0.25% of its average daily net assets pursuant to
the Plan to compensate recipients for providing services under the Plan
during a fiscal year. There are no provisions in the Plan which permit the
carrying over of distribution expenses from one year to the next. The Fund
did not make any payments under the Plan during the year ended August 31,
1995.
- -------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A:
Financial Highlights
PART B:
Report of Independent Certified Public Accountants
Portfolio of Investments at August 31, 1995
Statement of Assets and Liabilities at August 31, 1995
Statement of Operations for year ended August 31, 1995
Statement of Changes in Net Assets for years ended
August 31, 1995, and August 31, 1994
Notes to Financial Statements
(b) EXHIBITS
1. Articles of Incorporation, effective June 28, 1991
Included as part of Initial Registration
Statement filed with the Commission on
October 23, 1991
Articles of Amendment, effective December 18,
1991 Included as part of Pre-Effective
Amendment No.1 filed with the Commission on
March 4, 1992
Articles of Amendment, effective September 10,
1992 included in Post-Effective Amendment
No. 4 filed on November 16, 1994.
2. Bylaws, approved July 12, 1991
Included as part of Initial Registration
Statement filed with the Commission on
October 23, 1991.
Amendment to Bylaws, effective December 18, 1991
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4,
1992
3. None
4. Specimen Stock Certificate
Included as part of Pre-Effective Amendment No.1
filed with the Commission on March 4, 1992
C-1
<PAGE>
5. Investment Advisory Contract, effective
December 1, 1994
Included in Post-Effective Amendment No. 5 filed
on June 22, 1995
6. Distribution Agreement, effective December 1, 1994
Included in Post-Effective Amendment No. 5 filed
on June 22, 1995
7. None
8. Custodian Agreement, dated April 20, 1994.
Included in Post-Effective Amendment No. 4
filed on November 16, 1994
9. (a) Accounting Services Agreement, effective
December 1, 1994 Included in
Post-Effective Amendment No. 5 filed on
June 22, 1995
(b) Transfer Agency Agreement, effective
December 1, 1994
Included in Post-Effective Amendment
No. 5 filed on June 22, 1995
10. Opinion of counsel as to the legality of the
securities being registered filed pursuant to
Registrant's Rule 24F-2 Notice.
11. (a) Consent of Tait, Weller & Baker,
independent certified public
accountants. Filed herewith.
(b) Consent of J.G. Gordon Yocum, counsel.
Filed herewith.
12. None
13. Agreements for Initial Capital
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4, 1992
Amended Agreement for Initial Capital
Included as part of Pre-Effective Amendment
No. 2 filed with the Commission on
April 20, 1992
14. IRA Plan
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4, 1992
15. Distribution Plan pursuant to Rule 12b-1
dated December 26, 1991
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4, 1992
C-2
<PAGE>
16. Selling Dealer Agreement
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4, 1992
17. Code of Ethics, adopted November 19, 1991
Included as part of Pre-Effective Amendment
No.1 filed with the Commission on March 4, 1992
18. Power of Attorney Forms appointing David F. Ganley
and J.G. Gordon Yocum, and each of them,
Attorneys-in-Fact to sign the Registration
Statement on Form N-1A and any Pre-Effective
and Post-Effective Amendments thereto
Included as part of Post-Effective Amendment
No.5 filed with the Commission on
June 22, 1995.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No persons are directly or indirectly controlled by or under common control
with the Registrant.
NUMBER OF HOLDERS OF SECURITIES
As of November 14, 1995
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Common Stock 28
INDEMNIFICATION
Sections 10.01-10.03 of Article X of the Fund's Bylaws provide for the
indemnification by the Fund, under certain circumstances, of its officers,
directors, employees, agents or other persons against liability to the Company
or its shareholders. None of the foregoing persons are entitled to such
indemnification by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties with respect to the Fund. The aforementioned bylaw
sections are incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,
C-3
<PAGE>
officer or controlling person in connection with the securities being
registered, the Regis trant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The business activities of the Investment Adviser, BFM, Inc., d/b/a Barclay
Funds Management, (BFM), and its officers and directors during the past two
years are as follows:
BFM was organized in 1992 as a wholly-owned subsidiary of Barclay
Investments, Inc., (Barclay), a general services broker-dealer, which was
organized in 1930 and incorporated in 1972. BFM is part of the investment
advisory services of Barclay and is also the investment adviser for the
Gibraltar Equity Growth Fund Series of Gibraltar Funds, Inc. It may act for
other accounts.
An affiliated company is Barclay Financial Services, Inc., (BFS), organized
in 1994 as a wholly-owned subsidiary of Barclay. BFS is an accounting services
and transfer agent which acquired the facilities of the former Gibraltar Service
Corporation.
BFM's officers and directors are: Timothy R. Hutchinson, President and
Director; Bruce H. Rogove, Vice President and Director; Michael McGovern,
Secretary and Director; David F. Ganley, Treasurer; and Basil C. Williams,
Director. Their other affiliations are:
Mr. Hutchinson - Vice President and Director of BFS; Director of the Fund
and of Gibraltar Funds, Inc.
Mr. Rogove - Director of Barclay and of BFS; Vice President of the Fund
and of Gibraltar Funds, Inc.
Michael McGovern - Secretary and Director of BFS; Counsel to Barclay
companies;
David F. Ganley - Treasurer and Director of BFS; Treasurer of the Fund and
of Gibraltar Funds, Inc.; Officer and/or Director of the Internos companies
which serviced the Gibraltar Funds; (the Internos companies were Gibraltar Asset
Management, Inc., Dayton, Hancock, Waltman Securities, Inc., and Gibraltar
Service Corporation);
Basil C. Williams - President and Director of Barclay; Director of BFS, of
the Fund and of Gibraltar Funds, Inc.
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<PAGE>
The principal business address of BFM and Barclay is 66 South Main Street,
Providence, RI 02903. The principal business address of BFS, the Gibraltar Funds
and the Internos companies is 1201 County Line Road, Lower Level, Rosemont, PA
19010.
PRINCIPAL UNDERWRITERS
Barclay is Distributor and Principal Underwriter for the Fund and also for
the Gibraltar Equity Growth Fund Series of Gibraltar Funds, Inc. Barclay's
officers and directors are:
Basil C. Williams, President, Chairman and Director; also Director
of the Fund;
Michael J. McGovern, Secretary and Director
Keith E. Cich, Treasurer and Director
Bruce H. Rogove, Director; also Vice President of the Fund;
The principal business address of the foregoing officials is 66 South Main
Street, Providence, RI 02903.
No commissions and other compensation have been received by any principal
underwriter who was not an affiliated person of the Registrant or an affiliated
person of such an affiliated person, directly or indirectly, from the Registrant
during its last fiscal year.
LOCATION OF ACCOUNTS AND RECORDS
The Fund's Articles of Incorporation, Bylaws, minutes of directors' and
shareholders' meetings, contracts and certain accounts and records required to
be maintained by Section 31(a) of the Investment Company Act of 1940 are in the
physical possession of the Fund's accounting services and transfer agent,
Barclay Financial Services, Inc., or the Fund's Secretary and Treasurer at 1201
County Line Road, Lower Level, Rosemont, PA 19010, where the Fund's offices are
also located. Custodial records are retained by the Fund's custodian, The Bank
of New York, One Wall Street, New York, NY 10286. Any of the records not so
retained will be kept in the custody of the Adviser or the Distributor.
MANAGEMENT SERVICES
None.
UNDERTAKINGS
1. The additional performance information called for by Item 5A of
Form N-1A is contained in the latest annual report to shareholders.
Registrant undertakes to furnish each person to whom a prospectus
C-5
<PAGE>
is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
--------------------------------------------
Registrant represents that this amendment pursuant to Rule 485(b) is
filed solely for one or more of the purposes specified in paragraph (b) (1) of
Rule 485, and that no material event requiring disclosure in the prospectus,
other than one listed in paragraph post-effective amendment to its registration
statement which included a prospectus.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in Rosemont, Pennsylvania, on November 20, 1995.
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
By /s/ Joseph J. Waltman
PRESIDENT Joseph J. Waltman
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Joseph J. Waltman
- --------------------------- President November 20, 1995
Joseph J. Waltman
/s/ Bruce H. Rogove
- --------------------------- Vice President October 21, 1995
Bruce H. Rogove
- --------------------------- Vice President , 1995
S. Grey Dayton, Jr.
/s/ J. G. Gordon Yocum
- --------------------------- Secretary November 21, 1995
J.G. Gordon Yocum
/s/ David F. Ganley
- --------------------------- Treasurer November 21, 1995
David F. Ganley
- --------------------------- Director , 1995
Basil C. Williams
/s/ Timothy R. Hutchinson
- --------------------------- Director November 21, 1995
Timothy R. Hutchinson
- --------------------------- Director , 1995
Robert Scandone
/s/ M. David Chassen
- --------------------------- Director November 21, 1995
M. David Chassen
/s/Norman M. McAvoy
- --------------------------- Director November 21, 1995
Norman M. McAvoy
- --------------------------- , 1995
By David F. Ganley
Attorney-in-Fact
- ----------------------------- , 1995
By J.G. Gordon Yocum
Attorney-in-Fact
C-7
EXHIBIT 11(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Gibraltar U.S. Government Securities Fund, Inc.
1201 County Line Road
Rosemont, PA 19010
We consent to the reference in the Post-Effective Amendment No. 7 to
Form N-1A, Registration Statement (File No. 33-43587), of our Report dated
September 20, 1995 accompanying the August 31, 1995 financial statements of
Gibraltar U.S. Government Securities Fund, Inc. which are referred to in Part A
of said Registration Statement.
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 22, 1995
EXHIBIT 11(b)
GIBRALTAR U.S. GOVERNMENT SECURITIES FUND, INC.
CONSENT OF COUNSEL
Gibraltar U.S. Government Securities Fund, Inc.
1201 County Line Road
Rosemont, PA 19010
I consent to the use of my name and to the reference to myself as "counsel"
included in and made part of Parts A and B of Form N-1A used for filing
Post-Effective Amendment No. 7 under the Securities Act of 1933 and Amendment
No. 9 under the Investment Company Act of 1940, to the Registration Statement of
Gibraltar U.S.
Government Securities Fund, Inc., File No. 33-43587.
/s/ J. G. Gordon Yocum
J. G. Gordon Yocum
Counsel
Rosemont, PA
November 20, 1995
